UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 9, 2018
Alta Mesa Resources, Inc.
(Exact name of registrant as specified in its charter)
| Delaware | 001-38040 | 81-4433840 | ||
|
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS. Employer Identification No.) |
15021 Katy Freeway, Suite 400
Houston, Texas 77094
(Address of principal executive offices, including zip code)
281-530-0991
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Introductory Note
On February 9, 2018 (the “Closing Date”), Alta Mesa Resources, Inc. (formerly known as Silver Run Acquisition Corporation II) consummated the previously announced acquisition of:
| • | (i) all of the limited partner interests in Alta Mesa Holdings, LP, a Texas limited partnership (“Alta Mesa”), held by High Mesa Holdings, LP, a Delaware limited partnership (the “Alta Mesa Contributor”), and (ii) 100% of the economic interests and 90% of the voting interests in Alta Mesa Holdings GP, LLC, a Texas limited liability company and the sole general partner of Alta Mesa (“Alta Mesa GP”), pursuant to that certain Contribution Agreement, dated as of August 16, 2017 (the “Alta Mesa Contribution Agreement”), among the Alta Mesa Contributor, High Mesa Holdings GP, LLC, a Texas limited liability company and the sole general partner of the Alta Mesa Contributor, Alta Mesa, Alta Mesa GP, Silver Run (as defined below) and, solely for certain provisions therein, the equity owners of the Alta Mesa Contributor; |
| • | 100% of the outstanding membership interests in Kingfisher Midstream, LLC, a Delaware limited liability company (“Kingfisher”), pursuant to that certain Contribution Agreement, dated as of August 16, 2017 (the “Kingfisher Contribution Agreement”), among KFM Holdco, LLC, a Delaware limited liability company (the “Kingfisher Contributor”), Kingfisher, Silver Run and, solely for certain provisions therein, the equity owners of the Kingfisher Contributor; and |
| • | all of the limited partner interests in Alta Mesa held by Riverstone VI Alta Mesa Holdings L.P., a Delaware limited partnership (the “Riverstone Contributor” and, together with the Alta Mesa Contributor and the Kingfisher Contributor, the “Contributors”), pursuant to that certain Contribution Agreement, dated as of August 16, 2017 (the “Riverstone Contribution Agreement” and, together with the Alta Mesa Contribution Agreement and the Kingfisher Contribution Agreement, the “Contribution Agreements”), between the Riverstone Contributor and Silver Run. |
We refer to the acquisitions and the other transactions contemplated by the Contribution Agreements as the “Business Combination.” Following the completion of the Business Combination, our wholly owned subsidiary, SRII Opco GP, LLC, a Delaware limited liability company (“SRII Opco GP”), will be the sole general partner of SRII Opco, LP, a Delaware limited partnership (“SRII Opco”), and we will operate our business through SRII Opco and its subsidiaries, including Alta Mesa and Kingfisher.
In connection with the closing of the Business Combination (the “Closing”), the Company changed its name from Silver Run Acquisition Corporation II to Alta Mesa Resources, Inc. Unless the context otherwise requires, “Silver Run” refers to the registrant prior to the Closing, and “we,” “us,” “our” and the “Company” refer to the registrant and its subsidiaries, including Alta Mesa and Kingfisher, following the Closing.
Item 1.01. Entry into a Material Definitive Agreement.
Alta Mesa Credit Agreement
On February 9, 2018, Alta Mesa entered into an amended and restated senior secured revolving credit facility with Wells Fargo Bank, National Association, as the administrative agent (the “Alta Mesa Credit Facility”). The Alta Mesa Credit Facility is for an aggregate of $1.0 billion with an initial $350.0 million borrowing base limit. The Alta Mesa Credit Facility does not permit Alta Mesa to borrow funds if at the time of such borrowing it is not in pro forma compliance with its financial covenants. As of February 9, 2018, Alta Mesa has no borrowings under the Alta Mesa Credit Facility and no letters of credit reimbursement obligations.
Principal amounts borrowed are payable on the maturity date. Alta Mesa has a choice of borrowing in Eurodollars or at the base rate, with such borrowings bearing interest, payable quarterly for base rate loans and one month, three month or six month periods for Eurodollar loans. Eurodollar loans bear interest at a rate per annum equal to the rate appearing on the Reuters Reference LIBOR01 page as the London Interbank Offered Rate (LIBOR), for deposits in dollars at 11:00 a.m. (London, England time) for one, three, or six months plus an
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applicable margin ranging from 200 to 300 basis points. Base rate loans bear interest at a rate per annum equal to the greatest of (i) the agent bank’s reference rate, (ii) the federal funds effective rate plus 50 basis points and (iii) the rate for one month Eurodollar loans plus 1%, plus an applicable margin ranging from 100 to 200 basis points. The next scheduled redetermination of Alta Mesa’s borrowing base is on April 1, 2018. Alta Mesa’s borrowing base may be reduced in connection with the next redetermination of its borrowing base. The amounts outstanding under the Alta Mesa Credit Facility are secured by first priority liens on substantially all of Alta Mesa’s and its material operating subsidiaries’ oil and natural gas properties and associated assets and all of the stock of Alta Mesa’s material operating subsidiaries that are guarantors of the Alta Mesa Credit Facility. Additionally, SRII Opco and Alta Mesa GP will pledge their respective limited partner interests in Alta Mesa as security for Alta Mesa’s obligations. If an event of default occurs under the Alta Mesa Credit Facility, the administrative agent will have the right to proceed against the pledged capital stock and take control of substantially all of the assets of Alta Mesa and its material operating subsidiaries that are guarantors.
The Alta Mesa Credit Facility contains restrictive covenants that may limit Alta Mesa’s ability to, among other things, incur additional indebtedness, sell assets, guaranty or make loans to others, make investments, enter into mergers, make certain payments and distributions, enter into or be party to hedge agreements, amend its organizational documents, incur liens and engage in certain other transactions without the prior consent of the lenders. The Alta Mesa Credit Facility permits Alta Mesa to make distributions to any parent entity (i) to pay for reimbursement of third-party costs and expenses that are general and administrative expenses incurred in the ordinary course of business by such parent entity or (ii) in order to permit such parent entity to (x) make permitted tax distributions and (y) pay the obligations under the Tax Receivable Agreement (as defined below).
The Alta Mesa Credit Facility also requires Alta Mesa to maintain the following two financial ratios:
| • | a current ratio, tested quarterly, commencing with the fiscal quarter ending June 30, 2018, of Alta Mesa’s consolidated current assets to its consolidated current liabilities of not less than 1.0 to 1.0 as of the end of each fiscal quarter; and |
| • | a leverage ratio, tested quarterly, commencing with the fiscal quarter ending June 30, 2018, of Alta Mesa’s consolidated debt (other than obligations under hedge agreements) as of the end of such fiscal quarter to its consolidated EBITDAX over the four quarter period then ended of not greater than 4.0 to 1.0. |
The foregoing description of the Alta Mesa Credit Facility is a summary only and is qualified in its entirety by reference to the Alta Mesa Credit Facility, a copy of which is attached as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference.
Kingfisher Credit Agreement Amendment
On the Closing Date, Kingfisher entered into that certain First Amendment to Credit Agreement and Limited Consent (the “Kingfisher Amendment”), which amends the Credit Agreement, dated as of August 8, 2017, among Kingfisher, each of the lenders from time to time party thereto and ABN AMRO Capital USA LLC, as administrative agent and LC Issuer (the “Kingfisher Credit Agreement”). The Kingfisher Amendment, among other things, (1) permits the Business Combination, and (2) provides for the obligations under the Kingfisher Credit Agreement to be secured by a pledge of the equity interests in Kingfisher owned by SRII Opco.
The foregoing description of the Kingfisher Amendment is a summary only and is qualified in its entirety by reference to the Kingfisher Amendment, a copy of which is attached as Exhibit 10.3 to this Current Report on Form 8-K and is incorporated herein by reference.
Amended and Restated Limited Partnership Agreement of SRII Opco
At the Closing, we, SRII Opco GP and the Contributors entered into SRII Opco’s amended and restated agreement of limited partnership (the “SRII Opco LPA”), which sets forth, among other things, the rights and obligations of the general partner and limited partners of SRII Opco. Under the SRII Opco LPA, the Contributors became limited partners of SRII Opco and SRII Opco GP continued as the sole general partner of SRII Opco. As
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the sole general partner, SRII Opco GP has the ability to control all of the day-to-day business affairs and decision making of SRII Opco without the approval of any other partner, unless otherwise stated in the SRII Opco LPA. For example, SRII Opco GP cannot take any action that would result in the failure of SRII Opco to be taxable as a partnership for federal income tax purposes without the approval of the other partners. Pursuant to the terms of the SRII Opco LPA, SRII Opco GP cannot be removed as the general partner of SRII Opco except by its election. The material terms of the SRII Opco LPA are described in Silver Run’s definitive Proxy Statement, dated January 19, 2018 (the “Proxy Statement”), relating to the special meeting of Silver Run’s stockholders held on February 6, 2018 (the “Special Meeting”) in the section entitled “Proposal No. 1—The Business Combination Proposal—Related Agreements—Agreements Related to the Contribution Agreements—Amended and Restated Agreement of Limited Partnership of SRII Opco,” which is incorporated herein by reference.
The foregoing description of the SRII Opco LPA is a summary only and is qualified in its entirety by reference to the SRII Opco LPA, a copy of which is attached as Exhibit 10.4 to this Current Report on Form 8-K and is incorporated herein by reference.
Registration Rights Agreement
In connection with the Closing, on the Closing Date, the Company entered into a registration rights agreement (the “Registration Rights Agreement”) with the Contributors, pursuant to which such parties will be entitled to certain registration rights relating to shares of our Class A Common Stock, par value $0.0001 per share (the “Class A Common Stock”), issuable upon the future redemption or exchange by the Contributors of their common units representing limited partner interests in SRII Opco (the “SRII Opco Common Units”). The material provisions of the Registration Rights Agreement are described in the Proxy Statement in the section entitled “Proposal No. 1—The Business Combination Proposal—Related Agreements—Agreements Related to the Contribution Agreements—Registration Rights Agreement,” which is incorporated herein by reference.
The foregoing description of the Registration Rights Agreement is a summary only and is qualified in its entirety by reference to the Registration Rights Agreement, a copy of which is attached as Exhibit 4.1 to this Current Report on Form 8-K and is incorporated herein by reference.
Amendment to IPO Registration Rights Agreement
In connection with the Closing, on the Closing Date, the Company entered into Amendment No. 1 (the “Registration Rights Amendment”) to the Registration Rights Agreement, dated as of March 23, 2017 (the “Original Agreement”), by and among the Company, Silver Run Sponsor II, LLC, a Delaware limited liability company (the “Sponsor”), and affiliate of Riverstone Investment Group LLC (“Riverstone”), and the other holders party thereto. The Registration Rights Amendment amends and restates the cutback provisions in the Original Agreement relating to the holders’ piggyback registration rights.
The foregoing description of the Registration Rights Amendment is a summary only and is qualified in its entirety by reference to the Registration Rights Amendment, a copy of which is attached as Exhibit 4.2 to this Current Report on Form 8-K and is incorporated herein by reference.
Tax Receivable Agreement
On the Closing Date, we entered into a tax receivable agreement (the “Tax Receivable Agreement”) with SRII Opco, the Alta Mesa Contributor and the Riverstone Contributor. The Tax Receivable Agreement generally provides for the payment by us to the Alta Mesa Contributor and the Riverstone Contributor and their respective permitted transferees of 85% of the amount of net cash savings, if any, in U.S. federal, state and local income tax that we actually realize (or are deemed to realize in certain circumstances) in periods after the Business Combination as a result of (i) certain tax basis increases resulting from the exchange of SRII Opco Common Units for Class A Common Stock (or, in certain circumstances, cash) pursuant to the redemption right or our right to effect a direct exchange of SRII Opco Common Units under the SRII Opco LPA, other than such tax basis increases allocable to assets held by Kingfisher or otherwise used in Kingfisher’s midstream business, and (ii) interest paid or deemed to be paid by us as a result of, and additional tax basis arising from, any payments we make under the Tax Receivable
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Agreement. We will retain the benefit of the remaining 15% of these cash savings. The material terms of the Tax Receivable Agreement are described in the Proxy Statement in the section entitled “Proposal No. 1—The Business Combination Proposal—Related Agreements—Agreements Related to the Alta Mesa Contribution Agreement—Tax Receivable Agreement,” which is incorporated herein by reference.
The foregoing description of the Tax Receivable Agreement is a summary only and is qualified in its entirety by reference to the Tax Receivable Agreement, a copy of which is attached as Exhibit 10.5 to this Current Report on Form 8-K and is incorporated herein by reference.
Restrictive Covenant Agreement
On the Closing Date, we entered into a restrictive covenant agreement (the “Restrictive Covenant Agreement”) with Asset Risk Management, LLC, a Delaware limited liability company (“ARM”), the current operator of Kingfisher’s assets. Pursuant to the Restrictive Covenant Agreement, ARM has agreed to not conduct certain midstream services in Kingfisher, Garfield, Major, Blaine and Logan Counties, Oklahoma and certain townships in Canadian County, Oklahoma (for a period of 18 months after the Closing Date). The material terms of the Restrictive Covenant Agreement are described in the Proxy Statement in the section entitled “Proposal No. 1—The Business Combination Proposal—Related Agreements—Agreements Related to the Kingfisher Contribution Agreement—Restrictive Covenant Agreement,” which is incorporated herein by reference.
The foregoing description of the Restrictive Covenant Agreement is a summary only and is qualified in its entirety by reference to the Restrictive Covenant Agreement, a copy of which is attached as Exhibit 10.6 to this Current Report on Form 8-K and is incorporated herein by reference.
Indemnity Agreements
On the Closing Date, we entered into indemnity agreements with Messrs. David M. Leuschen, Pierre F. Lapeyre, Jr., William W. McMullen, Don Dimitrievich and Donald R. Sinclair, each of whom became a director following the Business Combination, and Messrs. Harlan H. Chappelle, Michael E. Ellis, Michael A. McCabe, David Murrell, Homer “Gene” Cole and Ronald J. Smith, each of who became executive officers and/or directors of the Company following the Business Combination. In addition, we amended the indemnity agreements previously entered into with Messrs. Jim T. Hackett, William D. Gutermuth and Jeffrey H. Tepper and Ms. Diana J. Walters to make certain changes to reflect the Closing. Each indemnity agreement provides that, subject to limited exceptions, and among other things, we will indemnify the director or executive officer to the fullest extent permitted by law for claims arising in his or her capacity as our director or officer.
The foregoing descriptions of the indemnity agreements and indemnity agreement amendments are a summary only and are qualified in their entirety by reference to the form of indemnity agreement and form of indemnity agreement amendment, copies of which are attached as Exhibit 10.7 and Exhibit 10.8 to this Current Report on Form 8-K, respectively, and are incorporated herein by reference.
Management Services Agreement
On the Closing Date, Alta Mesa entered into a management services agreement (the “Management Services Agreement”) with High Mesa, Inc. (“High Mesa”). Under the Management Services Agreement, during the 180-day period following the Closing (the “Initial Term”), Alta Mesa will provide certain administrative, management and operational services necessary to manage the business of High Mesa and its subsidiaries (the “Services”), in each case, subject to and in accordance with an approved budget. Thereafter, the Management Services Agreement will automatically renew for additional consecutive 180-day periods (each, a “Renewal Term”), unless terminated by either party upon at least 90 days’ written notice to the other party prior to the end of the Initial Term or any Renewal Term. For a period of 60 days following the expiration of the term, Alta Mesa is obligated to assist High Mesa with the transition of the Services from Alta Mesa to a successor service provider. As compensation for the Services, including during any transition to a successor service provider, High Mesa will pay Alta Mesa each month (i) a management fee of $10,000, (ii) an amount equal to Alta Mesa’s costs and expenses incurred in connection with providing the Services as provided for in the approved budget and (iii) an amount equal to Alta Mesa’s costs
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and expenses incurred in connection with any emergency. The material terms of the Management Services Agreement are described in the Proxy Statement in the section entitled “Proposal No. 1—The Business Combination Proposal—Related Agreements—Agreements Related to the Alta Mesa Contribution Agreement—Management Services Agreement,” which is incorporated herein by reference.
The foregoing description of the Management Services Agreement is a summary only and is qualified in its entirety by reference to the Management Services Agreement, a copy of which is attached as Exhibit 10.9 to this Current Report on Form 8-K and is incorporated herein by reference.
Voting Agreement
Following the Closing, certain existing owners of Alta Mesa, including Mr. Chappelle, Mr. Ellis and certain affiliates of Bayou City Energy Management, LLC, a Delaware limited liability company (“Bayou City”), and HPS Investment Partners, LLC, a Delaware limited liability company (“HPS”), will own an aggregate 10% voting interest in Alta Mesa GP. On the Closing Date, these existing owners entered into an amended and restated voting agreement (the “A&R Voting Agreement”) with SRII Opco and the Alta Mesa GP, pursuant to which such existing owners agreed to vote their interests in Alta Mesa GP as directed by SRII Opco and appointed SRII Opco as their respective proxy and attorney-in-fact with respect to any voting matters related to their respective interests in Alta Mesa GP. As a result of the A&R Voting Agreement, SRII Opco will effectively have a 100% voting interest in Alta Mesa GP. The A&R Voting Agreement will continue in force until SRII Opco elects to terminate the agreement or, with respect to each existing owner individually, such existing owner no longer owns a voting interest in Alta Mesa GP.
The foregoing description of the A&R Voting Agreement is a summary only and is qualified in its entirety by reference to the A&R Voting Agreement, a copy of which is attached as Exhibit 10.10 to this Current Report on Form 8-K and is incorporated herein by reference.
Transition Services Agreement
On the Closing Date, Kingfisher entered into an operating transition services agreement (the “Transition Services Agreement”) with ARM. Under the Transition Services Agreement, during the six-month period following the Closing, ARM will provide certain operational services with respect to certain gas gathering and processing systems and crude oil gathering facilities that are owned, or may be acquired, by Kingfisher in Kingfisher County, Oklahoma (the “TSA Services”), in each case, subject to and in accordance with an approved budget. As compensation for the TSA Services, Kingfisher will pay ARM each month (i) a management fee of $10,000, (ii) an amount equal to ARM’s costs and expenses incurred in connection with providing the TSA Services as provided for in the approved budget and (iii) an amount equal to ARM’s costs and expenses incurred in connection with any emergency. The material terms of the Transition Services Agreement are described in the Proxy Statement in the section entitled “Proposal No. 1—The Business Combination Proposal—Related Agreements—Agreements Related to the Kingfisher Contribution Agreement—Transition Services Agreement,” which is incorporated herein by reference.
The foregoing description of the Transition Services Agreement is a summary only and is qualified in its entirety by reference to the Transition Services Agreement, a copy of which is attached as Exhibit 10.11 to this Current Report on Form 8-K and is incorporated herein by reference.
Item 2.01. Completion of Acquisition or Disposition of Assets.
The disclosure set forth under “Introductory Note” above is incorporated in this Item 2.01 by reference. The material provisions of the Contribution Agreements are described in the Proxy Statement in the section entitled “Proposal No. 1—The Business Combination Proposal—The Contribution Agreements,” which is incorporated herein by reference.
The Business Combination was approved by Silver Run’s stockholders at the Special Meeting. At the Special Meeting, 112,232,759 shares of Silver Run Class A Common Stock and Class B Common Stock, par value $0.0001 per share (the “Class B Common Stock” and, together with the Class A Common Stock, the “common
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stock”), were voted in favor of the proposal to approve the Business Combination, 1,785,365 shares of Silver Run common stock were voted against the proposal, and holders of 300 shares of Silver Run common stock abstained from voting on the proposal. Silver Run’s public stockholders had the opportunity, in connection with the Closing, to redeem shares of Class A Common Stock pursuant to the terms of Silver Run’s amended and restated certificate of incorporation (the “Charter”), and public stockholders holding 3,270 shares of Class A Common Stock elected to have such shares redeemed for an aggregate amount of approximately $32,944. In addition, in connection with the Closing and in accordance with the Charter, all of the 25,875,000 outstanding shares of Class B Common Stock were converted into shares of Class A Common Stock on a one-for-one basis.
At Closing, pursuant to the terms of the Contribution Agreements:
| • | SRII Opco and Silver Run issued to the Alta Mesa Contributor 138,402,398 SRII Opco Common Units and 138,402,398 shares of Class C Common Stock, par value $0.0001 per share (the “Class C Common Stock”), respectively, and Silver Run contributed $400 million in cash to Alta Mesa; |
| • | SRII Opco and Silver Run issued to the Kingfisher Contributor 55,000,000 SRII Opco Common Units and 55,000,000 shares of Class C Common Stock, respectively, and SRII Opco paid to the Kingfisher Contributor approximately $814.8 million in cash; and |
| • | SRII Opco and Silver Run issued to the Riverstone Contributor 20,000,000 SRII Opco Common Units and 20,000,000 shares of Class C Common Stock, respectively. |
Pursuant to the Alta Mesa Contribution Agreement and the Kingfisher Contribution Agreement, for a period of seven years following the Closing, the Alta Mesa Contributor and the Kingfisher Contributor will be entitled to receive an aggregate of up to $800 million and $200 million in earn-out consideration, respectively, to be paid in the form of SRII Opco Common Units (and a corresponding number of shares of Class C Common Stock) if the 20-day volume-weighted average price of the Class A Common Stock equals or exceeds specified prices as described in the Proxy Statement.
Silver Run also issued to Riverstone VI SR II Holdings, L.P. (“Fund VI Holdings”), an affiliate of Riverstone, 40,000,000 shares of Class A Common Stock and warrants to purchase 13,333,333 shares of Class A Common Stock, in exchange for $400 million pursuant to that certain Forward Purchase Agreement, dated as of March 17, 2017 (the “Forward Purchase Agreement”), by and between Silver Run and Fund VI Holdings. A copy of the Forward Purchase Agreement, which was filed as Exhibit 10.9 to Silver Run’s Registration Statement on Form S-1/A (File No. 333-216409) filed with the SEC on March 17, 2017, is incorporated herein by reference.
As of the Closing Date and following the completion of the Business Combination, the Company had the following outstanding securities: (a) 169,371,730 shares of Class A Common Stock, (b) 213,402,398 shares of Class C Common Stock held by the Contributors, (c) warrants exercisable for 62,966,666 shares of Class A Common Stock, (d) one share of Series A Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”), held by each of Bayou City, HPS and AM Equity Holdings, LP, a Texas limited partnership (“AM Management”), and (e) one share of Series B Preferred Stock, par value $0.0001 per share (the “Series B Preferred Stock”), held by the Riverstone Contributor. As of the Closing Date and following the completion of the Business Combination, the Contributors owned an aggregate of 213,402,398 SRII Opco Common Units exchangeable on a one-for-one basis for shares of Class A Common Stock. Upon the exchange by any Contributor of SRII Opco Common Units for shares of Class A Common Stock, a corresponding number of shares of Class C Common Stock held by such Contributor will be cancelled.
As of the Closing Date and following the completion of the Business Combination, the ownership interests of the Company’s stockholders were as follows:
| • | public stockholders owned 103,496,730 shares of Class A Common Stock, representing an approximate 61.1% economic interest and an approximate 27.0% voting interest; |
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| • | the holders of our founder shares, including our Sponsor and the Company’s independent directors prior to the Closing owned 25,875,000 shares of Class A Common Stock, representing an approximate 15.3% economic interest and an approximate 6.8% voting interest; |
| • | the Alta Mesa Contributor owned 138,402,398 shares of Class C Common Stock, representing a 0% economic interest and an approximate 36.2% voting interest; |
| • | the Kingfisher Contributor owned 55,000,000 shares of Class C Common Stock, representing a 0% economic interest and an approximate 14.4% voting interest; |
| • | the Riverstone Contributor owned 20,000,000 shares of Class C Common Stock, representing a 0% economic interest and an approximate 5.2% voting interest; and |
| • | Fund VI Holdings owned 40,000,000 shares of Class A Common Stock, representing an approximate 23.6% economic interest and an approximate 10.4% voting interest. |
Prior to the Closing, Silver Run was a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) with no operations, formed as a vehicle to effect a business combination with one or more operating businesses. After the Closing, the Company became a holding company whose assets primarily consist of interests in its subsidiaries, SRII Opco GP and SRII Opco. The following information is provided about the business of the Company reflecting the consummation of the Business Combination.
Cautionary Note Regarding Forward-Looking Statements
The Company makes forward-looking statements in this Current Report on Form 8-K. These forward-looking statements relate to expectations for future financial performance, business strategies or expectations for our business. Specifically, forward-looking statements may include statements relating to:
| • | the benefits of the Business Combination; |
| • | the future financial performance of the Company following the Business Combination; |
| • | changes in Alta Mesa’s and Kingfisher’s strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans; |
| • | expansion plans and opportunities; and |
| • | other statements preceded by, followed by or that include the words “estimate,” “plan,” “project,” “forecast,” “intend,” “expect,” “anticipate,” “believe,” “seek,” “target” or similar expressions. |
These forward-looking statements are based on information available as of the date of this Current Report on Form 8-K, and current expectations, forecasts and assumptions, and involve a number of risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing the Company’s views as of any subsequent date, and the Company does not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ include:
| • | the risk that the Business Combination disrupts our, Alta Mesa’s or Kingfisher’s current plans and operations; |
| • | the ability to recognize the anticipated benefits of the Business Combination, which may be affected by, among other things, competition and the ability of the combined business to grow and manage growth profitably; |
| • | costs related to the Business Combination; |
| • | changes in applicable laws or regulations; |
| • | the possibility that the Company, Alta Mesa or Kingfisher may be adversely affected by other economic, business, and/or competitive factors; and |
| • | other risks and uncertainties set forth in the Proxy Statement in the section entitled “Risk Factors” beginning on page 43 of the Proxy Statement. |
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Business and Properties
The business and properties of Alta Mesa and Kingfisher prior to the Business Combination are described in the Proxy Statement in the sections entitled “Business of Alta Mesa” beginning on page 257 and “Business of Kingfisher” beginning on page 305, which are incorporated herein by reference. The business of Silver Run prior to the Business Combination is described in the Proxy Statement in the section entitled “Business of Silver Run” beginning on page 206, which is incorporated herein by reference.
Risk Factors
The risk factors related to the Company’s business and operations are described in the Proxy Statement in the section entitled “Risk Factors” beginning on page 43, which is incorporated herein by reference.
Selected Historical Financial Information of Alta Mesa and Kingfisher
The selected historical financial information of Alta Mesa for the three years ended December 31, 2016 and the nine months ended September 30, 2017 is provided in the Proxy Statement in the section entitled “Selected Historical Financial Information of Alta Mesa” beginning on page 36, which is incorporated herein by reference.
The selected historical financial information of Kingfisher as of December 31, 2016 and 2015 and for the year ended December 31, 2016 and the period from Kingfisher’s inception (January 30, 2015) through December 31, 2015 and the nine months ended September 30, 2017 is provided in the Proxy Statement in the section entitled “Selected Historical Financial Information of Kingfisher” beginning on page 39, which is incorporated herein by reference.
Unaudited Pro Forma Condensed Consolidated Combined Financial Information
The unaudited pro forma condensed consolidated combined financial information of Silver Run for the year ended December 31, 2016 and the nine months ended September 30, 2017 included in the Proxy Statement beginning on page 97 is incorporated herein by reference.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Management’s discussion and analysis of financial condition and results of operations of Alta Mesa and Kingfisher prior to the Business Combination is included in the Proxy Statement in the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Alta Mesa” beginning on page 226 and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Kingfisher” beginning on page 291, respectively, which are incorporated herein by reference. Management’s discussion and analysis of financial condition and results of operations of Silver Run prior to the Business Combination is described in the Proxy Statement in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Silver Run” beginning on page 203, which is incorporated herein by reference.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information known to the Company regarding ownership of shares of voting securities of the Company, which consists of Class A Common Stock and Class C Common Stock, as of February 9, 2018:
| • | each person who is known by the Company to own beneficially more than 5% of the outstanding shares of the Company’s voting securities; |
| • | each of the Company’s current executive officers and directors; and |
| • | all current executive officers and directors of the Company, as a group. |
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Beneficial ownership is determined according to the rules of the SEC, which generally provide that a person has beneficial ownership of a security if he, she or it possesses sole or shared voting or investment power over that security or has the right to acquire such securities within 60 days, including options and warrants that are currently exercisable or exercisable within 60 days.
The beneficial ownership of voting securities of the Company is based on 382,774,128 shares of Class A Common Stock and Class C Common Stock issued and outstanding in the aggregate as of February 9, 2018.
Unless otherwise indicated, we believe that all persons named in the table below have sole voting and investment power with respect to all shares of voting securities beneficially owned by them.
|
Name and Address of Beneficial Owners(1) |
Number of
Shares of Voting Securities |
Percent of
Class % |
||||||
|
5% or Greater Stockholders |
||||||||
|
Investment vehicles affiliated with Riverstone Holdings LLC(2) |
85,776,000 | 22.4 | % | |||||
|
Highfields Capital Management(3) |
11,500,000 | 3.0 | % | |||||
|
Orbis Allan Gray LTD(4) |
11,286,508 | 2.9 | % | |||||
|
Baupost Group LLC(5) |
6,615,552 | 1.7 | % | |||||
|
High Mesa Holdings, LP(6)(8) |
138,402,398 | 36.2 | % | |||||
|
KFM Holdco, LLC(7)(8) |
55,000,000 | 14.4 | % | |||||
|
Directors and Executive Officers |
||||||||
|
James T. Hackett |
— | — | ||||||
|
Harlan H. Chappelle |
— | — | ||||||
|
Michael E. Ellis(6)(8) |
— | — | ||||||
|
Michael A. McCabe |
— | — | ||||||
|
David M. Leuschen(2) |
— | — | ||||||
|
Pierre F. Lapeyre Jr.(2) |
— | — | ||||||
|
William W. McMullen |
— | — | ||||||
|
Don Dimitrievich |
— | — | ||||||
|
William D. Gutermuth |
33,000 | * | ||||||
|
Jeffrey H. Tepper |
33,000 | * | ||||||
|
Diana J. Walters |
33,000 | * | ||||||
|
Donald R. Sinclair |
— | — | ||||||
|
David Murrell |
— | — | ||||||
|
Homer “Gene” Cole |
— | — | ||||||
|
Ronald J. Smith |
— | — | ||||||
|
All directors and executive officers, as a group (15 individuals) |
99,000 | * | ||||||
| * | Less than one percent. |
| (1) | Unless otherwise noted, the business address of each of the following entities or individuals is c/o Alta Mesa Resources, Inc., 15021 Katy Freeway, Suite 400, Houston, Texas 77094. |
| (2) | Includes 16,548,894 shares of Class A Common Stock held of record by Sponsor, 18,522,000 shares of Class A Common Stock held of record by Riverstone VI SR II Holdings, L.P. (“SR II Holdings”), 25,857,148 shares of Class A Common Stock held by Riverstone AMR Partners, L.P. (“AMR Partners”), 1,720,243 shares of Class A Common Stock held of record by Riverstone AMR Partners-U, LLC (“AMR Partners-U”), 3,127,715 shares of Class A Common Stock held of record by Riverstone AMR Partners-T, L.P. (“AMR Partners-T”) and 20,000,000 shares of Class C Common Stock held of record by Riverstone VI Alta Mesa Holdings, L.P. (“Riverstone Contributor” and, together with the Sponsor, SR II Holdings, AMR Partners, AMR Partners-U and AMR Partners-T, the “Riverstone Funds”). David M. Leuschen and Pierre F. Lapeyre, Jr. are the managers of Riverstone Management Group, L.L.C. (“Riverstone Management”), which is the general partner of Riverstone/Gower Mgmt Co Holdings, L.P. (“Riverstone/Gower”), which is the sole member of Riverstone Holdings LLC (“Holdings”), which is the sole shareholder of Riverstone Energy GP VI Corp, which is the managing member of Riverstone Energy GP VI, LLC (“Riverstone Energy GP”) which is the general partner of Riverstone Energy Partners VI, L.P., which is the general partner of AMR Partners, the manager of AMR Partners-U and the managing member of Riverstone Energy VI Holdings GP, LLC, which is the general partner of each of the Riverstone Contributor and SR II Holdings, which is the sole and managing member of Silver Run. Riverstone Energy GP is also the sole member of Riverstone Energy Partners VI (Non-U.S.), LLC, which is the general partner of AMR Partners-T, L.P. Riverstone Energy GP is managed by a managing committee consisting of Pierre F. Lapeyre, Jr., David M. Leuschen, E. Bartow Jones, N. John Lancaster, Baran Tekkora and Robert M. Tichio. As such, each of Riverstone Energy GP, Riverstone Energy GP VI Corp, Holdings, Riverstone/Gower, Riverstone Management, Mr. Leuschen and Mr. Lapeyre may be deemed to have or share |
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| beneficial ownership of the securities held directly by the Riverstone Funds. Each such entity or person disclaims any such beneficial ownership. The business address of each of these entities and individuals is c/o Riverstone Holdings LLC, 712 Fifth Avenue, 36th Floor, New York, NY 10019. |
| (3) | Based on information contained in Schedule 13G filed on April 4, 2017 by Highfields Capital Management LP (“Highfields”). Highfields’ address is 200 Clarendon Street, 59th Floor, Boston, Massachusetts 02116. |
| (4) | Based on information contained in Schedule 13G filed on April 10, 2017 by Orbis Investment Management Limited (“OIML”) and Orbis Investment Management (U.S.), LLC (“OIMUS”). OIML’s address is Orbis House, 25 Front Street, Hamilton Bermuda HM11 and OIMUS’s address is 600 Montgomery Street, Suite 3800, San Francisco, CA 94111, USA. |
| (5) | Based on information contained on Form 13F filed on August 11, 2017 by Baupost Group L.L.C. (“Baupost”). Baupost’s address is 10 St James Avenue, Suite 1700, Boston, MA 02116. |
| (6) | The sole general partner of the Alta Mesa Contributor is High Mesa Holdings GP, LLC (“High Mesa GP”). High Mesa, Inc. (“High Mesa”) holds a majority of the outstanding limited partner interests in the Alta Mesa Contributor and all of the outstanding limited liability company interests in High Mesa GP. The interests of the Alta Mesa Contributor are beneficially owned (either directly or through interests in High Mesa) by three groups, each consisting of affiliated parties: (i) AM MME Holdings, LP, Galveston Bay Resources Holdings, LP, Petro Acquisitions Holdings, LP, Petro Operating Company Holdings, Inc., Harlan H. Chappelle, Gene Cole, Mike McCabe, Dale Hayes, AM Equity Holdings, LP and MME Mission Hope, LLC (collectively, the “Management Holders”), (ii) HPS Investment Partners, LLC, Mezzanine Partners II Delaware Subsidiary, LLC, Offshore Mezzanine Partners Master Fund II, L.P., Institutional Mezzanine Partners II Subsidiary, L.P., AP Mezzanine Partners II, L.P., The Northwestern Mutual Life Insurance Company, The Northwestern Mutual Life Insurance Company for its Group Annuity Separate Account, Northwestern Mutual Capital Strategic Equity Fund III, LP, KCK-AMIH, Ltd. and United Insurance Company of America, Jade Real Assets Fund, L.P. (collectively, the “HPS Alta Mesa Holders”) and (iii) Bayou City Energy Management, LLC, BCE-MESA Holdings LLC, and BCE-AMH Holdings, LLC (collectively, the “Bayou City Holders”). The Class C Common Stock owned by the Alta Mesa Contributor is subject to a voting agreement pursuant to which the Alta Mesa Contributor will vote the shares of Class C Common Stock proportionately in accordance with the express direction of the HPS Alta Mesa Holders, the Bayou City Holders and the Management Holders, respectively, based upon the relative ownership in the Alta Mesa Contributor of each such group. Mr. Ellis (who is our Chief Operating Officer—Upstream and one of our directors), through his ownership in AM MME Holdings, LP, Galveston Bay Resources Holdings, LP, Petro Acquisitions Holdings, LP, Petro Operating Company Holdings, Inc. and AM Equity Holdings, LP, will effectively control the vote of the Management Holders, and as a result, may be deemed to beneficially own the Class C Common Stock beneficially owned by each such entity. William W. McMullen ( who is one of our directors) through his ownership of the Bayou City Holders may be deemed to beneficially own the shares beneficially owned by the Bayou City Holders. Mr. Ellis, Mr. McMullen, the Management Holders, the HPS Alta Mesa Holders and the Bayou City Holders disclaim beneficial ownership of the shares of the Alta Mesa Contributor and the other Alta Mesa Contributor holders except to the extent of their respective pecuniary interests therein. |
| (7) | The members of the Kingfisher Contributor are (i) ARM-M I, LLC, a Delaware limited liability company (“ARMMI”), (ii) HMS Kingfisher HoldCo, LLC, a Delaware limited liability company (“HMS”), and (iii) Mezzanine Partners II Delaware Subsidiary, LLC, a Delaware limited liability company, KFM Offshore, LLC, a Delaware limited liability company, KFM Institutional, LLC, a Delaware limited liability company, AP Mezzanine Partners II, L.P., a Delaware limited partnership, and Jade Real Assets Fund, L.P., a Delaware limited partnership, each of which is directly or indirectly managed by HPS Investment Partners, LLC (collectively, the “HPS Kingfisher Holders”). ARMMI, HMS and the HPS Kingfisher Holders disclaim beneficial ownership of the shares held by the Kingfisher Contributor, except to the extent of their respective pecuniary interests therein. The business address of the Kingfisher Contributor is 20329 State Highway 249, Suite 450, Houston, Texas, 77070. |
| (8) | Reflects shares of Class C Common Stock. |
Directors
On the Closing Date, in connection with the Business Combination, the size of the Company’s board of directors (the “Board”) was increased from four members to eleven members. Messrs. William D. Gutermuth, Donald R. Sinclair and David M. Leuschen were appointed to serve as Class I directors, with terms expiring at the Company’s annual meeting of stockholders in 2018; Messrs. Jeffrey H. Tepper, Michael E. Ellis and Pierre F. Lapeyre Jr. and Ms. Diana J. Walters were appointed to serve as Class II directors, with a term expiring at the Company’s annual meeting of stockholders in 2019; and Messrs. James T. Hackett, Harlan H. Chappelle, Don Dimitrievich and William W. McMullen were appointed to serve as Class III directors, with a term expiring at the Company’s annual meeting of stockholders in 2020. Information with respect to each of the Company’s directors (other than Mr. Sinclair) is set forth in the Proxy Statement in the section entitled “Officers and Directors of Silver Run” beginning on page 209, which is incorporated herein by reference, and information with respect to Mr. Sinclair is provided below.
Donald R. Sinclair. Mr. Sinclair has been appointed to serve on the Board effective upon the Closing. Mr. Sinclair has over 30 years of experience in the oil and gas industry, with a focus on marketing and trading, particularly in the midstream sector. Mr. Sinclair currently serves as the Chairman of the Board of Directors and President of WTX Pumping Services LLC. He also currently serves as a senior advisor to Anadarko Petroleum Corporation and as a senior advisor to Western Gas Equity Holdings, LLC (“WES GP”), the general partner of Western Gas Equity Partners LP. From 2009 to 2017, Mr. Sinclair served as the President and Chief Executive Officer of WES GP and as a member of the board of directors of WES GP. From 2010 to 2016, he also served as the
11
Vice President and Senior Vice President of Anadarko Petroleum Corporation. In 2003, Mr. Sinclair co-founded Ceritas Energy, LLC (“Ceritas”), and served as the President and Chief Executive Officer of Ceritas from 2003 to 2009. From 1998 to 2003, Mr. Sinclair was involved in energy industry consulting and the management of personal business interests. From 1997 to 1998, he served as the President of Duke Energy Trading and Marketing LLC (“Duke”). Prior to joining Duke, Mr. Sinclair served as Senior Vice President of Tenneco Energy, a unit of Tenneco Inc. (“Tenneco”), and as President of Tenneco Energy Resources Corporation. Prior to joining Tenneco, Mr. Sinclair served for eight years in various officer positions with Dynegy Inc. (formerly NGC Corporation), including as Senior Vice President and Chief Risk Officer, during which time he was in charge of all risk management activities and commercial operations. Mr. Sinclair earned a Bachelor of Business Administration degree from Texas Tech University. Mr. Sinclair was selected to serve on the Board due to his significant leadership experience and his extensive investment experience in the oil and gas industry.
Since the beginning of the Company’s last fiscal year through the present, there have been no transactions with the Company, and there are currently no proposed transactions with the Company, in which the amount involved exceeds $120,000 and in which Mr. Sinclair had or will have a direct or indirect material interest within the meaning of Item 404(a) of Regulation S-K. No arrangement or understanding exists between Mr. Sinclair and any other person pursuant to which Mr. Sinclair was selected as a director of the Company.
Independence of Directors
Under the listing rules of The NASDAQ Capital Market (“NASDAQ”), we are required to have a majority of independent directors serving on our Board. The Company’s Board has determined that Ms. Diana J. Walters and Messrs. Don Dimitrievich, William D. Gutermuth, Jeffrey H. Tepper, Donald R. Sinclair, David M. Leuschen and Pierre F. Lapeyre, Jr. are independent within the meaning of NASDAQ Rule 5605(a)(2).
Committees of the Board of Directors
Following the Closing, the standing committees of the Company’s Board consist of an audit committee (the “Audit Committee”), a compensation committee (the “Compensation Committee”) and a nominating and corporate governance committee (the “Nominating and Corporate Governance Committee”). Each of the committees reports to the Board. The composition, duties and responsibilities of these committees are set forth below.
Audit Committee . The principal functions of the Company’s Audit Committee are detailed in the Company’s Audit Committee charter, which is available on the Company’s website, and include:
| • | the appointment, compensation, retention, replacement, and oversight of the work of the independent auditors and any other independent registered public accounting firm engaged by the Company; |
| • | pre-approving all audit and permitted non-audit services to be provided by the independent auditors or any other registered public accounting firm engaged by the Company, and establishing pre-approval policies and procedures; |
| • | reviewing and discussing with the independent auditors all relationships the auditors have with the Company in order to evaluate their continued independence; |
| • | setting clear hiring policies for employees or former employees of the independent auditors; |
| • | setting clear policies for audit partner rotation in compliance with applicable laws and regulations; |
| • | obtaining and reviewing a report, at least annually, from the independent auditors describing (i) the independent auditor’s internal quality-control procedures and (ii) any material issues raised by the most recent internal quality-control review, or peer review, of the audit firm, or by any inquiry or investigation by governmental or professional authorities within the preceding five years respecting one or more independent audits carried out by the firm and any steps taken to deal with such issues; |
| • | reviewing and approving any related party transaction required to be disclosed pursuant to Item 404 of Regulation S-K promulgated by the SEC prior to us entering into such transaction; and |
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| • | reviewing with management, the independent auditors and our legal advisors, as appropriate, any legal, regulatory or compliance matters, including any correspondence with regulators or government agencies and any employee complaints or published reports that raise material issues regarding our financial statements or accounting policies and any significant changes in accounting standards or rules promulgated by the Financial Accounting Standards Board, the SEC or other regulatory authorities. |
Under the NASDAQ listing standards and applicable SEC rules, the Company is required to have at least three members of the Audit Committee, all of whom must be independent. Following the Closing, our Audit Committee consists of Messrs. William D. Gutermuth and Jeffrey H. Tepper and Ms. Diana J. Walters, with Ms. Diana J. Walters serving as the Chair. We believe that Messrs. William D. Gutermuth and Jeffrey H. Tepper and Ms. Diana J. Walters qualify as independent directors according to the rules and regulations of the SEC with respect to audit committee membership. We also believe that Ms. Diana J. Walters qualifies as our “audit committee financial expert,” as such term is defined in Item 401(h) of Regulation S-K.
Compensation Committee . The principal functions of the Company’s Compensation Committee are detailed in the Company’s Compensation Committee charter, which is available on the Company’s website, and include:
| • | reviewing and approving on an annual basis the corporate goals and objectives relevant to the Company’s Chief Executive Officer’s compensation, evaluating its Chief Executive Officer’s performance in light of such goals and objectives and determining and approving the remuneration (if any) of its Chief Executive Officer based on such evaluation; |
| • | reviewing and approving on an annual basis the compensation of all of the Company’s other officers; |
| • | reviewing on an annual basis the Company’s executive compensation policies and plans; |
| • | implementing and administering the Company’s incentive compensation equity-based remuneration plans; |
| • | assisting management in complying with the Company’s proxy statement and annual report disclosure requirements; |
| • | approving all special perquisites, special cash payments and other special compensation and benefit arrangements for the Company’s officers and employees; |
| • | if required, producing a report on executive compensation to be included in the Company’s annual proxy statement; and |
| • | reviewing, evaluating and recommending changes, if appropriate, to the remuneration for directors. |
Under the NASDAQ listing standards, the Company is required to have a Compensation Committee, all of whom must be independent. Following the Closing, our Compensation Committee consists of Messrs. Donald R. Sinclair and Jeffrey H. Tepper and Ms. Diana J. Walters, with Mr. Donald R. Sinclair serving as the Chair. We believe that Messrs. Donald R. Sinclair and Jeffrey H. Tepper and Ms. Diana J. Walters qualify as independent directors according to the rules and regulations of the NASDAQ with respect to compensation committee membership.
Nominating and Corporate Governance Committee. The principal functions of the Company’s Nominating and Corporate Governance Committee are detailed in the Company’s Nominating and Corporate Governance Committee charter, which is available on the Company’s website, and include:
| • | assisting the Board in identifying individuals qualified to become members of the Board, consistent with criteria approved by the Board; |
| • | recommending director nominees for election or for appointment to fill vacancies; |
| • | recommending the election of officer candidates; |
| • | monitoring the independence of Board members; |
| • | ensuring the availability of director education programs; and |
| • | advising the Board about appropriate composition of the Board and its committees. |
13
The Nominating and Corporate Governance Committee also develops and recommends to the Board corporate governance principles and practices and assists in implementing them, including conducting a regular review of our corporate governance principles and practices. The Nominating and Corporate Governance Committee oversees the annual performance evaluation of the Board and the committees of the Board and makes a report to the Board on succession planning.
Following the Closing, our Nominating and Corporate Governance Committee consists of Messrs. Donald R. Sinclair, Jeffrey H. Tepper and Ms. Diana J. Walters, with Mr. Jeffrey H. Tepper serving as the Chair.
Executive Officers
In connection with and effective as of the Closing, Mr. Thomas J. Walker resigned as the Company’s Chief Financial Officer and Mr. Stephen S. Coats resigned as the Company’s Secretary. Mr. James T. Hackett, who will no longer serve as Chief Executive Officer, was appointed by the Board to serve as Chief Operating Officer—Midstream. Also, in connection with the Closing, the following individuals were appointed by the Board as executive officers of the Company:
|
Name |
Position |
|
| Harlan H. Chappelle | Chief Executive Officer | |
| Michael E. Ellis | Chief Operating Officer—Upstream and Director | |
| Michael A. McCabe | Chief Financial Officer, Chief Compliance Officer and Secretary | |
| David Murrell | Vice President of Land and Business Development | |
| Homer “Gene” Cole | Vice President and Chief Technical Officer | |
| Ronald J. Smith | Vice President and Chief Accounting Officer |
Information with respect to Messrs. Hackett, Chappelle, Ellis and McCabe is set forth in the Proxy Statement in the section entitled “Officers and Directors of Silver Run” beginning on page 209, which is incorporated herein by reference, and information with respect to the remaining executive officers is provided below.
David Murrell. Mr. Murrell has been appointed to serve as the Company’s Vice President of Land and Business Development effective upon the Closing. Mr. Murrell has over 30 years of experience in Gulf Coast leasing, exploration and development programs, contract management and acquisitions and divestitures. Prior to Mr. Murrell’s appointment as our Vice President of Land and Business Development, Mr. Murrell served as the Vice President of Land and Business Development at Alta Mesa from 2006 until the Closing. While at Alta Mesa, he created a structured land management system, and built a team of division order analysts, lease analysts, landmen, and field representatives that facilitated Alta Mesa’s growth. Mr. Murrell earned a Bachelor of Business Administration in Petroleum Land Management from the University of Oklahoma and is a Certified Professional Landman through the Association of Professional Landmen.
Homer “Gene” Cole . Mr. Cole has been appointed to serve as the Company’s Vice President and Chief Technical Officer effective upon the Closing. Mr. Cole has over 25 years of extensive domestic and international oilfield experience in management, well completions and well stimulation design and execution. Prior to Mr. Cole’s appointment as our Vice President and Chief Technical Officer, Mr. Cole served as the Vice President and Chief Technical Officer of Alta Mesa from 2007 to the Closing. Mr. Cole started his career with Schlumberger Dowell as a Field Engineer and served from 1986 to 2007 in numerous positions of increasing responsibility with Schlumberger in the areas of field operations, engineering and management. He has a Bachelor of Science in Petroleum Engineering from Marietta College.
Ronald J. Smith . Mr. Smith has been appointed to service as the Company’s Vice President and Chief Accounting Officer effective upon the Closing. Mr. Smith has over 35 years of accounting experience, primarily in the energy industry. Prior to Mr. Smith’s appointment as our Vice President and Chief Accounting Officer, Mr. Smith served as the Vice President and Chief Accounting Officer of Alta Mesa from 2008 to the Closing. Mr. Smith has served in numerous senior level management positions including positions with Calpine Corporation and Mariner Energy. Mr. Smith holds a Bachelor of Science in Accounting from Robert Morris University, an MBA in Finance from the University of Houston and is a Certified Public Accountant.
14
Messrs. Murrell, Cole and Smith have entered into an employment agreement with the Company and have been issued awards under the LTIP The material terms of the employment agreements and LTIP awards are described in “—Director and Executive Officer Compensation” of this Current Report on Form 8-K which is incorporated herein by reference.
There are no arrangements or understandings between any of Messrs. Murrell, Cole or Smith and any other persons pursuant to which such individual was appointed as an executive officer of the Company. There are no family relationships between any of Messrs. Murrell, Cole or Smith and any director, executive officer or any person nominated or chosen by the Company to become a director or executive officer. No information is required to be disclosed with respect to Messrs. Murrell, Cole or Smith pursuant to Item 404(a) of Regulation S-K.
Indemnification of Directors and Executive Officers
Information about the indemnification of the Company’s directors and executive officers is set forth in the Proxy Statement in the section entitled “Proposal No. 1—The Business Combination Proposal—The Contribution Agreements” beginning on page 107 and in Amendment No. 3 to Silver Run’s Registration Statement on Form S-1 (File No. 333-216409) filed with the SEC on March 22, 2017, in the section entitled “Limitation on Liability and Indemnification of Officers and Directors” beginning on page 117, which are incorporated herein by reference. Please also see the information set forth under “Item 1.01. Entry into a Material Definitive Agreement—Indemnity Agreements” of this Current Report on Form 8-K.
Director and Executive Officer Compensation
Pre-Closing Compensation of Executive Officers and Directors
The compensation of Silver Run’s, Alta Mesa’s and Kingfisher’s named executive officers and directors before the consummation of the Business Combination is set forth in the Proxy Statement in the section titled “Executive Compensation” beginning on page 214, which is incorporated herein by reference.
Post-Closing Compensation of Executive Officers and Directors
After completion of the Business Combination, Mr. James T. Hackett will serve as Chairman of the Board and Chief Operating Officer—Midstream, while Messrs. Harlan H. Chappelle, Michael E. Ellis, Michael A. McCabe, David Murrell, Homer “Gene” Cole and Ronald J. Smith will serve as Chief Executive Officer; Chief Operating Officer—Upstream; Chief Financial Officer, Chief Compliance Officer and Secretary; Vice President of Land and Business Development; Vice President and Chief Technical Officer; and Vice President and Chief Accounting Officer, respectively.
Employment Agreements, Annual Base Salaries and Target Bonuses
On the Closing Date, the Company entered into a letter agreement with Mr. Hackett under which, if the Company terminates Mr. Hackett’s employment without cause or he resigns for good reason, within the meaning of and under the letter agreement, he will be entitled to full accelerated vesting of all Company equity awards granted to him during the three years following closing of the Business Combination that are subject to time-based vesting and accelerated vesting of any such Company equity awards that are subject to performance-based vesting at the target level of performance. The Board also approved an annual base salary for Mr. Hackett of $450,000, effective on the Closing Date, and a target annual bonus amount under an annual performance bonus program for 2018 of 95% of his annual base salary.
In addition, on the Closing Date, the Company entered into new employment agreements with each of Messrs. Chappelle, Ellis, McCabe, Cole, Murrell and Smith. The employment agreements supersede each executive’s previous employment agreement with Alta Mesa and are for terms of three years (or two years for Mr. Smith).
15
Mr. Chappelle’s employment agreement entitles him to receive an annual base salary of $830,000 and to participate in an annual performance bonus program with a target bonus award determined by the Board. For 2018, Mr. Chappelle’s target annual bonus amount under this program will be 125% of his annual base salary. Mr. Chappelle is also entitled to receive an annual physical and reimbursement of up to $5,000 per year for tax planning services. If the Company terminates Mr. Chappelle’s employment without cause or he resigns for good reason, within the meaning of and under his employment agreement, Mr. Chappelle will be entitled to receive (i) a prorated annual bonus for the year of termination, determined based on satisfaction of performance criteria prorated for the partial performance period, (ii) full accelerated vesting of all Company equity awards that are subject to time-based vesting, accelerated vesting of any Company equity awards that are subject to performance-based vesting at the target level of performance and full accelerated vesting of any nonqualified deferred compensation account balance or benefit, (iii) a lump-sum payment equal to the sum of $40,000 for outplacement services, two years of his annual base salary and two times the greater of his target annual bonus and the annual bonus paid to him for the prior year and (iv) payment for up to 18 months of his premiums for continued coverage in the Company’s group health plans and, thereafter, continued participation in the Company’s group health plans at his cost for up to an additional 18 months. Mr. Chappelle is also entitled to receive the amounts under clauses (i), (iii) and (iv) of the preceding sentence if his employment terminates due to his death or disability, under and within the meaning of his employment agreement. If Mr. Chappelle’s qualifying employment termination occurs during the twenty-one months following a change in control (within the meaning of the employment agreement) or, only in the case of termination without cause or resignation for good reason, during the three months prior to a change in control and is demonstrated to be in connection with the change in control, then in addition to the foregoing payments and benefits, Mr. Chappelle will be entitled to an additional lump-sum payment equal to the sum of one year of his annual base salary and one times the greater of his target annual bonus and the annual bonus paid to him for the prior year. Mr. Chappelle’s right to receive termination payments and benefits, other than a prorated annual bonus for the year of termination, is conditioned upon his executing a general release of claims in our favor. Mr. Chappelle has also agreed to refrain from competing with the Company or soliciting its customers or employees during and for a period of 12 months following his employment with the Company.
The employment agreements for Messrs. Ellis, McCabe, Cole, Murrell and Smith entitle them to receive annual base salaries of $520,000, $450,000, $450,000, $360,000, and $270,000, respectively, and to participate in an annual performance bonus program with a target bonus award determined by the Board. For 2018, Mr. Ellis’s, Mr. McCabe’s and Mr. Cole’s target annual bonus amounts under this program will be 95% of their respective annual base salaries, and Mr. Murrell’s and Mr. Smith’s target annual bonus amounts under this program will be 65% of their respective annual base salaries. Each of Messrs. Ellis, McCabe, Cole, Murrell and Smith is also entitled to receive an annual physical and reimbursement of up to $5,000 per year for tax planning services. If the Company terminates Mr. Ellis’s, Mr. McCabe’s, Mr. Cole’s, Mr. Murrell’s or Mr. Smith’s employment without cause or he resigns for good reason, within the meaning of and under his employment agreement, he will be entitled to receive (i) a prorated annual bonus for the year of termination, determined based on satisfaction of performance criteria prorated for the partial performance period, (ii) full accelerated vesting of all Company equity awards that are subject to time-based vesting, accelerated vesting of any Company equity awards that are subject to performance-based vesting at the target level of performance and full accelerated vesting of any nonqualified deferred compensation account balance or benefit, (iii) a lump-sum payment equal to the sum of $24,000 (or $20,000 for Mr. Smith) for outplacement services, 18 months (or 12 months for Mr. Smith) of his annual base salary and 1.5 times (or one times for Mr. Smith) the greater of his target annual bonus and the annual bonus paid to him for the prior year and (iv) payment for up to 18 months of his premiums for continued coverage in the Company’s group health plans and, thereafter, for Messrs. Ellis, McCabe, Cole and Murrell, continued participation in the Company’s group health plans at his cost for up to an additional six months. Messrs. Ellis, McCabe, Cole, Murrell and Smith would each also be entitled to receive the amounts under clauses (i), (iii) and (iv) of the preceding sentence if his employment terminates due to death or disability, under and within the meaning of his employment agreement. If Mr. Ellis’s, Mr. McCabe’s, Mr. Cole’s, Mr. Murrell’s or Mr. Smith’s qualifying termination of employment occurs during the fifteen months following a change in control (within the meaning of his employment agreement) or, only in the case of termination without cause or resignation for good reason, during the three months prior to a change in control and is demonstrated to be in connection with the change in control, then in addition to the foregoing payments and benefits, he will be entitled to an additional lump-sum payment equal to the sum of six months of his annual base salary and 0.5 times the greater of his target annual bonus and the annual bonus paid to him for the prior year. Mr. Ellis’s, Mr. McCabe’s, Mr. Cole’s, Mr. Murrell’s and Mr. Smith’s rights to receive termination payments and benefits, other than a prorated annual bonus for the year of termination, are conditioned upon executing a general release of claims in our favor. Each of Messrs. Ellis, McCabe, Cole, Murrell and Smith has also agreed to refrain from competing with the Company or soliciting its customers or employees during and for a period of 12 months following his employment with the Company.
16
The employment agreements for Messrs. Chappelle, Ellis, McCabe, Cole, Murrell and Smith further entitle them, if a termination of employment occurs during the three years (or two years for Mr. Smith) following the Closing Date, to payment for any excise taxes imposed under Section 4999 of the Internal Revenue Code as a result of a change in control (within the meaning of their respective employment agreements) other than the Business Combination plus an additional amount that puts the executive in the same after-tax position he would have been absent the imposition of excise taxes under Section 4999 of the Internal Revenue Code.
The foregoing summaries of the Company’s agreements with Messrs. Hackett, Chappelle, Ellis, McCabe, Cole, Murrell and Smith are subject to the full text of the agreements, which are filed, respectively, as Exhibits 10.12, 10.13, 10.14, 10.15, 10.16, 10.17 and 10.18 to this Current Report on Form 8-K and are incorporated herein by reference.
LTIP Awards
On February 6, 2018, the stockholders of the Company approved the Alta Mesa Resources, Inc. 2018 Long Term Incentive Plan (the “LTIP”), effective upon the closing of the Business Combination. The description of the LTIP set forth in the Proxy Statement section titled “Proposal No. 7—The LTIP Proposal” beginning on page 157 is incorporated herein by reference. A copy of the full text of the LTIP is filed as Exhibit 10.19 to this Current Report on Form 8-K and is incorporated herein by reference.
The Company issued the following awards of options to purchase shares of Class A Common Stock under the LTIP on the Closing Date and has approved, effective upon the effectiveness of a registration statement on Form S-8 filed by the Company with the SEC covering the offer and sale of securities under the LTIP and subject to the executive’s continued employment until such time, the following awards of restricted shares of Class A Common Stock to Messrs. Hackett, Chappelle, Ellis, McCabe, Cole, Murrell and Smith under the LTIP:
|
Name |
Stock Options (#) | Restricted Stock (#) | ||||||
|
James T. Hackett |
589,623 | — | ||||||
|
Harlan H. Chappelle |
589,623 | — | ||||||
|
Michael E. Ellis |
353,774 | — | ||||||
|
Michael A. McCabe |
283,019 | 125,786 | ||||||
|
Homer “Gene” Cole |
283,019 | 125,786 | ||||||
|
David Murrell |
106,132 | 47,170 | ||||||
|
Ronald J. Smith |
53,066 | 23,585 | ||||||
The stock options were issued with exercise prices equal to the initial sale price on the Closing Date for Class A Common Stock on the NASDAQ, and the Compensation Committee amended the definition of fair market value in the LTIP to mean such initial sale price for purposes of these grants. The stock options and restricted stock awards will each vest in three substantially equal annual installments on the first three anniversaries of the Closing Date, subject to the executive’s continued service with us and the accelerated vesting terms of the agreements with the relevant executive described above.
Director Compensation
Effective as of the Closing, the Company adopted a director compensation program under which each director who is not an employee of the Company or a subsidiary and is not affiliated with Riverstone, Bayou City, HPS or AM Management will receive the following cash amounts for their services on our Board:
| • | An annual director fee of $75,000; |
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| • | If the director serves on a committee of our Board, an additional annual fee as follows: |
| • | Chairperson of the Audit Committee – $22,500; |
| • | Audit Committee member other than the chairperson – $10,000; |
| • | Chairperson of the Compensation Committee – $15,000; |
| • | Compensation Committee member other than the chairperson – $6,000; |
| • | Chairperson of the Nominating and Corporate Governance Committee – $12,500; and |
| • | Nominating and Corporate Governance Committee member other than the chairperson – $5,000. |
| • | If the director serves on a committee of our Board, an additional per meeting fee of $1,500 for: |
| • | Each member of the Audit Committee for each Audit Committee meeting attended per calendar year in excess of eight meetings; |
| • | Each member of the Compensation Committee for each Compensation Committee meeting attended per calendar year in excess of six meetings; and |
| • | Each member of the Nominating and Corporate Governance Committee for each Nominating and Corporate Governance Committee meeting attended per calendar year in excess of six meetings. |
Director fees under the program will be payable in arrears in four equal quarterly installments not later than the 15th day following the final day of each fiscal quarter, provided that the amount of each payment in respect of annual fees will be prorated for any portion of a quarter that a director is not serving on our Board or on a particular committee, and no fee will be payable in respect of any period prior to the Closing.
The Company has also approved an award of 18,344 fully vested shares of Class A Common Stock to each of Ms. Diana J. Walters and Messrs. William D. Gutermuth, Jeffrey H. Tepper and Donald R. Sinclair under the LTIP, effective upon the effectiveness of a registration statement on Form S-8 filed by the Company with the SEC covering the offer and sale of securities under the LTIP and subject to the director’s continued service until such time.
Certain Relationships and Related Party Transactions
Founder Shares
On November 21, 2016, the Sponsor purchased 11,500,000 shares of Class B Common Stock, the founder shares, from Silver Run, for an aggregate purchase price of $25,000, or approximately $0.002 per share. In March 2017, the Sponsor transferred 33,000 founder shares to each of Silver Run’s then independent directors (together with the Sponsor, the “Initial Stockholders”) at their original purchase price. In March 2017, Silver Run effected a stock dividend of approximately 1.25 shares for each outstanding share of Class B Common Stock, resulting in the Initial Stockholders holding an aggregate of 25,857,000 founder shares. On February 9, 2018, pursuant to the terms of the Charter, all of the outstanding shares of Class B Common Stock were automatically converted into shares of Class A Common Stock on a one-for-one basis in connection with the Closing. As used herein, unless the context otherwise requires, “founder shares” are deemed to include the shares of Class A Common Stock issued upon conversion thereof.
The Company’s Initial Stockholders have agreed, subject to limited exceptions, not to transfer, assign or sell any of their founder shares until the earlier to occur of: (A) one year after the completion of the Business Combination or (B) subsequent to the Business Combination, (x) if the last sale price of the Class A Common Stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30 trading day period commencing at least 150 days after the Business Combination, or (y) the date on which the Company completes a liquidation, merger, stock exchange or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property.
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Private Placement Warrants
On March 29, 2017, the Sponsor purchased from Silver Run an aggregate of 15,133,333 warrants (the “Private Placement Warrants”) at a price of $1.50 per warrant ($22,700,000 in the aggregate) in a private placement that occurred simultaneously with the closing of Silver Run’s initial public offering (the “IPO”). Each whole Private Placement Warrant is exercisable for one share of Class A Common Stock at a price of $11.50 per share. A portion of the purchase price of the Private Placement Warrants was placed in Silver Run’s trust account along with the proceeds from the IPO. The Private Placement Warrants are non-redeemable and exercisable on a cashless basis so long as they are held by the Sponsor or its permitted transferees.
The Sponsor has agreed, subject to limited exceptions, not to transfer, assign or sell any of the Private Placement Warrants until 30 days after the completion of the Business Combination.
Related Party Loans
On November 22, 2016, the Sponsor agreed to loan Silver Run an aggregate of up to $300,000 to cover expenses related to the IPO pursuant to a promissory note (the “2016 Note”). The 2016 Note was non-interest bearing and payable on the earlier of March 31, 2017 or the completion of the IPO. On November 22, 2016, Silver Run borrowed $300,000 under the 2016 Note, and repaid the full $300,000 balance of the 2016 Note on March 29, 2017.
On September 27, 2017, the Sponsor agreed to loan Silver Run an aggregate of up to $2,000,000 to cover expenses related to the Business Combination pursuant to a promissory note (the ‘‘2017 Note’’). This loan is non-interest bearing and payable on the earlier of March 29, 2019 or the date on which Silver Run consummates a Business Combination. On September 27, 2017, Silver Run borrowed $2,000,000 under the 2017 Note, and Silver Run repaid the $2,000,000 balance on the Closing Date.
Administrative Support Agreement
On March 23, 2017, Silver Run entered into an administrative support agreement pursuant to which it agreed to pay an affiliate of the Sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative support. Silver Run paid the affiliate of the Sponsor $30,000 and $60,000 for such services for the three and nine months ended September 30, 2017, respectively. Following the Business Combination, the Company will cease paying these monthly fees.
Forward Purchase Agreement
On March 17, 2017, Silver Run entered into the Forward Purchase Agreement with Fund VI Holdings, pursuant to which Silver Run agreed to sell at the closing of an initial business combination, and Fund VI Holdings agreed to purchase, up to an aggregate of up to 40,000,000 shares of Class A Common Stock and warrants to purchase 13,333,333 shares of Class A Common Stock, for an aggregate purchase price of up to $400 million. In connection with the Closing, Fund VI Holdings purchased from Silver Run 40,000,000 shares of Class A Common Stock (the “Forward Purchase Shares”) and warrants to purchase 13,333,333 shares of Class A Common Stock (the “Forward Purchase Warrants”), and Silver Run used the proceeds from such purchase to fund a portion of the consideration paid in the Business Combination. The Forward Purchase Shares are identical to shares of Class A Common Stock, except that the Forward Purchase Shares are subject to transfer restrictions and certain registration rights. The Forward Purchase Warrants are identical to the Private Placement Warrants. Fund VI Holdings cannot transfer any of the Forward Purchase Shares or Forward Purchase Warrants until 30 days after the Closing.
The information set forth under “Item 1.01. Entry into a Material Definitive Agreement—Amended and Restated Limited Partnership Agreement of SRII Opco,” “—Registration Rights Agreement,” “—Amendment to IPO Registration Rights Agreement,” “—Tax Receivable Agreement” and “—Indemnity Agreements,” of this Current Report on Form 8-K is incorporated herein by reference.
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Legal Proceedings
Information about legal proceedings of the Company is set forth in the Proxy Statement in the sections entitled “Business of Alta Mesa—Legal Proceedings” beginning on page 279, and “Business of Kingfisher—Legal Proceedings” beginning on page 316, which are incorporated herein by reference.
Market Price of and Dividends on the Company’s Common Equity and Related Stockholder Matters
Silver Run
Silver Run’s units, shares of Class A Common Stock and warrants were historically quoted on NASDAQ under the symbols “SRUNU,” “SRUN” and “SRUNW,” respectively. Silver Run’s units commenced public trading on March 29, 2017, and the shares of Class A Common Stock and warrants each commenced separate trading on April 26, 2017.
The following table sets forth, for the calendar quarter indicated, the high and low sales prices per unit and share of Class A Common Stock as reported on NASDAQ for the periods presented. Since warrants are not currently eligible to be exercised, there is no information presented for the warrants in the table below.
| Units (SRUNU) |
Class A Common
Stock (SRUN) |
|||||||||||||||
| High | Low | High | Low | |||||||||||||
|
Fiscal 2017: |
||||||||||||||||
|
Fourth Quarter |
$ | 10.99 | $ | 10.20 | $ | 10.30 | $ | 9.65 | ||||||||
|
Third Quarter |
$ | 11.00 | $ | 10.50 | $ | 10.38 | $ | 10.09 | ||||||||
|
Second Quarter (1) |
$ | 10.90 | $ | 10.25 | $ | 10.35 | $ | 9.80 | ||||||||
|
First Quarter (2) |
$ | 10.50 | $ | 10.37 | N/A | N/A | ||||||||||
| (1) | Beginning on April 26, 2017 with respect to the Class A Common Stock. |
| (2) | Beginning on March 29, 2017 with respect to the units. The Class A Common Stock and the warrants commenced separate trading on April 26, 2017. |
On August 15, 2017, the trading date before the public announcement of the Business Combination, Silver Run’s units and Class A Common Stock closed at $10.72 and $10.18, respectively.
Silver Run has not paid any cash dividends on the Class A Common Stock to date. Following completion of the Business Combination, the Company’s Board will consider whether or not to institute a dividend policy. It is the present intention of the Company to retain any earnings for use in its business operations and, accordingly, the Company does not anticipate the Board declaring any dividends in the foreseeable future.
As of the Closing Date, there was one holder of record of the Company’s Class A Common Stock.
In connection with the closing of the Business Combination, the Company’s Class A Common Stock and warrants will continue to be listed on the NASDAQ under the new trading symbols of “AMR” and “AMRWW,” respectively.
On February 9, 2018, in connection with the Closing, all of the units of the Company separated into their component parts of one share of Class A Common Stock and one-third of one warrant to purchase one share of Class A Common Stock of the Company, and the units ceased trading on NASDAQ.
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Alta Mesa and Kingfisher
Historical market price information regarding Alta Mesa and Kingfisher is not provided because there is no public market for Alta Mesa’s or Kingfisher’s equity securities. Alta Mesa and Kingfisher have not made any cash distributions on their respective equity securities since January 1, 2015.
Recent Sales of Unregistered Securities
In addition to the below, information about unregistered sales of Silver Run’s equity securities is set forth in “Part II, Item 15. Recent Sales of Unregistered Securities” of Amendment No. 3 to Silver Run’s Registration Statement on Form S-1 (File No. 333-216409) filed with the SEC on March 22, 2017.
Issuances under the Forward Purchase Agreement
On the Closing Date, the Company issued the Forward Purchase Shares and the Forward Purchase Warrants pursuant to the Forward Purchase Agreement. The issuance of the Forward Purchase Shares and the Forward Purchase Warrants was not registered under the Securities Act of 1933, as amended (the “Securities Act”), and such securities were issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act.
Other Issuances Related to the Business Combination
On the Closing Date, in connection with the Business Combination, the Company issued 213,402,398 shares of Class C Common Stock to the Contributors, one share of Series A Preferred Stock to each of Bayou City, HPS and AM Management and one share of Series B Preferred Stock to the Riverstone Contributor. These issuances were made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act. Descriptions of the rights, preferences and privileges of the Class C Common Stock, the Series A Preferred Stock and the Series B Preferred Stock are set forth under “—Description of the Company’s Securities—Class C Common Stock,” “—Description of the Company’s Securities—Series A Preferred Stock” and “—Description of the Company’s Securities—Series B Preferred Stock,” respectively, below.
Description of the Company’s Securities
The Company has authorized 1,531,000,000 shares of capital stock, consisting of (a) 1,530,000,000 shares of common stock, including (i) 1,200,000,000 shares of Class A Common Stock, (ii) 50,000,000 shares of Class B Common Stock and (iii) 280,000,000 shares of Class C Common Stock, and (b) 1,000,000 shares of preferred stock, including three shares of Series A Preferred Stock and one share of Series B Preferred Stock. As of the Closing Date, there was: (a) one holder of record of Class A Common Stock and 169,371,730 shares of Class A Common Stock outstanding; (b) three holders of record of Class C Common Stock and 213,402,398 shares of Class C Common Stock outstanding; (c) three holders of record of Series A Preferred Stock and three shares of Series A Preferred Stock outstanding; (d) one holder of record of Series B Preferred Stock and one share of Series B Preferred Stock outstanding; and (e) two holders of the Company’s warrants and 62,966,666 warrants outstanding. All of the Company’s shares of Class B Common Stock were converted into shares of Class A Common stock on a one-for-one basis at the Closing.
Class A Common Stock
Holders of the Company’s Class A Common Stock are entitled to one vote for each share held on all matters to be voted on by the Company’s stockholders. Holders of the Class A Common Stock and holders of the Class C Common Stock will vote together as a single class on all matters submitted to a vote of the Company’s stockholders, except as required by law. Unless specified in the Second Amended and Restated Charter (as defined below) (including any certificate of designation of preferred stock) or the bylaws of the Company, or as required by applicable provisions of the General Corporation Law of the State of Delaware or applicable stock exchange rules, the affirmative vote of a majority of the Company’s shares of common stock that are voted is required to approve any such matter voted on by the Company’s stockholders. There is no cumulative voting with respect to the election of directors, with the result that the holders of more than 50% of the shares voted for the election of directors can elect all of the directors (subject to (i) the right of the holders of our Series A Preferred Stock to nominate and elect
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four directors and (ii) the right of the holder of our Series B Preferred Stock to nominate and elect three directors). Subject to the rights of the holders of any outstanding series of preferred stock, the Company’s stockholders are entitled to receive ratable dividends when, as and if declared by the Board out of funds legally available therefor.
In the event of a liquidation, dissolution or winding up of the Company, the holders of the Class A Common Stock are entitled to share ratably in all assets remaining available for distribution to them after payment of liabilities and after provision is made for each class of stock, if any, having preference over the Class A Common Stock. The Company’s stockholders have no preemptive or other subscription rights. There are no sinking fund provisions applicable to the Class A Common Stock.
Class C Common Stock
In connection with the Business Combination, Silver Run issued 213,402,398 shares of Class C Common Stock to the Contributors. Holders of Class C Common Stock, together with holders of Class A Common Stock voting as a single class, will have the right to vote on all matters properly submitted to a vote of the stockholders. In addition, the holders of Class C Common Stock, voting as a separate class, will be entitled to approve any amendment, alteration or repeal of any provision of our Second Amended and Restated Charter that would alter or change the powers, preferences or relative, participating, optional or other or special rights of the Class C Common Stock. Holders of Class C Common Stock will not be entitled to any dividends from the Company and will not be entitled to receive any of our assets in the event of any voluntary or involuntary liquidation, dissolution or winding up of our affairs.
Shares of Class C Common Stock may be issued only to the Contributors, their respective successors and assigns, as well as any permitted transferees of the Contributors. A holder of Class C Common Stock may transfer shares of Class C Common Stock to any transferee (other than the Company) only if such holder also simultaneously transfers an equal number of such holder’s SRII Opco Common Units to such transferee in compliance with the SRII Opco LPA. The SRII Opco LPA provides a redemption right to each limited partner of SRII Opco (other than the Company) that entitles it to cause SRII Opco to redeem, from time to time on or after the date that is 180 days after the Closing Date (except that the Kingfisher Contributor may cause the redemption of up to 39,000,000 SRII Opco Common Units at any time that is 90 days after the Closing Date), all or a portion of their SRII Opco Common Units for, at SRII Opco’s option, newly-issued shares of our Class A Common Stock on a one-for-one basis or a cash payment equal to the average of the volume-weighted closing price of one share of Class A Common Stock for the five trading days prior to the date the Contributor delivers a notice of redemption for each SRII Opco Common Unit redeemed (subject to customary adjustments, including for stock splits, stock dividends and reclassifications). Upon the future redemption or exchange of SRII Opco Common Units held by a Contributor, a corresponding number of shares of Class C Common Stock held by such Contributor will be cancelled. For more information on the redemption and exchange rights related to the Class C Common Stock and SRII Opco Common Units, see the section of the Proxy Statement entitled “Proposal No. 1—The Business Combination Proposal—Related Agreements—Agreements Related to the Contribution Agreements—Amended and Restated Agreement of Limited Partnership of SRII Opco—SRII Opco Common Unit Redemption Right,” which is incorporated herein by reference.
Series A Preferred Stock
In connection with the Business Combination, Silver Run issued one share of Series A Preferred Stock to each of Bayou City, HPS and AM Management. Bayou City, HPS and AM Management, as the holders of the Series A Preferred Stock, will not be entitled to any dividends from the Company, but will be entitled to preferred distributions in liquidation in the amount of $0.0001 per share of Series A Preferred Stock and will have a limited voting right as described below. The Series A Preferred Stock will be redeemable by us for par value upon the earlier to occur of (a) the fifth anniversary of the Closing Date, (b) at any time at the election of the holder thereof or (c) upon a breach by the holder of the transfer restrictions relating to the Series A Preferred Stock. In addition, for so long as the Series A Preferred Stock remains outstanding, the holders of the Series A Preferred Stock will be entitled to nominate and elect directors to the Board for a period of five years following the Closing based on their and their affiliates’ beneficial ownership of Class A Common Stock as follows:
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|
Holder / Beneficial Ownership and Other Requirements |
Designation Right |
|
| Bayou City and its affiliates | ||
|
• at least 10% |
one director who must be independent for purposes of the listing rules of NASDAQ (unless the director to be nominated is William W. McMullen who need not be independent) | |
| HPS and its affiliates | ||
|
• at least 10% |
one director who must be independent for purposes of the listing rules of NASDAQ | |
| AM Management and its affiliates | ||
|
• at least 10% |
two directors who need not be independent for purposes of the listing rules of NASDAQ | |
|
• less than 10% but at least 5% and either Hal Chappelle or Michael Ellis is a member of the Company’s management |
one director who need not be independent for purposes of the listing rules of NASDAQ |
The terms, rights, obligations and preferences of the Series A Preferred Stock are set forth in that certain Certificate of Designation of Series A Preferred Stock (the “Series A Certificate of Designation”) filed with the Secretary of State of the State of Delaware on February 9, 2018. A copy of the Series A Certificate of Designation is attached as Exhibit 3.2 to this Current Report on Form 8-K and is incorporated herein by reference, and the foregoing description of the Series A Preferred Stock is qualified in its entirety by reference thereto.
Series B Preferred Stock
In connection with the Business Combination, Silver Run issued one share of Series B Preferred Stock to the Riverstone Contributor. The Riverstone Contributor, as the holder of the Series B Preferred Stock, will not be entitled to any dividends from the Company, but will be entitled to preferred distributions in liquidation in the amount of $0.0001 per share of Series B Preferred Stock and will have a limited voting right as described below. The Series B Preferred Stock will be redeemable by us for par value upon the earlier to occur of (a) the fifth anniversary of the Closing Date, (b) at any time at the election of the holder thereof or (c) upon a breach by the holder of the transfer restrictions relating to the Series B Preferred Stock. In addition, for so long as the Series B Preferred Stock remains outstanding, the holder of the Series B Preferred Stock will be entitled to nominate and elect directors to the Board for a period of five years following the Closing based on it and its affiliates’ beneficial ownership of Class A Common Stock as follows:
|
Holder / Beneficial Ownership and Other Requirements |
Designation Right |
|
|
Riverstone Contributor and its affiliates |
||
|
• at least 15% |
three directors (one of whom will be the Chairman of the Board) | |
|
• less than 15% but at least 10% |
two directors (one of whom will be the Chairman of the Board) | |
|
• less than 10% but at least 5% |
one director (who may be the Chairman of the Board if such person is Jim Hackett) |
The terms, rights, obligations and preferences of the Series B Preferred Stock are set forth in that certain Certificate of Designation of Series B Preferred Stock (the “Series B Certificate of Designation”) filed with the Secretary of State of the State of Delaware on February 9, 2018. A copy of the Series B Certificate of Designation is attached as Exhibit 3.3 to this Current Report on Form 8-K and is incorporated herein by reference, and the foregoing description of the Series B Preferred Stock is qualified in its entirety by reference thereto.
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Warrants
Public Stockholders’ Warrants . Each whole warrant issued in Silver Run’s IPO entitles the registered holder to purchase one share of our Class A Common Stock at a price of $11.50 per share, subject to adjustment as discussed below, at any time commencing upon the earlier of 12 months from the closing of the IPO or 30 days after the Closing Date. Pursuant to the warrant agreement (the “Warrant Agreement”), a warrant holder may exercise its warrants only for a whole number of shares of Class A Common Stock. No fractional warrants have been issued and only whole warrants trade. The warrants will expire five years after the Closing Date, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.
The Company will not be obligated to deliver any shares of Class A Common Stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act, with respect to the shares of Class A Common Stock underlying the warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations described below with respect to registration. No warrant will be exercisable and the Company will not be obligated to issue shares of Class A Common Stock upon exercise of a warrant unless Class A Common Stock issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants. In the event that the conditions in the two immediately preceding sentences are not satisfied with respect to a warrant, the holder of such warrant will not be entitled to exercise such warrant and such warrant may have no value and expire worthless.
The Company has agreed that as soon as practicable, but in no event later than 15 business days, after the closing of the Business Combination, the Company will use its best efforts to file with the SEC a registration statement for the registration, under the Securities Act, of the shares of Class A Common Stock issuable upon exercise of the warrants. The Company will use its best efforts to cause the same to become effective and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the warrants in accordance with the provisions of the Warrant Agreement. Notwithstanding the above, if the Class A Common Stock is at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of public warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, it will not be required to file or maintain in effect a registration statement, but the Company will be required to use its best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
Once the warrants become exercisable, the Company may call the warrants for redemption:
| • | in whole and not in part; |
| • | at a price of $0.01 per warrant; |
| • | upon not less than 30 days’ prior written notice of redemption (the “30-day redemption period”) to each warrant holder; and |
| • | if, and only if, the reported last sale price of the Class A Common Stock equals or exceeds $18.00 per share for any 20 trading days within a 30-trading day period ending three business days before the Company sends the notice of redemption to the warrant holders. |
If and when the warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
The Company has established the last of the redemption criterion discussed above to prevent a redemption call unless there is at the time of the call a significant premium to the warrant exercise price. If the foregoing conditions are satisfied and the Company issues a notice of redemption of the warrants, each warrant holder will be entitled to exercise its warrant prior to the scheduled redemption date. However, the price of the Class A Common Stock may fall below the $18.00 redemption trigger price as well as the $11.50 warrant exercise price after the redemption notice is issued.
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If the Company calls the warrants for redemption as described above, the Company’s management will have the option to require any holder that wishes to exercise its warrant to do so on a “cashless basis.” In determining whether to require all holders to exercise their warrants on a “cashless basis,” the Company’s management will consider, among other factors, its cash position, the number of warrants that are outstanding and the dilutive effect on its stockholders of issuing the maximum number of shares of Class A Common Stock issuable upon the exercise of its warrants. If the Company’s management takes advantage of this option, all holders of warrants would pay the exercise price by surrendering their warrants for that number of shares of Class A Common Stock equal to the quotient obtained by dividing (x) the product of the number of shares of Class A Common Stock underlying the warrants, multiplied by the excess of the “fair market value” (defined below) over the exercise price of the warrants by (y) the fair market value. The “fair market value” shall mean the average reported last sale price of the Class A Common Stock for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants. If the Company’s management takes advantage of this option, the notice of redemption will contain the information necessary to calculate the number of shares of Class A Common Stock to be received upon exercise of the warrants, including the “fair market value” in such case. Requiring a cashless exercise in this manner will reduce the number of shares to be issued and thereby lessen the dilutive effect of a warrant redemption. The Company believes this feature is an attractive option to the Company if it does not need the cash from the exercise of the warrants. If the Company calls its warrants for redemption and its management does not take advantage of this option, the Sponsor and its permitted transferees would still be entitled to exercise their Private Placement Warrants for cash or on a cashless basis using the same formula described above that other warrant holders would have been required to use had all warrant holders been required to exercise their warrants on a cashless basis, as described in more detail below.
A holder of a warrant may notify the Company in writing in the event it elects to be subject to a requirement that such holder will not have the right to exercise such warrant, to the extent that after giving effect to such exercise, such person (together with such person’s affiliates), to the warrant agent’s actual knowledge, would beneficially own in excess of 9.8% (or such other amount as a holder may specify) of the shares of Class A Common Stock outstanding immediately after giving effect to such exercise.
If the number of outstanding shares of Class A Common Stock is increased by a stock dividend payable in shares of Class A Common Stock, or by a split-up of shares of Class A Common Stock or other similar event, then, on the effective date of such stock dividend, split-up or similar event, the number of shares of Class A Common Stock issuable on exercise of each warrant will be increased in proportion to such increase in the outstanding shares of Class A Common Stock. A rights offering to holders of Class A Common Stock entitling holders to purchase shares of Class A Common Stock at a price less than the fair market value will be deemed a stock dividend of a number of shares of Class A Common Stock equal to the product of (i) the number of shares of Class A Common Stock actually sold in such rights offering (or issuable under any other equity securities sold in such rights offering that are convertible into or exercisable for Class A Common Stock) multiplied by (ii) one (1) minus the quotient of (x) the price per share of Class A Common Stock paid in such rights offering divided by (y) the fair market value. For these purposes (i) if the rights offering is for securities convertible into or exercisable for Class A Common Stock, in determining the price payable for Class A Common Stock, there will be taken into account any consideration received for such rights, as well as any additional amount payable upon exercise or conversion and (ii) fair market value means the volume weighted average price of Class A Common Stock as reported during the 10 trading day period ending on the trading day prior to the first date on which the shares of Class A Common Stock trade on the applicable exchange or in the applicable market, regular way, without the right to receive such rights.
In addition, if the Company, at any time while the warrants are outstanding and unexpired, pays a dividend or makes a distribution in cash, securities or other assets to the holders of Class A Common Stock on account of such shares of Class A Common Stock (or other shares of the Company’s capital stock into which the warrants are convertible), other than (a) as described above or (b) certain ordinary cash dividends, then the warrant exercise price will be decreased, effective immediately after the effective date of such event, by the amount of cash and/or the fair market value of any securities or other assets paid on each share of Class A Common Stock in respect of such event.
If the number of outstanding shares of Class A Common Stock is decreased by a consolidation, combination, reverse stock split or reclassification of shares of Class A Common Stock or other similar event, then, on the effective date of such consolidation, combination, reverse stock split, reclassification or similar event, the number of shares of Class A Common Stock issuable on exercise of each warrant will be decreased in proportion to such decrease in outstanding shares of Class A Common Stock.
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Whenever the number of shares of Class A Common Stock purchasable upon the exercise of the warrants is adjusted, as described above, the warrant exercise price will be adjusted by multiplying the warrant exercise price immediately prior to such adjustment by a fraction (x) the numerator of which will be the number of shares of Class A Common Stock purchasable upon the exercise of the warrants immediately prior to such adjustment, and (y) the denominator of which will be the number of shares of Class A Common Stock so purchasable immediately thereafter.
In case of any reclassification or reorganization of the outstanding shares of Class A Common Stock (other than those described above or that solely affects the par value of such shares of Class A Common Stock), or in the case of any merger or consolidation of the Company with or into another corporation (other than a consolidation or merger in which the Company is the continuing corporation and that does not result in any reclassification or reorganization of the Company’s outstanding shares of Class A Common Stock), or in the case of any sale or conveyance to another corporation or entity of the assets or other property of the Company as an entirety or substantially as an entirety in connection with which the Company is dissolved, the holders of the warrants will thereafter have the right to purchase and receive, upon the basis and upon the terms and conditions specified in the warrants and in lieu of the shares of Class A Common Stock immediately theretofore purchasable and receivable upon the exercise of the rights represented thereby, the kind and amount of shares of stock or other securities or property (including cash) receivable upon such reclassification, reorganization, merger or consolidation, or upon a dissolution following any such sale or transfer, that the holder of the warrants would have received if such holder had exercised their warrants immediately prior to such event. If less than 70% of the consideration receivable by the holders of Class A Common Stock in such a transaction is payable in the form of Class A Common Stock in the successor entity that is listed for trading on a national securities exchange or is quoted in an established over-the-counter market, or is to be so listed for trading or quoted immediately following such event, and if the registered holder of the warrant properly exercises the warrant within 30 days following public disclosure of such transaction, the warrant exercise price will be reduced as specified in the Warrant Agreement based on the Black-Scholes value (as defined in the Warrant Agreement) of the warrant.
The warrants may be exercised upon surrender of the warrant certificate on or prior to the expiration date at the offices of the warrant agent, with the exercise form on the reverse side of the warrant certificate completed and executed as indicated, accompanied by full payment of the exercise price (or on a cashless basis, if applicable), by certified or official bank check payable to the Company, for the number of warrants being exercised. The warrant holders do not have the rights or privileges of holders of Class A Common Stock and any voting rights until they exercise their warrants and receive shares of Class A Common Stock. After the issuance of shares of Class A Common Stock upon exercise of the warrants, each holder will be entitled to one vote for each share held of record on all matters to be voted on by stockholders.
No fractional shares will be issued upon exercise of the warrants. If, upon exercise of the warrants, a holder would be entitled to receive a fractional interest in a share, the Company will, upon exercise, round down to the nearest whole number of shares of Class A Common Stock to be issued to the warrant holder.
The warrants have been issued in registered form under a Warrant Agreement between Continental Stock Transfer & Trust Company, as warrant agent, and Silver Run. The Warrant Agreement provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval by the holders of at least 50% of the then outstanding public warrants to make any change that adversely affects the interests of the registered holders of public warrants.
A copy of the Warrant Agreement, which was filed as Exhibit 4.4 to Silver Run’s Current Report on Form 8-K filed with the SEC on March 29, 2017, is incorporated herein by reference, and the foregoing description of the warrants is qualified in its entirety by reference thereto.
Private Placement Warrants . The Private Placement Warrants (including the Class A Common Stock issuable upon exercise of the Private Placement Warrants) will not be transferable, assignable or saleable until 30 days after the completion of the Business Combination (except, among other limited exceptions, to the Company’s officers and directors and other persons or entities affiliated with the Sponsor) and they will not be redeemable by the Company so long as they are held by the Sponsor or its permitted transferees. Otherwise, the Private Placement Warrants have terms and provisions that are identical to those of the warrants sold as part of the units in the IPO, including as to exercise price, exercisability and exercise period. If the Private Placement Warrants are held by holders other than the Sponsor or its permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by the holders on the same basis as the warrants included in the units sold in the IPO.
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If holders of the Private Placement Warrants elect to exercise them on a cashless basis, they would pay the exercise price in the same manner as holders of warrants sold in the IPO as described above under “—Public Stockholders’ Warrants.” The reason that the Company has agreed that the Private Placement Warrants will be exercisable on a cashless basis so long as they are held by the Sponsor or its permitted transferees is because it was not known at the time of issuance whether the Sponsor would be affiliated with the Company following an initial business combination. If the Sponsor remains affiliated with the Company, its ability to sell the Company’s securities in the open market will be significantly limited. The Company has policies in place that prohibit insiders from selling the Company’s securities except during specific periods of time. Even during such periods of time when insiders will be permitted to sell the Company’s securities, an insider cannot trade in the Company’s securities if he or she is in possession of material non-public information. Accordingly, unlike public stockholders who could sell the shares of Class A Common Stock issuable upon exercise of the warrants freely in the open market, the insiders could be significantly restricted from doing so. As a result, the Company believes that allowing the holders to exercise the Private Placement Warrants on a cashless basis is appropriate.
The Sponsor has agreed not to transfer, assign or sell any of the Private Placement Warrants (including the Class A Common Stock issuable upon exercise of any of the Private Placement Warrants) until the date that is 30 days after the Closing Date, except to, among other limited exceptions, the Company’s officers and directors and other persons or entities affiliated with the Sponsor.
The Private Placement Warrants were sold in a private placement pursuant to a purchase agreement between Silver Run and the Sponsor and have the terms set forth in the Warrant Agreement between Continental Stock Transfer & Trust Company, as warrant agent, and Silver Run. Copies of the warrant purchase agreement and the Warrant Agreement, which were filed as Exhibit 10.5 and Exhibit 4.4, respectively, to Silver Run’s Current Report on Form 8-K filed with the SEC on March 29, 2017, are incorporated herein by reference, and the foregoing description of the Private Placement Warrants is qualified in its entirety by reference thereto.
The Forward Purchase Warrants have the same terms as the Private Placement Warrants so long as they are held by Fund VI Holdings or its permitted transferees.
Financial Statements and Supplementary Data
The historical financial statements of Alta Mesa for the three years ended December 31, 2016 and the nine months ended September 30, 2017 included in the Proxy Statement beginning on page Fin-30 are incorporated herein by reference.
The historical financial statements of Kingfisher for the years ended December 31, 2016 and 2015 and the nine months ended September 30, 2017 included in the Proxy Statement beginning on page Fin-85 are incorporated herein by reference.
Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
The information set forth under “Item 1.01. Entry into a Material Definitive Agreement—Alta Mesa Credit Agreement” and “Item 1.01 Entry into a Material Definitive Agreement—Kingfisher Credit Agreement Amendment” is incorporated in this Item 2.03 by reference.
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Item 3.02. Unregistered Sales of Equity Securities.
The information set forth under “Item 2.01. Completion of Acquisition or Disposition of Assets—Recent Sales of Unregistered Securities” is incorporated in this Item 3.02 by reference.
Item 5.01. Changes in Control of Registrant.
To the extent required, the information set forth under “Introductory Note” and “Item 2.01. Completion of Acquisition or Disposition of Assets” of this Current Report on Form 8-K is incorporated herein by reference.
Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
The information set forth under “Item 2.01 Completion of Acquisition or Disposition of Assets—Directors” and “Item 2.01 Completion of Acquisition or Disposition of Assets—Executive Officers” of this Current Report on Form 8-K is incorporated herein by reference.
Item 5.03. Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.
On the Closing Date, the Company’s Charter was amended and restated (as amended and restated, the “Second Amended and Restated Charter”) to, among other things:
| • | change the name of the Company to “Alta Mesa Resources, Inc.”; |
| • | create a new class of capital stock, the Class C Common Stock, that was issued to the Contributors at the Closing; |
| • | increase the number of authorized shares of the Company’s Class A Common Stock from 400,000,000 shares to 1,200,000,000 shares; |
| • | adopt Delaware as the exclusive forum for certain stockholder litigation; and |
| • | eliminate certain provisions relating to the Company’s initial business combination that are no longer applicable to the Company following the Closing. |
A copy of the Second Amended and Restated Charter is filed with this Current Report on Form 8-K as Exhibit 3.1 and is incorporated herein by reference, and the foregoing description of the Second Amended and Restated Charter is qualified in its entirety by reference thereto.
Item 5.06. Change in Shell Company Status.
As a result of the Business Combination, which fulfilled the definition of an initial business combination as required by Silver Run’s Charter, the Company ceased to be a shell company, as defined in Rule 12b-2 of the Exchange Act, as of the Closing Date. The material terms of the Business Combination are described in the Proxy Statement in the section entitled “Proposal No. 1—The Business Combination Proposal” beginning on page 131, which is incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits.
| (a) | Financial Statements of Businesses Acquired |
The historical financial statements of Alta Mesa for the three years ended December 31, 2016 and the nine months ended September 30, 2017 included in the Proxy Statement beginning on page Fin-30 are incorporated herein by reference.
The historical financial statements of Kingfisher for the years ended December 31, 2016 and 2015 and the nine months ended September 30, 2017 included in the Proxy Statement beginning on page Fin-85 are incorporated herein by reference.
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| (b) | Pro Forma Financial Information |
The unaudited pro forma condensed consolidated combined financial information of Silver Run for the year ended December 31, 2016 and the nine months ended September 30, 2017 included in the Proxy Statement beginning on page 97 is incorporated herein by reference.
| (d) | Exhibits |
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| * | Filed herewith. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| ALTA MESA RESOURCES, INC. | ||||||
| Date: February 9, 2018 | ||||||
| By: | /s/ Michael A McCabe | |||||
| Name: | Michael A. McCabe | |||||
| Title: | Chief Financial Officer, Chief Compliance Officer and Secretary | |||||
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Exhibit 3.1
SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
SILVER RUN ACQUISITION CORPORATION II
February 9, 2018
Silver Run Acquisition Corporation II, a corporation organized and existing under the laws of the State of Delaware (the “ Corporation ”), DOES HEREBY CERTIFY AS FOLLOWS:
1. The name of the Corporation is “Silver Run Acquisition Corporation II”. The original certificate of incorporation of the Corporation was filed with the Secretary of State of the State of Delaware on November 16, 2016 (the “ Original Certificate ”).
2. An amended and restated certificate of incorporation, which amended and restated the Original Certificate in its entirety, was filed with the Secretary of State of the State of Delaware on March 21, 2017, and a certificate of amendment thereto was filed with the Secretary of State of the State of Delaware on March 22, 2017 (as so amended, the “ Amended Certificate ”).
3. This Second Amended and Restated Certificate of Incorporation (the “ Second Amended and Restated Certificate ”), which both restates and further amends the provisions of the Original Certificate, was duly adopted in accordance with Sections 242 and 245 of the General Corporation Law of the State of Delaware (as amended from time to time, the “ DGCL ”) and by the Corporation’s stockholders in accordance with Section 212 of the DGCL.
4. This Second Amended and Restated Certificate shall become effective on the date of filing with the Secretary of State of the State of Delaware.
5. The text of the Amended Certificate is hereby amended and restated in its entirety to read as follows:
ARTICLE I
NAME
The name of the corporation is Alta Mesa Resources, Inc.
ARTICLE II
PURPOSE
The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the DGCL. In addition to the powers and privileges conferred upon the Corporation by law and those incidental thereto, the Corporation shall possess and may exercise all the powers and privileges that are necessary or convenient to the conduct, promotion or attainment of the business or purposes of the Corporation, including, but not limited to, effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination, involving the Corporation and one or more businesses (a “ Business Combination ”).
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ARTICLE III
REGISTERED AGENT
The address of the Corporation’s registered office in the State of Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle, State of Delaware, 19801, and the name of the Corporation’s registered agent at such address is The Corporation Trust Company.
ARTICLE IV
CAPITALIZATION
Section 4.1 Authorized Capital Stock . The total number of shares of all classes of capital stock, each with a par value of $0.0001 per share, which the Corporation is authorized to issue is 1,531,000,000 shares, consisting of (a) 1,530,000,000 shares of common stock (the “ Common Stock ”), including (i) 1,200,000,000 shares of Class A Common Stock (the “ Class A Common Stock ”), (ii) 50,000,000 shares of Class B Common Stock (the “ Class B Common Stock ”), and (iii) 280,000,000 shares of Class C Common Stock (the “ Class C Common Stock ”), and (b) 1,000,000 shares of preferred stock, par value $0.0001 per share (the “ Preferred Stock ”).
Section 4.2 Preferred Stock . The Board of Directors of the Corporation (the “ Board ”) is hereby expressly authorized to provide out of the unissued shares of the Preferred Stock for one or more series of Preferred Stock and to establish from time to time the number of shares to be included in each such series and to fix the voting rights, if any, designations, powers, preferences and relative, participating, optional, special and other rights, if any, of each such series and any qualifications, limitations and restrictions thereof, as shall be stated in the resolution or resolutions adopted by the Board providing for the issuance of such series and included in a certificate of designation (a “ Preferred Stock Designation ”) filed pursuant to the DGCL, and the Board is hereby expressly vested with the authority to the full extent provided by law, now or hereafter, to adopt any such resolution or resolutions.
Section 4.3 Common Stock .
(a) Voting .
(i) Except as otherwise required by law or this Second Amended and Restated Certificate (including any Preferred Stock Designation), the holders of the Common Stock shall exclusively possess all voting power with respect to the Corporation.
(ii) Except as otherwise required by law or this Second Amended and Restated Certificate (including any Preferred Stock Designation), the holders of shares of Common Stock shall be entitled to one vote for each such share on each matter properly submitted to the stockholders on which the holders of the Common Stock are entitled to vote.
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(iii) Except as otherwise required by law or this Second Amended and Restated Certificate (including any Preferred Stock Designation), at any annual or special meeting of the stockholders of the Corporation, holders of the Class A Common Stock, holders of the Class B Common Stock and holders of the Class C Common Stock, voting together as a single class, shall have the exclusive right to vote for the election of directors and on all other matters properly submitted to a vote of the stockholders. Notwithstanding the foregoing, except as otherwise required by law or this Second Amended and Restated Certificate (including any Preferred Stock Designation), holders of shares of any series of Common Stock shall not be entitled to vote on any amendment to this Second Amended and Restated Certificate (including any amendment to any Preferred Stock Designation) that relates solely to the terms of one or more outstanding series of Preferred Stock or other series of Common Stock if the holders of such affected series of Preferred Stock or Common Stock, as applicable, are entitled, either separately or together with the holders of one or more other such series, to vote thereon pursuant to this Second Amended and Restated Certificate (including any Preferred Stock Designation) or the DGCL.
(b) Class B Common Stock .
(i) Shares of Class B Common Stock shall be convertible into shares of Class A Common Stock on a one-for-one basis (the “ Initial Conversion Ratio ”) (A) at any time and from time to time at the option of the holder thereof and (B) automatically upon the consummation of the Business Combination. Concurrently with such conversion pursuant to this Section 4.3(b)(i)(B) , the number of authorized shares of Class B Common Stock shall be reduced to zero. It is intended that the conversion of shares of Class B Common Stock into shares of Class A Common Stock pursuant to this Section 4.3(b)(i)(B) will be treated as a reorganization within the meaning of Section 368(a)(1)(E) of the Internal Revenue Code of 1986, as amended.
(ii) Notwithstanding the Initial Conversion Ratio, in the case that additional shares of Class A Common Stock, or Equity-linked Securities (as defined below), are issued or deemed issued in excess of the amounts sold in the Corporation’s initial public offering of securities (the “ Offering ”) and related to the closing of the initial Business Combination (other than the Forward Purchase Securities (as defined below)), all issued and outstanding shares of Class B Common Stock shall automatically convert into shares of Class A Common Stock at the time of the closing of the initial Business Combination at a ratio for which:
| • | the numerator shall be equal to the sum of (A) 25% of all shares of Class A Common Stock issued or issuable (upon the conversion or exercise of any Equity-linked Securities or otherwise) by the Corporation, related to or in connection with the consummation of the initial Business Combination (excluding the Forward Purchase Securities and any securities issued or issuable to any seller in the initial Business Combination) plus (B) the number of shares of Class B Common Stock issued and outstanding prior to the closing of the initial Business Combination; and |
| • | the denominator shall be the number of shares of Class B Common Stock issued and outstanding prior to the closing of the initial Business Combination. |
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As used herein, the term “ Equity-linked Securities ” means any securities of the Corporation which are convertible into or exchangeable or exercisable for Common Stock.
Notwithstanding anything to the contrary contained herein, (i) the foregoing adjustment to the Initial Conversion Ratio may be waived as to any particular issuance or deemed issuance of additional shares of Class A Common Stock or Equity-linked Securities by the written consent or agreement of holders of a majority of the shares of Class B Common Stock then outstanding consenting or agreeing separately as a single class in the manner provided in Section 4.3(b)(iii) , and (ii) in no event shall the Class B Common Stock convert into Class A Common Stock at a ratio that is less than one-for-one.
As used herein, the term “ Forward Purchase Securities ” means the shares of Class A Common Stock and warrants to purchase shares of Class A Common Stock issued pursuant to that certain Forward Purchase Agreement, dated as of March 17, 2017, by and between the Corporation and Riverstone VI SR II Holdings, L.P., as the same may be amended.
The foregoing conversion ratio shall also be adjusted to account for any subdivision (by stock split, subdivision, exchange, stock dividend, reclassification, recapitalization or otherwise) or combination (by reverse stock split, exchange, reclassification, recapitalization or otherwise) or similar reclassification or recapitalization of the outstanding shares of Class A Common Stock into a greater or lesser number of shares occurring after the original filing of this Second Amended and Restated Certificate without a proportionate and corresponding subdivision, combination or similar reclassification or recapitalization of the outstanding shares of Class B Common Stock.
Each share of Class B Common Stock shall convert into its pro rata number of shares of Class A Common Stock pursuant to this Section 4.3(b) . The pro rata share for each holder of Class B Common Stock will be determined as follows: Each share of Class B Common Stock shall convert into such number of shares of Class A Common Stock as is equal to the product of one (1) multiplied by a fraction, the numerator of which shall be the total number of shares of Class A Common Stock into which all of the issued and outstanding shares of Class B Common Stock shall be converted pursuant to this Section 4.3(b) and the denominator of which shall be the total number of issued and outstanding shares of Class B Common Stock at the time of conversion.
(iii) Voting . Except as otherwise required by law or this Second Amended and Restated Certificate (including any Preferred Stock Designation), for so long as any shares of Class B Common Stock shall remain outstanding, the Corporation shall not, without the prior vote or written consent of the holders of a majority of the shares of
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Class B Common Stock then outstanding, voting separately as a single class, amend, alter or repeal any provision of this Second Amended and Restated Certificate, whether by merger, consolidation or otherwise, if such amendment, alteration or repeal would alter or change the powers, preferences or relative, participating, optional or other or special rights of the Class B Common Stock. Any action required or permitted to be taken at any meeting of the holders of Class B Common Stock may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of the outstanding Class B Common Stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares of Class B Common Stock were present and voted and shall be delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which minutes of proceedings of stockholders are recorded. Delivery made to the Corporation’s registered office shall be by hand or by certified or registered mail, return receipt requested. Prompt written notice of the taking of corporate action without a meeting by less than unanimous written consent of the holders of Class B Common Stock shall, to the extent required by law, be given to those holders of Class B Common Stock who have not consented in writing and who, if the action had been taken at a meeting, would have been entitled to notice of the meeting if the record date for notice of such meeting had been the date that written consents signed by a sufficient number of holders of Class B Common Stock to take the action were delivered to the Corporation.
(c) Class C Common Stock .
(i) Permitted Owners . Shares of Class C Common Stock may be issued only to, and registered in the name of, an Existing Owner (as defined below), its successors and assigns as well as its respective transferees permitted in accordance with Section 4.3(c)(iv) (including all subsequent successors, assigns and permitted transferees) (each Existing Owner, together with such persons, collectively, “ Permitted Class C Owners ”). As used in this Second Amended and Restated Certificate, (i) “ Existing Owner ” means each of High Mesa Holdings, LP, a Delaware limited partnership, High Mesa Holdings GP, LLC, a Texas limited liability company, KFM Holdco, LLC, a Delaware limited liability company, and Riverstone VI Alta Mesa Holdings, L.P., a Delaware limited partnership, and (ii) “ Common Unit ” means a common unit representing limited partner interests in SRII Opco, LP, a Delaware limited partnership, or any successor entities thereto (the “ Partnership ”), authorized and issued under its Amended and Restated Agreement of Limited Partnership, dated as of February 9, 2018, as such agreement may be further amended, restated, amended and restated, supplemented or otherwise modified from time to time (the “ Partnership Agreement ”), and constituting a “Common Unit” as defined in the Partnership Agreement as in effect as of the effective time of this Second Amended and Restated Certificate.
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(ii) Voting . Except as otherwise required by law or this Second Amended and Restated Certificate (including any Preferred Stock Designation), for so long as any shares of Class C Common Stock shall remain outstanding, the Corporation shall not, without the prior vote or written consent of the holders of at least 75% of the shares of Class C Common Stock then outstanding, voting separately as a single class, amend, alter or repeal any provision of this Second Amended and Restated Certificate, whether by merger, consolidation or otherwise, if such amendment, alteration or repeal would alter or change the powers, preferences or relative, participating, optional or other special rights of the Class C Common Stock. Any action required or permitted to be taken at any meeting of the holders of Class C Common Stock may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of the outstanding Class C Common Stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares of Class C Common Stock were present and voted and shall be delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which minutes of proceedings of stockholders are recorded. Delivery made to the Corporation’s registered office shall be by hand or by certified or registered mail, return receipt requested. Prompt written notice of the taking of corporate action without a meeting by less than unanimous written consent of the holders of Class C Common Stock shall, to the extent required by law, be given to those holders of Class C Common Stock who have not consented in writing and who, if the action had been taken at a meeting, would have been entitled to notice of the meeting if the record date for notice of such meeting had been the date that written consents signed by a sufficient number of holders of Class C Common Stock to take the action were delivered to the Corporation.
(iii) Dividends . Notwithstanding anything to the contrary in this Second Amended and Restated Certificate, other than as set forth in Section 4.3(e) , dividends shall not be declared or paid on the Class C Common Stock.
(iv) Transfer of Class C Common Stock .
(1) A holder of Class C Common Stock may surrender shares of Class C Common Stock to the Corporation for no consideration at any time. Following the surrender of any shares of Class C Common Stock to the Corporation, the Corporation will take all actions necessary to retire such shares and such shares shall not be re-issued by the Corporation.
(2) A holder of Class C Common Stock may transfer shares of Class C Common Stock to any transferee (other than the Corporation) only if, and only to the extent permitted by the Partnership Agreement, such holder also simultaneously transfers an equal number of such holder’s Common Units to such transferee in compliance with the Partnership Agreement. The transfer restrictions described in this Section 4.3(c )( iv)(2) are referred to as the “ Restrictions .”
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(3) Any purported transfer of shares of Class C Common Stock in violation of the Restrictions shall be null and void. If, notwithstanding the Restrictions, a person shall, voluntarily or involuntarily, purportedly become or attempt to become, the purported owner (“ Purported Owner ”) of shares of Class C Common Stock in violation of the Restrictions, then the Purported Owner shall not obtain any rights in and to such shares of Class C Common Stock (the “ Restricted Shares ”), and the purported transfer of the Restricted Shares to the Purported Owner shall not be recognized by the Corporation’s transfer agent (the “ Transfer Agent ”).
(4) Upon a determination by the Board that a person has attempted or may attempt to transfer or to acquire Restricted Shares in violation of the Restrictions, the Board may take such action as it deems advisable to refuse to give effect to such transfer or acquisition on the books and records of the Corporation, including without limitation, to cause the Transfer Agent to record the Purported Owner’s transferor as the record owner of the Restricted Shares and to institute proceedings to enjoin or rescind any such transfer or acquisition.
(5) The Board may, to the extent permitted by law, from time to time establish, modify, amend or rescind, by bylaw or otherwise, regulations and procedures that are consistent with the provisions of this Section 4.3(c)(iv) for determining whether any transfer or acquisition of shares of Class C Common Stock would violate the Restrictions and for the orderly application, administration and implementation of the provisions of this Section 4.3(c)(iv) . Any such procedures and regulations shall be kept on file with the Secretary of the Corporation and with the Transfer Agent and shall be made available for inspection by any prospective transferee and, upon written request, shall be mailed to holders of shares of Class C Common Stock.
(6) The Board shall have all powers necessary to implement the Restrictions, including without limitation, the power to prohibit the transfer of any shares of Class C Common Stock in violation thereof.
(v) Issuance of Class A Common Stock Upon Redemption; Cancellation of Class C Common Stock .
(1) To the extent that any Permitted Class C Owner exercises its right pursuant to the Partnership Agreement to have its Common Units redeemed by the Partnership in accordance with the Partnership Agreement, then simultaneous with the payment of the consideration due under the Partnership Agreement to such Permitted Class C Owner, the Corporation shall cancel for no consideration a number of shares of Class C Common Stock registered in the name of the redeeming or exchanging Permitted Class C Owner equal to the number of Common Units held by such Permitted Class C Owner that are redeemed or exchanged in such redemption or exchange transaction. The Corporation will at all times reserve and keep available out of its authorized but unissued shares of Class A Common Stock, solely for the purpose of issuance upon redemption of the Common Units for Class A Common Stock pursuant to the Partnership Agreement, such number of shares of Class A Common Stock that shall be issuable upon any such redemption pursuant to the Partnership Agreement;
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provided that nothing contained herein shall be construed to preclude the Corporation from satisfying its obligations in respect of any such redemption of Common Units pursuant to the Partnership Agreement by delivering to the holder of Common Units upon such redemption cash in lieu of shares of Class A Common Stock in the amount permitted by and provided in the Partnership Agreement. All shares of Class A Common Stock that shall be issued upon any such redemption will, upon issuance in accordance with the Partnership Agreement, be validly issued, fully paid and nonassessable.
(2) Notwithstanding the Restrictions, (A) in the event that an outstanding share of Class C Common Stock shall cease to be held by a registered holder of Common Units, such share of Class C Common Stock shall automatically and without further action on the part of the Corporation or any holder of Class C Common Stock be cancelled for no consideration, and the Corporation will take all actions necessary to retire such share and such share shall not be re-issued by the Corporation, (B) in the event that one or more of the Common Units held by a registered holder of Class C Common Stock ceases to be held by such holder (other than as a result of a transfer of one or more Common Units together with an equal number of shares of Class C Common Stock as permitted by the Partnership Agreement), a corresponding number of shares of Class C Common Stock registered in the name of such holder shall automatically and without further action on the part of the Corporation or such holder be cancelled for no consideration, and the Corporation will take all actions necessary to retire such shares and such shares shall not be re-issued by the Corporation and (C) in the event that no Permitted Class C Owner owns any Common Units that are redeemable pursuant to the Partnership Agreement, then all shares of Class C Common Stock will be cancelled for no consideration, and the Corporation will take all actions necessary to retire such shares and such shares shall not be re-issued by the Corporation.
(vi) Restrictive Legend . All certificates or book entries representing shares of Class C Common Stock, as the case may be, shall bear a legend substantially in the following form (or in such other form as the Board may determine):
THE SECURITIES REPRESENTED BY THIS [CERTIFICATE][BOOK ENTRY] ARE SUBJECT TO THE RESTRICTIONS (INCLUDING RESTRICTIONS ON TRANSFER) SET FORTH IN THE SECOND AMENDED AND RESTATED CERTIFICATE OF INCORPORATION (A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE CORPORATION AND SHALL BE PROVIDED FREE OF CHARGE TO ANY STOCKHOLDER MAKING A REQUEST THEREFOR).
(vii) Amendment . At any time when there are no longer any shares of Class C Common Stock outstanding, this Second Amended and Restated Certificate automatically shall be deemed amended to delete this Section 4.3(c) .
(viii) Liquidation, Dissolution or Winding Up of the Corporation . The holders of Class C Common Stock shall not be entitled to receive any assets of the Corporation in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation.
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(d) Dividends . Subject to applicable law and the rights, if any, of the holders of any outstanding series of the Preferred Stock, the holders of shares of Common Stock (other than holders of shares of Class C Common Stock) shall be entitled to receive such dividends and other distributions (payable in cash, property or capital stock of the Corporation) when, as and if declared thereon by the Board from time to time out of any assets or funds of the Corporation legally available therefor and shall share equally on a per share basis in such dividends and distributions.
(e) Class A Common Stock and Class C Common Stock . In no event shall the shares of either Class A Common Stock or Class C Common Stock be split, divided, or combined (including by way of stock dividend) unless the outstanding shares of the other class shall be proportionately split, divided or combined.
(f) Liquidation, Dissolution or Winding Up of the Corporation . Subject to applicable law, and the rights, if any, of the holders of any outstanding series of the Preferred Stock, in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, after payment or provision for payment of the debts and other liabilities of the Corporation, the holders of shares of Common Stock (other than holders of shares of Class C Common Stock) shall be entitled to receive all the remaining assets of the Corporation available for distribution to its stockholders, ratably in proportion to the number of shares of Common Stock (other than shares of Class C Common Stock) held by them.
Section 4.4 Rights and Options . The Corporation has the authority to create and issue rights, warrants and options entitling the holders thereof to acquire from the Corporation any shares of its capital stock of any class or classes, with such rights, warrants and options to be evidenced by or in instrument(s) approved by the Board. The Board is empowered to set the exercise price, duration, times for exercise and other terms and conditions of such rights, warrants or options; provided, however, that the consideration to be received for any shares of capital stock issuable upon exercise thereof may not be less than the par value thereof.
ARTICLE V
BOARD OF DIRECTORS
Section 5.1 Board Powers . The business and affairs of the Corporation shall be managed by, or under the direction of, the Board. In addition to the powers and authority expressly conferred upon the Board by statute, this Second Amended and Restated Certificate or the Bylaws of the Corporation (“ Bylaws ”), the Board is hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation, subject, nevertheless, to the provisions of the DGCL, this Second Amended and Restated Certificate, and any Bylaws adopted by the stockholders; provided, however, that no Bylaws hereafter adopted by the stockholders shall invalidate any prior act of the Board that would have been valid if such Bylaws had not been adopted.
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Section 5.2 Number, Election and Term .
(a) The number of directors of the Corporation shall be fixed from time to time in the manner provided in the Bylaws.
(b) Subject to Section 5.5 , the Board shall be divided into three classes, as nearly equal in number as possible and designated Class I, Class II and Class III. The Board is authorized to assign members of the Board already in office to Class I, Class II or Class III. The term of the initial Class I Directors shall expire at the first annual meeting of the stockholders of the Corporation following the effectiveness of this Second Amended and Restated Certificate; the term of the initial Class II Directors shall expire at the second annual meeting of the stockholders of the Corporation following the effectiveness of this Second Amended and Restated Certificate; and the term of the initial Class III Directors shall expire at the third annual meeting of the stockholders of the Corporation following the effectiveness of this Second Amended and Restated Certificate. At each succeeding annual meeting of the stockholders of the Corporation, beginning with the first annual meeting of the stockholders of the Corporation following the effectiveness of this Second Amended and Restated Certificate, successors to the class of directors whose term expires at that annual meeting shall be elected for a three-year term or until the election and qualification of their respective successors in office, subject to their earlier death, resignation or removal. Subject to Section 5.5 , if the number of directors is changed, any increase or decrease shall be apportioned by the Board among the classes so as to maintain the number of directors in each class as nearly equal as possible, but in no case shall a decrease in the number of directors shorten the term of any incumbent director. Directors shall be elected by a plurality of the votes cast at an annual meeting of stockholders by holders of the Common Stock. The Board is hereby expressly authorized, by resolution or resolutions thereof, to assign members of the Board already in office to the aforesaid classes at the time this Second Amended and Restated Certificate (and therefore such classification) becomes effective in accordance with the DGCL.
(c) Subject to Section 5.5 , a director shall hold office until the annual meeting for the year in which his or her term expires and until his or her successor has been elected and qualified, subject, however, to such director’s earlier death, resignation, retirement, disqualification or removal.
(d) Advance notice of nominations for the election of directors, other than by the Board or a duly authorized committee thereof, and information concerning nominees, shall be given in the manner provided in the Bylaws.
(e) Unless and except to the extent that the Bylaws shall so require, the election of directors need not be by written ballot.
Section 5.3 Newly Created Directorships and Vacancies . Subject to Section 5.5 , newly created directorships resulting from an increase in the number of directors and any vacancies on the Board resulting from death, resignation, retirement, disqualification, removal or other cause may be filled solely and exclusively by a majority vote of the remaining directors then in office, even if less than a quorum, or by a sole remaining director (and not by stockholders), and any director so chosen shall hold office for the remainder of the full term of the class of directors to which the new directorship was added or in which the vacancy occurred and until his or her successor has been elected and qualified, subject, however, to such director’s earlier death, resignation, retirement, disqualification or removal.
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Section 5.4 Removal . Subject to Section 5.5 , any or all of the directors may be removed from office at any time, but only for cause and only by the affirmative vote of holders of a majority of the voting power of all then outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class.
Section 5.5 Preferred Stock—Directors . Notwithstanding any other provision of this Article V , and except as otherwise required by law, whenever the holders of one or more series of the Preferred Stock shall have the right, voting separately by class or series, to elect one or more directors, the term of office, the filling of vacancies, the removal from office and other features of such directorships shall be governed by the terms of such series of the Preferred Stock as set forth in this Second Amended and Restated Certificate (including any Preferred Stock Designation) and such directors shall not be included in any of the classes created pursuant to this Article V unless expressly provided by such terms.
ARTICLE VI
BYLAWS
In furtherance and not in limitation of the powers conferred upon it by law, the Board shall have the power and is expressly authorized to adopt, amend, alter or repeal the Bylaws. The affirmative vote of a majority of the Board shall be required to adopt, amend, alter or repeal the Bylaws. The Bylaws also may be adopted, amended, altered or repealed by the stockholders; provided, however, that in addition to any vote of the holders of any class or series of capital stock of the Corporation required by law or by this Second Amended and Restated Certificate (including any Preferred Stock Designation), the affirmative vote of the holders of at least a majority of the voting power of all then outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required for the stockholders to adopt, amend, alter or repeal the Bylaws; and provided further, however, that no Bylaws hereafter adopted by the stockholders shall invalidate any prior act of the Board that would have been valid if such Bylaws had not been adopted.
ARTICLE VII
MEETINGS OF STOCKHOLDERS;
ACTION BY WRITTEN CONSENT
Section 7.1 Meetings . Subject to the rights, if any, of the holders of any outstanding series of the Preferred Stock, and to the requirements of applicable law, special meetings of stockholders of the Corporation may be called only by the Chairman of the Board, Chief Executive Officer of the Corporation, or the Board pursuant to a resolution adopted by a majority of the Board, and the ability of the stockholders to call a special meeting is hereby specifically denied. Except as provided in the foregoing sentence, special meetings of stockholders may not be called by another person or persons.
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Section 7.2 Advance Notice . Advance notice of stockholder nominations for the election of directors and of business to be brought by stockholders before any meeting of the stockholders of the Corporation shall be given in the manner provided in the Bylaws.
Section 7.3 Action by Written Consent . Except as may be otherwise provided for or fixed pursuant to this Second Amended and Restated Certificate (including any Preferred Stock Designation) relating to the rights of the holders of any outstanding series of Preferred Stock, subsequent to the consummation of the Offering, any action required or permitted to be taken by the stockholders of the Corporation must be effected by a duly called annual or special meeting of such stockholders and may not be effected by written consent of the stockholders.
ARTICLE VIII
LIMITED LIABILITY; INDEMNIFICATION
Section 8.1 Limitation of Director Liability . A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent such exemption from liability or limitation thereof is not permitted under the DGCL as the same exists or may hereafter be amended unless they violated their duty of loyalty to the Corporation or its stockholders, acted in bad faith, knowingly or intentionally violated the law, authorized unlawful payments of dividends, unlawful stock purchases or unlawful redemptions, or derived improper personal benefit from their actions as directors. Any amendment, modification or repeal of the foregoing sentence shall not adversely affect any right or protection of a director of the Corporation hereunder in respect of any act or omission occurring prior to the time of such amendment, modification or repeal.
Section 8.2 Indemnification and Advancement of Expenses .
(a) To the fullest extent permitted by applicable law, as the same exists or may hereafter be amended, the Corporation shall indemnify and hold harmless each person who is or was made a party or is threatened to be made a party to or is otherwise involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (a “ proceeding ”) by reason of the fact that he or she is or was a director or officer of the Corporation or, while a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, other enterprise or nonprofit entity, including service with respect to an employee benefit plan (an “ indemnitee ”), whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent, or in any other capacity while serving as a director, officer, employee or agent, against all liability and loss suffered and expenses (including, without limitation, attorneys’ fees, judgments, fines, ERISA excise taxes and penalties and amounts paid in settlement) reasonably incurred by such indemnitee in connection with such proceeding. The Corporation shall to the fullest extent not prohibited by applicable law pay the expenses (including attorneys’ fees) incurred by an indemnitee in defending or otherwise participating in any proceeding in advance of its final disposition; provided, however, that, to the extent required by applicable law, such payment of expenses in advance of the final disposition of the proceeding shall be made only upon receipt of an undertaking, by or on behalf of the indemnitee, to repay all amounts so advanced if it shall ultimately be determined that the indemnitee is not entitled to be indemnified under this Section
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8.2 or otherwise. The rights to indemnification and advancement of expenses conferred by this Section 8.2 shall be contract rights and such rights shall continue as to an indemnitee who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators. Notwithstanding the foregoing provisions of this Section 8.2(a) , except for proceedings to enforce rights to indemnification and advancement of expenses, the Corporation shall indemnify and advance expenses to an indemnitee in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) was authorized by the Board.
(b) The rights to indemnification and advancement of expenses conferred on any indemnitee by this Section 8.2 shall not be exclusive of any other rights that any indemnitee may have or hereafter acquire under law, this Second Amended and Restated Certificate, the Bylaws, an agreement, vote of stockholders or disinterested directors, or otherwise.
(c) Any repeal or amendment of this Section 8.2 by the stockholders of the Corporation or by changes in law, or the adoption of any other provision of this Second Amended and Restated Certificate inconsistent with this Section 8.2 , shall, unless otherwise required by law, be prospective only (except to the extent such amendment or change in law permits the Corporation to provide broader indemnification rights on a retroactive basis than permitted prior thereto), and shall not in any way diminish or adversely affect any right or protection existing at the time of such repeal or amendment or adoption of such inconsistent provision in respect of any proceeding (regardless of when such proceeding is first threatened, commenced or completed) arising out of, or related to, any act or omission occurring prior to such repeal or amendment or adoption of such inconsistent provision.
(d) This Section 8.2 shall not limit the right of the Corporation, to the extent and in the manner authorized or permitted by law, to indemnify and to advance expenses to persons other than indemnitees.
ARTICLE IX
CORPORATE OPPORTUNITY
The doctrine of corporate opportunity, or any other analogous doctrine, shall not apply with respect to the Corporation or any of its officers or directors, or any of their respective affiliates, in circumstances where the application of any such doctrine would conflict with any fiduciary duties or contractual obligations they may have as of the date of this Second Amended and Restated Certificate or in the future. In addition to the foregoing, the doctrine of corporate opportunity shall not apply to any other corporate opportunity with respect to any of the directors or officers of the Corporation unless such corporate opportunity is offered to such person solely in his or her capacity as a director or officer of the Corporation and such opportunity is one the Corporation is legally and contractually permitted to undertake and would otherwise be reasonable for the Corporation to pursue.
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ARTICLE X
EXCLUSIVE JURISDICTION FOR CERTAIN ACTIONS
Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall, to the fullest extent permitted by applicable law, be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee or agent of the Corporation to the Corporation or the Corporation’s stockholders, creditors or other constituents, (iii) any action asserting a claim against the Corporation or any director or officer of the Corporation arising pursuant to any provision of the DGCL or this Second Amended and Restated Certificate or the Bylaws (as either may be amended from time to time), (iv) any action to interpret, apply, enforce or determine the validity of this Second Amended and Restated Certificate or the Bylaws, or (v) any action asserting a claim against the Corporation or any director or officer of the Corporation governed by the internal affairs doctrine, in each such case subject to said Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein; provided, however, that, if and only if the Court of Chancery of the State of Delaware dismisses any such action for lack of subject matter jurisdiction, such action may be brought in another state or federal court sitting in the State of Delaware with subject matter jurisdiction over the matter. To the fullest extent permitted by law, any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Article X . If any provision or provisions of this Article X shall be held to be invalid, illegal or unenforceable as applied to any person or entity or circumstance for any reason whatsoever, then, to the fullest extent permitted by law, the validity, legality and enforceability of such provisions in any other circumstance and of the remaining provisions of this Article X (including, without limitation, each portion of any sentence of this Article X containing any such provision held to be invalid, illegal or unenforceable that is not itself held to be invalid, illegal or unenforceable) and the application of such provision to other persons or entities and circumstances shall not in any way be affected or impaired thereby.
ARTICLE XI
AMENDMENT OF AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
The Corporation reserves the right at any time and from time to time to amend, alter, change or repeal any provision contained in this Second Amended and Restated Certificate (including any Preferred Stock Designation), and other provisions authorized by the laws of the State of Delaware at the time in force that may be added or inserted, in the manner now or hereafter prescribed by this Second Amended and Restated Certificate and the DGCL; and, except as set forth in Article VIII , all rights, preferences and privileges of whatever nature herein conferred upon stockholders, directors or any other persons by and pursuant to this Second Amended and Restated Certificate in its present form or as hereafter amended are granted subject to the right reserved in this Article XI .
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IN WITNESS WHEREOF, Silver Run Acquisition Corporation II has caused this Second Amended and Restated Certificate to be duly executed and acknowledged in its name and on its behalf by an authorized officer as of the date first set forth above.
| SILVER RUN ACQUISITION CORPORATION II | ||
| By: |
/s/ Stephen S. Coats |
|
| Name: | Stephen S. Coats | |
| Title: | Secretary | |
[ Signature Page to Amended and Restated Certificate of Incorporation ]
Exhibit 3.2
CERTIFICATE OF DESIGNATION OF
SERIES A PREFERRED STOCK OF
ALTA MESA RESOURCES, INC.
Alta Mesa Resources, Inc. (f/k/a Silver Run Acquisition Corporation II), a Delaware corporation (the “ Corporation ”), hereby certifies that, pursuant to the provisions of Sections 103, 141 and 151 of the General Corporation Law of the State of Delaware, on February 9, 2018, the board of directors of the Corporation (the “ Board ”) adopted the resolution shown immediately below, which resolution is now, and at all times since its date of adoption has been, in full force and effect:
RESOLVED, that pursuant to the provisions of the Second Amended and Restated Certificate of Incorporation of the Corporation (as such may be amended, modified or restated from time to time, the “ Second Amended and Restated Certificate ”) (which authorizes 1,000,000 shares of preferred stock, par value $0.0001 per share (the “ Preferred Stock ”)), and the authority thereby vested in the Board, a series of Preferred Stock be, and it hereby is, created, and that the designation and number of shares of such series, and the voting and other powers, preferences and relative, participating, optional or other rights, and the qualifications, limitations and restrictions thereof are as set forth in the Second Amended and Restated Certificate and this Certificate of Designation, as it may be amended from time to time (the “ Certificate of Designation ”) as follows:
SECTION 1. Designation and Number of Shares . Pursuant to the Second Amended and Restated Certificate, there is hereby created out of the authorized and unissued shares of Preferred Stock a series of Preferred Stock consisting of three (3) shares of Preferred Stock designated as “Series A Preferred Stock” (the “ Series A Preferred Stock ”), which shall consist of the following: (a) one (1) share designated as Series A-1 Preferred Stock (the “ Series A-1 Preferred Stock ”), (b) one (1) share designated as Series A-2 Preferred Stock (the “ Series A-2 Preferred Stock ”) and (c) one (1) share designated as Series A-3 Preferred Stock (the “ Series A-3 Preferred Stock ”). Except as otherwise provided herein, all shares of Series A Preferred Stock shall have the same terms.
SECTION 2 . Permitted Owners. The Series A-1 Preferred Stock may be issued only to, and registered in the name of Bayou City Energy Management LLC, a Delaware limited liability company (“ Bayou City ”), its successors and assigns as well as their respective transferees permitted in accordance with Section 5 . The Series A-2 Preferred Stock may be issued only to, and registered in the name of HPS Investment Partners, LLC, a Delaware limited liability company (“ HPS ”), its successors and assigns as well as their respective transferees permitted in accordance with Section 5 . The Series A-3 Preferred Stock may be issued only to, and registered in the name of AM Equity Holdings, LP, a Texas limited partnership (“ Management ”), its successors and assigns as well as their respective transferees permitted in accordance with Section 5 .
SECTION 3 . Voting. Except as provided herein, the holder of a share of Series A Preferred Stock shall not be entitled to vote on any matter on which stockholders of the Corporation generally are entitled to vote.
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SECTION 4 . Dividends. Notwithstanding anything to the contrary in the Second Amended and Restated Certificate, dividends shall not be declared or paid on the Series A Preferred Stock.
SECTION 5 . Transfer of Series A Preferred Stock. Neither the Series A Preferred Stock nor any rights, powers, preferences or privileges thereunder shall be transferable, in whole or in part, except that each of Bayou City, HPS and Management may transfer its applicable share of Series A Preferred Stock to an Affiliate (as defined below) of the transferor.
SECTION 6 . Conversion; Redemption. The Series A Preferred Stock is not convertible into any other security of the Corporation. Each share of Series A Preferred Stock will be redeemable for the par value thereof by the Corporation upon the earliest to occur of (1) February 9, 2023, (2) the optional redemption of such Series A Preferred Stock at the election of the holder thereof or (3) a breach of the restrictions on transfer in Section 5 .
SECTION 7 . Director Election .
(a) So long as the applicable share of Series A Preferred Stock of Bayou City, HPS and Management remains outstanding, but in no event after February 9, 2023, such holder will be entitled to nominate directors for election to the Board in connection with any vote (whether at a meeting or by written consent) of the stockholders of the Corporation for the election of directors as follows:
(i) if Bayou City and its Affiliates collectively Beneficially Own at least 10% of the total outstanding shares of Common Stock, the holder of the Series A-1 Preferred Stock shall be entitled to nominate one director who shall be an Independent Director (unless the director to be nominated by Bayou City is William M. McMullen who need not be an independent director);
(ii) if HPS and its Affiliates collectively Beneficially Own at least 10% of the total outstanding shares of Common Stock, the holder of the Series A-2 Preferred Stock shall be entitled to nominate one director who shall be an Independent Director;
(iii) if Management and AM MME Holdings, LP, a Texas limited partnership, and their Affiliates and Beneficial Owners (collectively, the “ Management Group ”), collectively Beneficially Own at least 10% of the total outstanding shares of Common Stock, the holder of the Series A-3 Preferred Stock shall be entitled to nominate two directors who need not be Independent Directors; and
(iv) if the Management Group collectively Beneficially Owns less than 10% but at least 5% of the total outstanding shares of Common Stock, and either Harlan H. Chappelle or Michael E. Ellis continues to participate as a member of management of the Corporation, the holder of the Series A-3 Preferred Stock shall be entitled to nominate one director who need not be an Independent Director.
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(b) The vote of the holder of the applicable share of Series A Preferred Stock shall be the only vote required to elect such nominees to the Board (each such director, in such capacity, a “ Series A Director ”). So long as the holder of a share of Series A Preferred Stock has the right to designate one or more individuals to serve as a Series A Director pursuant to Section 7(a) , subject to the limitations set forth in Section 7(a) , vacancies on the Board resulting from the death, resignation, retirement, disqualification or removal of a Series A Director shall be filled only by the affirmative vote of the holder of the applicable share of Series A Preferred Stock (and not pursuant to Section 5.3 of the Second Amended and Restated Certificate).
(c) In the event that the holder of a share of Series A Preferred Stock ceases to have the right to designate an individual to serve as a Series A Director pursuant to Section 7(a) , (i) the number of Series A Directors for which the holder of such share of Series A Preferred Stock ceases to have the right to designate to serve as a Series A Director shall resign no later than the next annual meeting of stockholders of the Corporation or, if earlier, such time as such Series A Director’s successor is appointed or elected (provided that the holder of such share of Series A Preferred Stock shall have the authority to select which such particular Series A Director or Series A Directors designated by such holder will resign), and (ii) the vacancy created by such resignation or removal shall be filled as provided in the Second Amended and Restated Certificate and the Bylaws of the Corporation. The Corporation shall also have the right to cause the removal of any Series A Director from the Board immediately upon redemption of an applicable share of Series A Preferred Stock in accordance with Section 6 .
(d) The Series A Directors shall be included in the classes created pursuant to Section 5.2(b) of the Second Amended and Restated Certificate as agreed upon between the holder(s) of the Series A Preferred Stock and the Corporation.
(e) For purposes of this Section 7 :
(i) “ Affiliate ” means any Person that directly, or indirectly through one or more intermediaries, controls, is controlled by or is under common control with the Person specified. For purposes of this definition, control of a Person means the power, direct or indirect, to direct or cause the direction of the management and policies of such Person whether through ownership of voting securities or ownership interests, by contract or otherwise.
(ii) “ Beneficial Owner ” has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Securities Exchange Act of 1934 (the “ Exchange Act ”), except that in calculating the beneficial ownership of any particular “person” (as that term is used in Section 13(d)(3) of the Exchange Act), such “person” will be deemed to have beneficial ownership of all securities that such “person” has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only after the passage of time. The terms “ Beneficially Owns ” and “ Beneficially Owned ” have a corresponding meaning.
(iii) “ Class A Common Stock ” shall mean the Corporation’s Class A Common Stock, par value $0.0001 per share.
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(iv) “ Common Stock ” shall mean, collectively, the Class A Common Stock and the Corporation’s Class C Common Stock, par value $0.0001 per share.
(v) “ Independent Director ” shall mean a director who, as of such director’s election or appointment to the Board, (a) if the Class A Common Stock is listed on the NASDAQ Capital Market (the “ NASDAQ ”), is not an executive officer or employee of the Corporation and in the opinion of the Board has no relationship, which would interfere with the exercise of independent judgment in carrying out the responsibilities of a director, and is not otherwise disqualified from acting as an independent director under NASDAQ Rule 5605(a)(2) or (ii) if the Class A Common Stock is not listed on the NASDAQ, qualifies as an “independent director” under the listing rules of the national securities exchange on which shares of the Class A Common Stock are then listed for trading.
(vi) “ Person ” means any natural person, corporation, general partnership, limited partnership, limited liability company, proprietorship, other business organization, trust, union, association or governmental authority.
SECTION 8. Liquidation, Dissolution or Winding Up of the Corporation . In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, after payment or provision for payment of the debts and other liabilities of the Corporation, each holder of a share of Series A Preferred Stock shall be entitled to receive, out of the assets of the Corporation or proceeds thereof available for distribution to stockholders of the Corporation, before any distribution of such assets or proceeds is made to or set aside for the holders of common stock of the Corporation and any other stock of the Corporation ranking junior to the Series A Preferred Stock as to such distribution, payment in full in an amount equal to $0.0001 per share.
[ signature page follows ]
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IN WITNESS WHEREOF, the Corporation has caused this Certificate of Designation to be signed by its undersigned duly authorized officer this 9th day of February, 2018.
| ALTA MESA RESOURCES, INC. | ||
| By: |
/s/ Stephen S. Coats |
|
| Name: Stephen S. Coats | ||
| Title: Secretary | ||
[ Signature Page to Series A Certificate of Designation ]
Exhibit 3.3
CERTIFICATE OF DESIGNATION OF
SERIES B PREFERRED STOCK OF
ALTA MESA RESOURCES, INC.
Alta Mesa Resources, Inc. (f/k/a Silver Run Acquisition Corporation II), a Delaware corporation (the “ Corporation ”), hereby certifies that, pursuant to the provisions of Sections 103, 141 and 151 of the General Corporation Law of the State of Delaware, on February 9, 2018, the board of directors of the Corporation (the “ Board ”) adopted the resolution shown immediately below, which resolution is now, and at all times since its date of adoption, has been in full force and effect:
RESOLVED, that pursuant to the provisions of the Second Amended and Restated Certificate of Incorporation of the Corporation (as such may be amended, modified or restated from time to time, the “ Second Amended and Restated Certificate ”) (which authorizes 1,000,000 shares of preferred stock, par value $0.0001 per share (the “ Preferred Stock ”)), and the authority thereby vested in the Board, a series of Preferred Stock be, and it hereby is, created, and that the designation and number of shares of such series, and the voting and other powers, preferences and relative, participating, optional or other rights, and the qualifications, limitations and restrictions thereof are as set forth in the Second Amended and Restated Certificate and this Certificate of Designation, as it may be amended from time to time (the “ Certificate of Designation ”) as follows:
SECTION 1. Designation and Number of Shares . Pursuant to the Second Amended and Restated Certificate, there is hereby created out of the authorized and unissued shares of Preferred Stock a series of Preferred Stock consisting of one (1) share of Preferred Stock designated as “Series B Preferred Stock” (the “ Series B Preferred Stock ”).
SECTION 2 . Permitted Owners. The Series B Preferred Stock may be issued only to, and registered in the name of, Riverstone VI Alta Mesa Holdings, L.P., a Delaware limited partnership (“ Riverstone ”), its successors and assigns as well as its transferees permitted in accordance with Section 5 .
SECTION 3 . Voting. Except as provided herein, the holder of the Series B Preferred Stock shall not be entitled to vote on any matter on which stockholders of the Corporation generally are entitled to vote.
SECTION 4 . Dividends. Notwithstanding anything to the contrary in the Second Amended and Restated Certificate, dividends shall not be declared or paid on the Series B Preferred Stock.
SECTION 5 . Transfer of Series B Preferred Stock. Neither the Series B Preferred Stock nor any rights, powers, preferences or privileges thereunder shall be transferable, in whole or in part, except to an Affiliate (as defined in the Amended and Restated Agreement of Limited Partnership of SRII Opco, LP, a Delaware limited partnership, dated as of February 9, 2018, as such agreement may be further amended, restated, amended and restated, supplemented or otherwise modified from time to time (the “ LP Agreement ”)) of Riverstone.
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SECTION 6 . Conversion; Redemption. The Series B Preferred Stock is not convertible into any other security of the Corporation. The Series B Preferred Stock will be redeemable for the par value thereof by the Corporation upon the earliest to occur of (1) the optional redemption of such Series B Preferred Stock at the election of the holder thereof or (2) a breach of the restrictions on transfer in Section 5 .
SECTION 7 . Director Election .
(a) Prior to February 9, 2023, so long as the Series B Preferred Stock remains outstanding, the holder of the Series B Preferred Stock will be entitled to nominate directors for election to the Board in connection with any vote (whether at a meeting or by written consent) of the stockholders of the Corporation for the election of directors as follows:
| (i) | if Riverstone and its Affiliates collectively Beneficially Own at least 15% of the total outstanding shares of Common Stock, up to three directors (one of whom shall be designated as the Chairman of the Board), |
| (ii) | if Riverstone and its Affiliates collectively Beneficially Own less than 15% but at least 10% of the outstanding shares of Common Stock, up to two directors (one of whom shall be designated as the Chairman of the Board), and |
| (iii) | if Riverstone and its Affiliates collectively Beneficially Own less than 10% but at least 5% of the outstanding shares of Common Stock, up to one director (who may be the Chairman of the Board if such person is Jim Hackett). |
(b) The vote of the holder of the Series B Preferred Stock shall be the only vote required to elect such nominees to the Board (each such director, in such capacity, a “ Series B Director ”). So long as the holder of Series B Preferred Stock has the right to designate an individual to serve as a Series B Director pursuant to Section 7(a) , subject to the limitations set forth in Section 7(a) , vacancies on the Board resulting from the death, resignation, retirement, disqualification or removal of a Series B Director shall be filled only by the affirmative vote of the holder of the Series B Preferred Stock (and not pursuant to Section 5.3 of the Second Amended and Restated Certificate).
(c) In the event that the holder of the Series B Preferred Stock ceases to have the right to designate an individual to serve as a Series B Director pursuant to Section 7(a) , (i) the number of Series B Directors for which the holder of the Series B Preferred Stock ceases to have the right to designate to serve as a Series B Director shall resign no later than the next annual meeting of stockholders of the Corporation or, if earlier, such time as such Series B Director’s successor is appointed or elected (provided that the holder of the Series B Preferred Stock shall have the authority to select which such particular Series B Director or Series B Directors directed by such holder will resign), and (ii) the vacancy created by such resignation or removal shall be filled as provided in the Second Amended and Restated Certificate and the Bylaws of the Corporation. The Corporation shall also have the right to cause the removal of any Series B Director from the Board immediately upon redemption of the Series B Preferred Stock in accordance with Section 6 .
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(d) The Series B Directors shall be included in the classes created pursuant to Section 5.2(b) of the Second Amended and Restated Certificate as agreed upon between the holder of the Series B Preferred Stock and the Corporation.
(e) For purposes of this Section 7 :
(i) “ Beneficial Owner ” has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Securities Exchange Act of 1934 (the “ Exchange Act ”), except that in calculating the beneficial ownership of any particular “person” (as that term is used in Section 13(d)(3) of the Exchange Act), such “person” will be deemed to have beneficial ownership of all securities that such “person” has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only after the passage of time. The terms “ Beneficially Owns ” and “ Beneficially Owned ” have a corresponding meaning.
(ii) “ Class A Common Stock ” shall mean the Corporation’s Class A Common Stock, par value $0.0001 per share.
(iii) “ Common Stock ” shall mean, collectively, the Class A Common Stock and the Corporation’s Class C Common Stock, par value $0.0001 per share.
SECTION 8. Liquidation, Dissolution or Winding Up of the Corporation . In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, after payment or provision for payment of the debts and other liabilities of the Corporation, the holder of the Series B Preferred Stock shall be entitled to receive, out of the assets of the Corporation or proceeds thereof available for distribution to stockholders of the Corporation, before any distribution of such assets or proceeds is made to or set aside for the holders of common stock of the Corporation and any other stock of the Corporation ranking junior to the Series B Preferred Stock as to such distribution, payment in full in an amount equal to $0.0001 per share.
[ signature page follows ]
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IN WITNESS WHEREOF, the Corporation has caused this Certificate of Designation to be signed by its undersigned duly authorized officer this 9th day of February, 2018.
| ALTA MESA RESOURCES, INC. | ||||
| By: | /s/ Stephen S. Coats | |||
| Name: | Stephen S. Coats | |||
| Title: | Secretary | |||
[ Signature Page to Series B Preferred Certificate of Designation ]
Exhibit 4.1
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this “ Agreement ”) is made as of February 9, 2018 by and among Alta Mesa Resources, Inc. a Delaware corporation (the “ Company ”), High Mesa Holdings, L.P., a Delaware limited partnership (“ High Mesa Holdings ”), KFM Holdco, LLC, a Delaware limited liability company (the “ Kingfisher Contributor ”), and Riverstone VI Alta Mesa Holdings, L.P., a Delaware limited partnership (“ Riverstone ”). Each of High Mesa Holdings, the Kingfisher Contributor, Riverstone and any person or entity who hereafter becomes a party to this Agreement pursuant to Section 5.02 of this Agreement, is herein referred to as a “ Holder ” and collectively as the “ Holders ”.
RECITALS
WHEREAS , this Agreement is made and entered into in connection with the closing of the transactions (the “ Transactions ”) contemplated by (i) that certain Contribution Agreement, dated as of August 16, 2017, by and among High Mesa Holdings, High Mesa Holdings GP, LLC, Alta Mesa Holdings, LP, a Texas limited partnership (“ Alta Mesa ”), Alta Mesa Holdings GP, LLC, a Texas limited liability company (“ Alta Mesa GP ”), the Company and, for limited purposes set forth therein, the equity holders of High Mesa Holdings (the “ Alta Mesa Contribution Agreement ”), (ii) that certain Contribution Agreement, dated as of August 16, 2017, by and among the Kingfisher Contributor, Kingfisher Midstream, LLC, a Delaware limited liability company (“ Kingfisher ”), the Company and, for limited purposes set forth therein, the equity holders of the Kingfisher Contributor (the “ Kingfisher Contribution Agreement ”), and (iii) that certain Contribution Agreement, dated as of August 16, 2017, by and between Riverstone and the Company (the “ Riverstone Contribution Agreement ”);
WHEREAS , pursuant to the terms of the Alta Mesa Contribution Agreement and the Kingfisher Contribution Agreement, the Company will contribute cash to SRII Opco, LP, a Delaware limited partnership (the “ Partnership ”), in exchange for the issuance by the Partnership to the Company of 169,371,730 Common Units (as defined below) and 62,966,666 warrants in the Partnership;
WHEREAS , pursuant to the terms of the Alta Mesa Contribution Agreement, (i) High Mesa Holdings will contribute all of its limited partner interests in Alta Mesa and 100% of the economic interests and 90% of the voting interests in Alta Mesa GP to the Partnership, in exchange for the issuance by the Company and the Partnership of (A) 138,402,398 Common Units to High Mesa Holdings, (B) 138,402,398 shares of the Company’s Class C common stock, par value $0.0001 per share (the “ Class C Common Stock ”), to High Mesa Holdings, (C) three shares of the Company’s Series A preferred stock, par value $0.0001 per share, to certain affiliates of High Mesa Holdings and (D) the Earn-Out Consideration (as defined in the Alta Mesa Contribution Agreement), and (ii) the Partnership will contribute $400 million in cash to Alta Mesa;
WHEREAS , pursuant to the terms of the Kingfisher Contribution Agreement, the Kingfisher Contributor will contribute 100% of the equity interests in Kingfisher Midstream to the Partnership, in exchange for (i) the payment by the Partnership to the Kingfisher Contributor of approximately $814.8 million in cash and (ii) the issuance by the Company and the Partnership of (A) 55,000,000 Common Units, (B) 55,000,000 shares of Class C Common Stock and (C) the Earn-Out Consideration (as defined in the Kingfisher Contribution Agreement);
WHEREAS , pursuant to the terms of the Riverstone Contribution Agreement, Riverstone will contribute all of its limited partner interests in Alta Mesa to the Partnership, in exchange for the issuance by the Company and the Partnership to Riverstone of (i) 20,000,000 Common Units, (ii) 20,000,000 shares of Class C Common Stock and (iii) one share of Series B Preferred Stock of the Company;
WHEREAS , immediately prior to or simultaneous with the closing of the Transactions, the Company, the Partnership, High Mesa Holdings, the Kingfisher Contributor and Riverstone will enter into that certain Amended and Restated Agreement of Limited Partnership of SRII Opco, LP (such agreement, as it may be amended, restated, amended and restated, supplemented or otherwise modified form time to time, the “ LP Agreement ”);
WHEREAS , in connection with the closing of the Transactions, the Partnership has provided High Mesa Holdings, the Kingfisher Contributor and Riverstone with a redemption right pursuant to which High Mesa Holdings, the Kingfisher Contributor and Riverstone may be able, at the Company’s option, to redeem or exchange their Common Units for shares of Class A Common Stock (as defined below) on the terms set forth in the LP Agreement; and
WHEREAS , the Company and the Holders desire to enter into this Agreement, pursuant to which the Company shall grant the Holders certain registration rights with respect to certain securities of the Company, as set forth in this Agreement.
NOW, THEREFORE , in consideration of the representations, covenants and agreements contained herein, and certain other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.01 Definitions. The terms defined in this Article I shall, for all purposes of this Agreement, have the respective meanings set forth below:
“ Adverse Disclosure ” shall mean any public disclosure of material non-public information, which disclosure, in the good faith judgment of the Chief Executive Officer or principal financial officer of the Company, after consultation with counsel to the Company, (i) would be required to be made in any Registration Statement or Prospectus in order for the applicable Registration Statement or Prospectus not to contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained therein (in the case of any prospectus and any preliminary prospectus, in the light of the circumstances under which they were made) not misleading, (ii) would not be required to be made at such time if the Registration Statement were not being filed, and (iii) the Company has a bona fide business purpose for not making such information public.
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“ Agreement ” shall have the meaning given in the Preamble.
“ Alta Mesa ” shall have the meaning given in the Recitals.
“ Alta Mesa Contribution Agreement ” shall have the meaning given in the Recitals.
“ Alta Mesa GP ” shall have the meaning given in the Recitals.
“ Blackout Period ” shall have the meaning given in Section 3.04(b) .
“ Business Day ” shall mean any day of the year on which national banking institutions in New York are open to the public for conducting business and are not required or authorized to close.
“ Class A Common Stock ” shall mean the Class A common stock, par value $0.0001 per share, of the Company.
“ Commission ” shall mean the Securities and Exchange Commission.
“ Common Units ” shall mean common units representing limited partner interests in the Partnership.
“ Company ” shall have the meaning given in the Preamble.
“ Contribution Closing Date ” shall mean February 9, 2018, the date on which the Transactions closed.
“ Demanding Holder ” and “ Demanding Holders ” shall have the meaning given in Section 2.02(a) .
“ Effectiveness Deadline ” shall have the meaning given in Section 2.01 .
“ Exchange Act ” shall mean the Securities Exchange Act of 1934, as it may be amended from time to time.
“ Founder Holders ” shall mean the “Holders” as defined in the Founder Registration Rights Agreement of Founder Registrable Securities.
“ Founder Registrable Securities ” shall mean the “Registrable Securities” as defined in the Founder Registration Rights Agreement
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“ Founder Registration Rights Agreement ” shall mean the Registration Rights Agreement dated as of March 23, 2017, by and among the Company, the Sponsor, William D. Gutermuth, Jeffrey H. Tepper and Diana J. Walters, as amended by Amendment No. 1 thereto, dated as of the date hereof.
“ Fund VI ” shall have the meaning given in Section 5.06 .
“ High Mesa Holdings ” shall have the meaning given in the Preamble.
“ Holders ” shall have the meaning given in the Preamble.
“ Kingfisher ” shall have the meaning given in the Recitals.
“ Kingfisher Contribution Agreement ” shall have the meaning given in the Recitals.
“ Kingfisher Contributor ” shall have the meaning given in the Preamble and shall also include any Holder to which the Kingfisher Contributor has assigned or delegated its rights, duties and obligations under this Agreement in connection with a Permitted Transfer (as defined in the LP Agreement).
“ LP Agreement ” shall have the meaning given in the Recitals.
“ Maximum Number of Securities ” shall have the meaning given in Section 2.02(b) .
“ Minimum Amount ” shall have the meaning given in Section 2.02(a) .
“ Misstatement ” shall mean an untrue statement of a material fact or an omission to state a material fact required to be stated in a Registration Statement or Prospectus, or necessary to make the statements in a Registration Statement or Prospectus in the light of the circumstances under which they were made not misleading.
“ Partnership ” shall have the meaning given in the Recitals.
“ Piggyback Registration ” shall have the meaning given in Section 2.03 .
“ Prospectus ” shall mean the prospectus included in any Registration Statement, as supplemented by any and all prospectus supplements and as amended by any and all post-effective amendments and including all material incorporated by reference in such prospectus.
“ Registrable Security ” shall mean (a) any shares of Class A Common Stock issued by the Company in a Share Settlement (as defined in the LP Agreement) in connection with (x) the redemption by the Partnership of Common Units owned by any Holder or (y) at the election of the Company, a direct exchange for Common Units owned by any Holder, in each case in accordance with the terms of the LP Agreement, and (b) any other equity security of the Company issued or issuable with respect to any such share of Class A Common Stock by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or reorganization; provided , however , that, as to any particular Registrable Security, such securities shall cease to be Registrable Securities when: (A) a Registration
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Statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been sold, transferred, disposed of or exchanged in accordance with such Registration Statement; (B) such securities shall have been otherwise transferred, new certificates for such securities not bearing a legend restricting further transfer shall have been delivered by the Company and subsequent public distribution of such securities shall not require registration under the Securities Act; (C) such securities shall have ceased to be outstanding; (D) such securities may be sold without registration pursuant to Rule 144 promulgated under the Securities Act (or any successor rule promulgated thereafter by the Commission) (but with no volume or other restrictions or limitations); or (E) such securities have been sold to, or through, a broker, dealer or underwriter in a public distribution or other public securities transaction.
“ Registration ” shall mean a registration effected by preparing and filing a registration statement or similar document in compliance with the requirements of the Securities Act, and the applicable rules and regulations promulgated thereunder, and such registration statement becoming effective.
“ Registration Expenses ” shall mean the out-of-pocket expenses of a Registration, including, without limitation, the following:
| (A) | all registration and filing fees (including fees with respect to filings required to be made with the Financial Industry Regulatory Authority, Inc.) and any securities exchange on which the Class A Common Stock is then listed; |
| (B) | fees and expenses of compliance with securities or blue sky laws (including reasonable fees and disbursements of counsel for the Underwriters in connection with blue sky qualifications of Registrable Securities); |
| (C) | printing, messenger, telephone and delivery expenses; |
| (D) | reasonable fees and disbursements of counsel for the Company; |
| (E) | reasonable fees and disbursements of all independent registered public accountants of the Company incurred specifically in connection with such Registration (including the expenses of any special audit and “comfort letters” required by or incident to such performance); and |
| (F) | reasonable fees and expenses of one (1) legal counsel selected by the Demanding Holders in connection with an Underwritten Offering. |
“ Registration Statement ” shall mean any registration statement that covers the Registrable Securities pursuant to the provisions of this Agreement, including the Prospectus included in such registration statement, amendments (including post-effective amendments) and supplements to such registration statement, and all exhibits to and all material incorporated by reference in such registration statement.
“ Riverstone ” shall have the meaning given in the Preamble.
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“ Riverstone Contribution Agreement ” shall have the meaning given in the Recitals.
“ Securities Act ” shall mean the Securities Act of 1933, as amended from time to time.
“ Sponsor ” shall have the meaning given in Section 5.06 .
“ Suspension Period ” shall have the meaning given in Section 3.04(a) .
“ Transactions ” shall have the meaning given in the Recitals.
“ Underwriter ” shall mean a securities dealer who purchases any Registrable Securities as principal in an Underwritten Offering and not as part of such dealer’s market-making activities.
“ Underwritten Offering ” shall mean an offering in which securities of the Company are sold to an Underwriter in a firm commitment underwriting for distribution to the public.
“ Underwritten Offerings Cap ” shall have the meaning set forth in Section 2.02(a) .
ARTICLE II.
REGISTRATIONS
Section 2.01 Registration Statement. The Company shall, as soon as practicable after the Contribution Closing Date, but in any event within thirty (30) days after the Contribution Closing Date, file a Registration Statement under the Securities Act to permit the public resale of all the Registrable Securities held by the Holders from time to time as permitted by Rule 415 under the Securities Act (or any successor or similar provision adopted by the Commission then in effect) on the terms and conditions specified in this Section 2.01 and shall use its commercially reasonable efforts to cause such Registration Statement to be declared effective as soon as practicable after the filing thereof, but in any event no later than the earlier of (i) sixty (60) days (or ninety (90) days if the Commission notifies the Company that it will “review” the Registration Statement) after the Contribution Closing Date and (ii) the tenth (10th) Business Day after the date the Company is notified (orally or in writing, whichever is earlier) by the Commission that such Registration Statement will not be “reviewed” or will not be subject to further review (such earlier date, the “ Effectiveness Deadline ”). The Registration Statement filed with the Commission pursuant to this Section 2.01 shall be on Form S-1 or such other form of registration statement as is then available to effect a registration for resale of such Registrable Securities, covering such Registrable Securities, and shall contain a Prospectus in such form as to permit any Holder to sell such Registrable Securities pursuant to Rule 415 under the Securities Act (or any successor or similar provision adopted by the Commission then in effect) at any time beginning on the effective date for such Registration Statement. A Registration Statement filed pursuant to this Section 2.01 shall provide for the resale pursuant to any method or combination of methods legally available to, and requested by, the Holders. The Company shall use its reasonable best efforts to cause a Registration Statement filed pursuant to this Section 2.01 to remain effective, and to be supplemented and amended to the extent necessary to ensure that such Registration Statement is available or, if not available, that another registration statement is available, for the resale of all the Registrable Securities held by the Holders until all such
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Registrable Securities have ceased to be Registrable Securities. As soon as practicable following the effective date of a Registration Statement filed pursuant to this Section 2.01 , but in any event within three (3) Business Days of such date, the Company shall notify the Holders of the effectiveness of such Registration Statement. When effective, a Registration Statement filed pursuant to this Section 2.01 (including any documents incorporated therein by reference) will comply as to form in all material respects with all applicable requirements of the Securities Act and the Exchange Act and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading (in the case of any Prospectus contained in such Registration Statement, in the light of the circumstances under which such statement is made).
Section 2.02 Underwritten Offering.
(a) In the event that (i) High Mesa Holdings, (ii) the Kingfisher Contributor or (iii) Riverstone elect to dispose of Registrable Securities under a Registration Statement pursuant to an Underwritten Offering of all or part of such Registrable Securities that are registered by such Registration Statement and reasonably expect aggregate gross proceeds in excess of $50,000,000 (the “ Minimum Amount ”) from such Underwritten Offering, then the Company shall, upon the written demand of High Mesa Holdings, the Kingfisher Contributor or Riverstone, as the case may be (any such Holder, a “ Demanding Holder ” and, collectively, the “ Demanding Holders ”), enter into an underwriting agreement in a form as is customary in Underwritten Offerings of equity securities with the managing Underwriter or Underwriters selected by the Company after consultation with the Demanding Holders and shall take all such other reasonable actions as are requested by the managing Underwriter or Underwriters in order to expedite or facilitate the disposition of such Registrable Securities; provided , however , that the Company shall have no obligation to facilitate or participate in (A) more than six (6) Underwritten Offerings pursuant to this Section 2.02 for High Mesa Holdings, (B) more than three (3) Underwritten Offerings pursuant to this Section 2.02 for the Riverstone Contributor or (C) more than two (2) Underwritten Offerings pursuant to this Section 2.02 for the Kingfisher Contributor (each such amount in (A), (B) or (C), respectively, the “ Underwritten Offerings Cap ”); provided further that if an Underwritten Offering is commenced but terminated prior to the pricing thereof for any reason, such Underwritten Offering will not be counted as an Underwritten Offering pursuant to this Section 2.02 . In addition, the Company shall give prompt written notice to each other Holder regarding such proposed Underwritten Offering, and such notice shall offer such Holders the opportunity to include in the Underwritten Offering such number of Registrable Securities as each such Holder may request. Each such Holder shall make such request in writing to the Company within five (5) business days after the receipt of any such notice from the Company, which request shall specify the number of Registrable Securities intended to be disposed of by such Holder. In connection with any Underwritten Offering contemplated by this Section 2.02 , the underwriting agreement into which each Demanding Holder and the Company shall enter shall contain such representations, covenants, indemnities (subject to Article IV ) and other rights and obligations as are customary in underwritten offerings of equity securities. No Demanding Holder shall be required to make any representations or warranties to or agreements with the Company or the Underwriters other than representations, warranties or agreements regarding such Demanding Holder’s authority to enter into such underwriting agreement and to sell, and its ownership of, the securities being registered on its behalf, its intended method of distribution and any other representation required by law.
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(b) If the managing Underwriter or Underwriters in an Underwritten Offering, in good faith, advises the Company and the Demanding Holders that the dollar amount or number of Registrable Securities that the Demanding Holders desire to sell, taken together with all other shares of Class A Common Stock or other equity securities that the Company or any other Holder desires to sell and the shares of Class A Common Stock, if any, as to which a Registration has been requested pursuant to separate written contractual piggy-back registration rights held by any other stockholders who desire to sell, exceeds the maximum dollar amount or maximum number of equity securities that can be sold in the Underwritten Offering without adversely affecting the proposed offering price, the timing, the distribution method, or the probability of success of such offering (such maximum dollar amount or maximum number of such securities, as applicable, the “ Maximum Number of Securities ”), then the Company shall include in such Underwritten Offering, as follows:
(i) first , the Registrable Securities of the Demanding Holders pro rata based on the respective number of Registrable Securities that each Demanding Holder has requested be included in such Underwritten Offering and the aggregate number of Registrable Securities that the Demanding Holders have requested be included in such Underwritten Offering that can be sold without exceeding the Maximum Number of Securities;
(ii) second , to the extent that the Maximum Number of Securities has not been reached under the foregoing clause (i) , shares of Class A Common Stock or other equity securities that the Company desires to sell, which can be sold without exceeding the Maximum Number of Securities; and
(iii) third , to the extent that the Maximum Number of Securities has not been reached under the foregoing clause (i) and clause (ii) , shares of Class A Common Stock or other equity securities of (x) other Holders who have elected to participate in the Underwritten Offering pursuant to Section 2.02(a) or (y) persons or entities that the Company is obligated to register in a Registration pursuant to separate written contractual arrangements with such persons, pro rata, which can be sold without exceeding the Maximum Number of Securities.
(c) A Demanding Holder shall have the right to withdraw all or any portion of its Registrable Securities included in an Underwritten Offering pursuant to this Section 2.02 for any or no reason whatsoever upon written notification to the Company and the Underwriter or Underwriters of its intention to withdraw from such Underwritten Offering prior to the pricing of such Underwritten Offering and such withdrawn amount shall no longer be considered an Underwritten Offering (including, without limitation, for purposes of the Underwritten Offerings Cap); provided , however , that upon the withdrawal of an amount of Registrable Securities that results in the remaining amount of Registrable Securities included by High Mesa Holdings, the Kingfisher Contributor or Riverstone, as the case may be, in such Underwritten Offering being less than the Minimum Amount, the Company shall cease all efforts to complete the
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Underwritten Offering and, for the avoidance of doubt, such Underwritten Offering shall not count against the Underwritten Offerings Cap. Notwithstanding anything to the contrary in this Agreement, the Company shall be responsible for the Registration Expenses incurred in connection with an Underwritten Offering prior to its withdrawal under this Section 2.02(c) .
Section 2.03 Piggyback Registration.
(a) If at any time the Company proposes to file a Registration Statement under the Securities Act with respect to an Underwritten Offering of equity securities, or securities or other obligations exercisable or exchangeable for, or convertible into equity securities, for its own account or for the account of stockholders of the Company (or by the Company and by the stockholders of the Company including, without limitation, pursuant to Section 2.02 hereof) on a form that would permit registration of Registrable Securities, other than a Registration Statement (i) filed in connection with any employee stock option or other benefit plan, (ii) for an exchange offer or offering of securities solely to the Company’s existing stockholders, (iii) for an offering of debt that is convertible into equity securities of the Company, (iv) for a dividend reinvestment plan or (v) on Form S-4, then the Company shall give written notice of such proposed filing to all of the Holders of Registrable Securities as soon as practicable but not less than ten (10) days before the anticipated filing date of such Registration Statement , which notice shall (A) describe the amount and type of securities to be included in such offering, the intended method(s) of distribution, and the name of the proposed managing Underwriter or Underwriters, if any, in such offering, and (B) offer to all of the Holders of Registrable Securities the opportunity to register the sale of such number of Registrable Securities as such Holders may request in writing within five (5) days after receipt of such written notice (in the case of an “overnight” or “bought” offering, such requests must be made by the Holders within one (1) Business Day after the delivery of any such notice by the Company) (such Registration a “ Piggyback Registration ”); provided, however , that if the Company has been advised by the managing Underwriter(s) that the inclusion of Registrable Securities for sale for the benefit of the Holders will have an adverse effect on the price, timing or distribution of the Class A Common Stock in the Underwritten Offering, then (A) if no Registrable Securities can be included in the Underwritten Offering in the opinion of the managing Underwriter(s), the Company shall not be required to offer such opportunity to the Holders or (B) if any Registrable Securities can be included in the Underwritten Offering in the opinion of the managing Underwriter(s), then the amount of Registrable Securities to be offered for the accounts of Holders shall be determined based on the provisions of Section 2.03(b) . Subject to Section 2.03(b) , the Company shall, in good faith, cause such Registrable Securities to be included in such Piggyback Registration and shall use its commercially reasonable efforts to cause the managing Underwriter or Underwriters of a proposed Underwritten Offering to permit the Registrable Securities requested by the Holders pursuant to this Section 2.03 to be included in a Piggyback Registration on the same terms and conditions as any similar securities of the Company included in such Registration and to permit the sale or other disposition of such Registrable Securities in accordance with the intended method(s) of distribution thereof. If no written request for inclusion from a Holder is received within the specified time, each such Holder shall have no further right to participate in such Underwritten Offering. All such Holders proposing to distribute their Registrable Securities through an Underwritten Offering under this Section 2.03 shall enter into an underwriting agreement in customary form with the Underwriter(s) selected for such Underwritten Offering by the Company.
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(b) If the managing Underwriter or Underwriters in an Underwritten Offering that is to be a Piggyback Registration, in good faith, advises the Company and the Holders of Registrable Securities participating in the Piggyback Registration that the dollar amount or number of shares of Class A Common Stock that the Company desires to sell, taken together with (i) the shares of Class A Common Stock, if any, as to which Registration has been demanded pursuant to separate written contractual arrangements with persons or entities other than the Holders of Registrable Securities hereunder, (ii) the Registrable Securities as to which registration has been requested pursuant to Sections 2.02 and 2.03 , and (iii) the shares of Class A Common Stock, if any, as to which Registration has been requested pursuant to separate written contractual piggy-back registration rights of other stockholders of the Company, exceeds the Maximum Number of Securities, then:
(i) If the Registration is undertaken for the Company’s account, the Company shall include in any such Registration (A) first , shares of Class A Common Stock or other equity securities that the Company desires to sell, which can be sold without exceeding the Maximum Number of Securities; (B) second , to the extent that the Maximum Number of Securities has not been reached under the foregoing clause (A), pro rata to (1) the Registrable Securities of Holders exercising their rights to register their Registrable Securities pursuant to Sections 2.02 and 2.03 hereof, and (2) the Founder Registrable Securities of Founder Holders exercising their rights to register their Founder Registrable Securities pursuant to the Founder Registration Rights Agreement, which can be sold without exceeding the Maximum Number of Securities; and (C) third , to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (A) and (B), shares of Class A Common Stock, if any, as to which Registration has been requested pursuant to written contractual piggy-back registration rights of other stockholders of the Company, which can be sold without exceeding the Maximum Number of Securities;
(ii) If the Registration is pursuant to a request by persons or entities other than the Holders of Registrable Securities, then the Company shall include in any such Registration (A) first , shares of Class A Common Stock or other equity securities, if any, of such requesting persons or entities, other than the Holders of Registrable Securities, which can be sold without exceeding the Maximum Number of Securities; (B) second , to the extent that the Maximum Number of Securities has not been reached under the foregoing clause (A), pro rata to (1) the Registrable Securities of Holders exercising their rights to register their Registrable Securities pursuant to Sections 2.02 and 2.03 hereof, and (2) the Founder Registrable Securities of Founder Holders exercising their rights to register their Founder Registrable Securities pursuant to the Founder Registration Rights Agreement, which can be sold without exceeding the Maximum Number of Securities; (C) third , to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (A) and (B), shares of Class A Common Stock or other equity securities that the Company desires to sell, which can be sold without exceeding the Maximum Number of Securities; and (D) fourth , to the
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extent that the Maximum Number of Securities has not been reached under the foregoing clauses (A), (B) and (C), shares of Class A Common Stock or other equity securities for the account of other persons or entities that the Company is obligated to register pursuant to separate written contractual arrangements with such persons or entities, which can be sold without exceeding the Maximum Number of Securities.
(c) Any Holder of Registrable Securities shall have the right to withdraw from a Piggyback Registration for any or no reason whatsoever upon written notification to the Company and the Underwriter or Underwriters (if any) of its intention to withdraw from such Piggyback Registration prior to the pricing of such Underwritten Offering. The Company (whether on its own good faith determination or as the result of a request for withdrawal by persons pursuant to separate written contractual obligations) may withdraw a Registration Statement filed with the Commission in connection with a Piggyback Registration at any time prior to the effectiveness of such Registration Statement. Notwithstanding anything to the contrary in this Agreement, the Company shall be responsible for the Registration Expenses incurred in connection with the Piggyback Registration prior to its withdrawal under this Section 2.03 .
(d) For purposes of clarity, any Registration effected pursuant to Section 2.03 hereof shall not be counted as a Registration effected under Section 2.02 hereof.
ARTICLE III.
COMPANY PROCEDURES
Section 3.01 General Procedures. The Company shall use its commercially reasonable efforts to effect the Registration of Registrable Securities in accordance with the intended plan of distribution thereof, and pursuant thereto the Company shall, as expeditiously as practicable:
(a) subject to Section 2.01 , prepare and file with the Commission a Registration Statement with respect to such Registrable Securities and use its commercially reasonable efforts to cause such Registration Statement to become effective and remain effective pursuant to the terms of this Agreement until all of such Registrable Shares have been disposed of (if earlier);
(b) prepare and file with the Commission such amendments and post-effective amendments to the Registration Statement, and such supplements to the Prospectus, as may be required by the rules, regulations or instructions applicable to the registration form used by the Company or by the Securities Act or rules and regulations thereunder to keep the Registration Statement effective until all of such Registrable Shares have been disposed of (if earlier) in accordance with the intended plan of distribution set forth in such Registration Statement or supplement to the Prospectus;
(c) prior to filing a Registration Statement or Prospectus, or any amendment or supplement thereto, furnish without charge to the Underwriters, if any, and the Holders of Registrable Securities included in such Registration, and to one legal counsel selected by the Holders, copies of such Registration Statement as proposed to be filed, each amendment and supplement to such Registration Statement (in each case including all exhibits thereto and documents incorporated by reference therein), the Prospectus included in such Registration
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Statement (including each preliminary Prospectus), and such other documents as the Underwriters and the Holders of Registrable Securities included in such Registration or the legal counsel selected by such Holders may request in order to facilitate the disposition of the Registrable Securities owned by such Holders;
(d) prior to any public offering of Registrable Securities, use its commercially reasonable efforts to (i) register or qualify the Registrable Securities covered by the Registration Statement under such securities or “blue sky” laws of such jurisdictions in the United States as the Holders of Registrable Securities included in such Registration Statement (in light of their intended plan of distribution) may request and (ii) take such action necessary to cause such Registrable Securities covered by the Registration Statement to be registered with or approved by such other governmental authorities as may be necessary by virtue of the business and operations of the Company and do any and all other acts and things that may be necessary or advisable to enable the Holders of Registrable Securities included in such Registration Statement to consummate the disposition of such Registrable Securities in such jurisdictions; provided , however , that the Company shall not be required to qualify generally to do business or as a dealer in securities in any jurisdiction where it would not otherwise be required to qualify or take any action to which it would be subject to general service of process or taxation in any such jurisdiction where it is not then otherwise so subject;
(e) use its commercially reasonable efforts to cause all such Registrable Securities to be listed on each securities exchange or automated quotation system on which similar securities issued by the Company are then listed;
(f) provide a transfer agent and registrar for all such Registrable Securities no later than the effective date of such Registration Statement;
(g) advise each seller of such Registrable Securities, promptly after it shall receive notice or obtain knowledge thereof, of the issuance of any stop order by the Commission suspending the effectiveness of such Registration Statement or the initiation or threatening of any proceeding for such purpose and promptly use its commercially reasonable efforts to prevent the issuance of any stop order or to obtain its withdrawal if such stop order should be issued;
(h) at least five (5) days prior to the filing of any Registration Statement or Prospectus or any amendment or supplement to such Registration Statement or Prospectus or any document that is to be incorporated by reference into such Registration Statement or Prospectus, furnish a copy thereof to each seller of such Registrable Securities or its counsel;
(i) notify the Holders at any time when a Prospectus relating to such Registration Statement is required to be delivered under the Securities Act, of the happening of any event as a result of which the Prospectus included in such Registration Statement, as then in effect, includes a Misstatement, and then to correct such Misstatement as set forth in Section 3.04 hereof;
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(j) permit a representative of the Holders, the Underwriters, if any, and any attorney or accountant retained by such Holders or Underwriter to participate, at each such person’s own expense, in the preparation of the Registration Statement, and cause the Company’s officers, directors and employees to supply all information reasonably requested by any such representative, Underwriter, attorney or accountant in connection with the Registration; provided , however , that such representatives or Underwriters enter into a confidentiality agreement, in form and substance reasonably satisfactory to the Company, prior to the release or disclosure of any such information;
(k) obtain a “cold comfort” letter from the Company’s independent registered public accountants in the event of an Underwritten Offering, in customary form and covering such matters of the type customarily covered by “cold comfort” letters as the managing Underwriter may reasonably request;
(l) on the date the Registrable Securities are delivered for sale pursuant to such Registration, obtain an opinion, dated as of such date, of counsel representing the Company for the purposes of such Registration, addressed to the placement agent or sales agent, if any, and the Underwriters, if any, covering such legal matters with respect to the Registration in respect of which such opinion is being given as are customarily included in such opinions and negative assurance letters;
(m) in the event of any Underwritten Offering, enter into and perform its obligations under an underwriting agreement, on terms agreed to by the Company with the managing Underwriter of such offering;
(n) make available to its security holders, as soon as reasonably practicable, an earnings statement (which need not be audited) covering the period of at least twelve (12) months beginning with the first day of the Company’s first full calendar quarter after the effective date of the Registration Statement which satisfies the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or any successor rule promulgated thereafter by the Commission);
(o) if any Underwritten Offering involves the disposition of Registrable Securities involving gross proceeds in excess of the Minimum Amount, use its reasonable efforts to make available senior executives of the Company to participate in customary “road show” presentations that may be reasonably requested by the Underwriter in such Underwritten Offering; and
(p) otherwise, in good faith, take such customary actions necessary to effect the registration of such Registrable Shares contemplated hereby.
Section 3.02 Registration Expenses. The Registration Expenses of all Registrations shall be borne by the Company. It is acknowledged by the Holders and the Company that the Holders shall bear all incremental selling expenses relating to the sale of Registrable Securities, such as Underwriters’ commissions and discounts, brokerage fees and, other than as set forth in the definition of “Registration Expenses,” all reasonable fees and expenses of any legal counsel representing the Holders.
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Section 3.03 Requirements for Participation in Underwritten Offerings. No person may participate in any Underwritten Offering for equity securities of the Company hereunder unless such person (i) agrees to sell such person’s securities on the basis provided in the underwriting agreement for such Underwritten Offering and (ii) completes and executes all customary questionnaires, powers of attorney, indemnities, lock-up agreements, underwriting agreements and other customary documents as may be reasonably required under the terms of such underwriting agreement.
Section 3.04 Suspension of Sales; Adverse Disclosure.
(a) Upon receipt of written notice from the Company that a Registration Statement or Prospectus contains a Misstatement, each of the Holders shall forthwith discontinue disposition of Registrable Securities until it has received copies of a supplemented or amended Prospectus correcting the Misstatement (it being understood that the Company hereby covenants to prepare and file such supplement or amendment as soon as practicable after the time of such notice), or until it is advised in writing by the Company that the use of the Prospectus may be resumed (any such period, a “ Suspension Period ”).
(b) If the filing, initial effectiveness or continued use of a Registration Statement in respect of any Registration (including in connection with an Underwritten Offering) at any time would require the Company to make an Adverse Disclosure or would require the inclusion in such Registration Statement of financial statements that are unavailable to the Company for reasons beyond the Company’s control, then the Company may, upon giving prompt written notice to the Holders, delay the filing or initial effectiveness of, or suspend use of, such Registration Statement (including in connection with an Underwritten Offering) for the shortest period of time, but in no event more than thirty (30) days, determined in good faith by the Company to be necessary for such purpose (any such period, a “ Blackout Period ”). In the event the Company exercises its rights under the preceding sentence, the Holders agree to suspend, immediately upon their receipt of the notice referred to above, their use of the Prospectus relating to any Registration in connection with any sale or offer to sell Registrable Securities.
(c) The Company shall immediately notify the Holders of the expiration of any period during which it exercised its rights under this Section 3.04 . Notwithstanding anything to the contrary in this Section 3.04 , in no event shall any Suspension Period or any Blackout Period continue for more than ninety (90) days in the aggregate during any 365-day period.
Section 3.05 Reporting Obligations. As long as any Holder shall own Registrable Securities, the Company, at all times while it shall be a reporting company under the Exchange Act, covenants to file timely (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to Sections 13(a) or 15(d) of the Exchange Act and to promptly furnish the Holders with true and complete copies of all such filings (the delivery of which will be satisfied by the Company’s filing of such reports on the Commission’s EDGAR system). The Company further covenants that it shall take such further action as any Holder may reasonably request, all to the extent required from time to time to enable such Holder to sell shares of Class A Common Stock held by such Holder without registration under the Securities Act within the limitation of the
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exemptions provided by Rule 144 promulgated under the Securities Act (or any successor rule promulgated thereafter by the Commission), including providing any legal opinions. Upon the request of any Holder, the Company shall deliver to such Holder a written certification of a duly authorized officer as to whether it has complied with such requirements.
ARTICLE IV.
INDEMNIFICATION AND CONTRIBUTION
Section 4.01 Indemnification.
(a) The Company agrees to indemnify, to the extent permitted by law, each Holder of Registrable Securities, its officers and directors and each person who controls such Holder (within the meaning of the Securities Act) against all losses, claims, damages, liabilities and expenses (including attorneys’ fees) caused by any untrue or alleged untrue statement of material fact contained in any Registration Statement, Prospectus or preliminary Prospectus or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as the same are caused by or contained in any information furnished in writing to the Company by such Holder expressly for use therein. The Company shall indemnify the Underwriters, their officers and directors and each person who controls such Underwriters (within the meaning of the Securities Act) to the same extent as provided in the foregoing with respect to the indemnification of the Holder.
(b) In connection with any Registration Statement in which a Holder of Registrable Securities is participating, such Holder shall furnish to the Company in writing such information and affidavits as the Company reasonably requests for use in connection with any such Registration Statement or Prospectus and, to the extent permitted by law, shall indemnify the Company, its directors and officers and agents and each person who controls the Company (within the meaning of the Securities Act) against any losses, claims, damages, liabilities and expenses (including without limitation reasonable attorneys’ fees) resulting from any untrue statement of material fact contained in the Registration Statement, Prospectus or preliminary Prospectus or any amendment thereof or supplement thereto or any omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, but only to the extent that such untrue statement or omission is contained in any information or affidavit so furnished in writing by such Holder expressly for use therein; provided , however , that the obligation to indemnify shall be several, not joint and several, among such Holders of Registrable Securities, and the liability of each such Holder of Registrable Securities shall be in proportion to and limited to the net proceeds received by such Holder from the sale of Registrable Securities pursuant to such Registration Statement. The Holders of Registrable Securities shall indemnify the Underwriters, their officers, directors and each person who controls such Underwriters (within the meaning of the Securities Act) to the same extent as provided in the foregoing with respect to indemnification of the Company.
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(c) Any person entitled to indemnification herein shall (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification (provided that the failure to give prompt notice shall not impair any person’s right to indemnification hereunder to the extent such failure has not materially prejudiced the indemnifying party) and (ii) unless in such indemnified party’s reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist with respect to such claim, permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party. If such defense is assumed, the indemnifying party shall not be subject to any liability for any settlement made by the indemnified party without its consent (but such consent shall not be unreasonably withheld). An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim shall not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim. No indemnifying party shall, without the consent of the indemnified party, consent to the entry of any judgment or enter into any settlement which cannot be settled in all respects by the payment of money (and such money is so paid by the indemnifying party pursuant to the terms of such settlement) or which settlement does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation.
(d) The indemnification provided for under this Agreement shall remain in full force and effect regardless of any investigation made by or on behalf of the indemnified party or any officer, director or controlling person of such indemnified party and shall survive the transfer of securities. The Company and each Holder of Registrable Securities participating in an offering also agrees to make such provisions as are reasonably requested by any indemnified party for contribution to such party in the event the Company’s or such Holder’s indemnification is unavailable for any reason.
(e) If the indemnification provided under this Section 4.01 from the indemnifying party is unavailable or insufficient to hold harmless an indemnified party in respect of any losses, claims, damages, liabilities and expenses referred to herein, then the indemnifying party, in lieu of indemnifying the indemnified party, shall contribute to the amount paid or payable by the indemnified party as a result of such losses, claims, damages, liabilities and expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and the indemnified party, as well as any other relevant equitable considerations. The relative fault of the indemnifying party and indemnified party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, was made by, or relates to information supplied by, such indemnifying party or indemnified party, and the indemnifying party’s and indemnified party’s relative intent, knowledge, access to information and opportunity to correct or prevent such action; provided , however , that the liability of any Holder under this Section 4.01(e) shall be limited to the amount of the net proceeds received by such Holder in such offering giving rise to such liability. The amount paid or payable by a party as a result of the losses or other liabilities referred to above shall be deemed to include, subject to the limitations set forth in Section 4.01(a) , Section 4.01(b) and Section 4.01(c) above, any legal or other fees, charges or expenses reasonably incurred by such party in connection with any investigation or proceeding. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 4.01(e) were determined by pro rata allocation or by any
16
other method of allocation, which does not take account of the equitable considerations referred to in this Section 4.01(e) . No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution pursuant to this Section 4.01(e) from any person who was not guilty of such fraudulent misrepresentation.
ARTICLE V. MISCELLANEOUS
Section 5.01 Notices. Any notice or communication under this Agreement must be in writing and given by (i) deposit in the United States mail, addressed to the party to be notified, postage prepaid and registered or certified with return receipt requested, (ii) delivery in person or by courier service providing evidence of delivery, or (iii) transmission by hand delivery, electronic mail, telecopy, or telegram. Each notice or communication that is mailed, delivered, or transmitted in the manner described above shall be deemed sufficiently given, served, sent, and received, in the case of mailed notices, on the third Business Day following the date on which it is mailed, in the case of notices delivered by courier service, telegram and hand delivery, at such time as it is delivered to the addressee (with the delivery receipt or the affidavit of messenger) and in the case of electronic mail and telecopy, when sent. Any notice or communication under this Agreement must be addressed, if to the Company, to: 15021 Katy Freeway, Suite 400, Houston, Texas 77094, Attention: Harlan H. Chappelle, and, if to any Holder, at such Holder’s address as set forth on the signature pages hereto. Any party may change its address for notice at any time and from time to time by written notice to the other parties hereto, and such change of address shall become effective upon receipt of such notice as provided in this Section 5.01 .
Section 5.02 Assignment; No Third Party Beneficiaries.
(a) This Agreement and the rights, duties and obligations of the Company hereunder may not be assigned or delegated by the Company in whole or in part.
(b) None of High Mesa Holdings, the Kingfisher Contributor or Riverstone may assign or delegate its rights, duties or obligations under this Agreement, in whole or in part, except in connection with a Permitted Transfer (as defined in the LP Agreement).
(c) This Agreement and the provisions hereof shall be binding upon and shall inure to the benefit of each of the parties and its successors and the permitted assigns of the Holders.
(d) This Agreement shall not confer any rights or benefits on any persons that are not parties hereto, other than as expressly set forth in this Agreement and this Section 5.02 .
(e) No assignment by any party hereto of such party’s rights, duties and obligations hereunder shall be binding upon or obligate the Company unless and until the Company shall have received (i) written notice of such assignment as provided in Section 5.01 and (ii) the written agreement of the assignee, in a form reasonably satisfactory to the Company, to be bound by the terms and provisions of this Agreement (which may be accomplished by an addendum or certificate of joinder to this Agreement). Any transfer or assignment made other than as provided in this Section 5.02 shall be null and void.
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Section 5.03 Counterparts. This Agreement may be executed in multiple counterparts (including electronic PDF counterparts), each of which shall be deemed an original, and all of which together shall constitute the same instrument, but only one of which need be produced.
Section 5.04 Governing Law. NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY ANY OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE STATE OF DELAWARE AS APPLIED TO AGREEMENTS AMONG DELAWARE RESIDENTS ENTERED INTO AND TO BE PERFORMED ENTIRELY WITHIN DELAWARE, WITHOUT REGARD TO THE CONFLICT OF LAW PROVISIONS OF SUCH JURISDICTION.
Section 5.05 Amendments and Modifications. Upon the written consent of the Company and the Holders of at least a majority in interest of the Registrable Securities at the time in question, compliance with any of the provisions, covenants and conditions set forth in this Agreement may be waived, or any of such provisions, covenants or conditions may be amended or modified; provided , however , that notwithstanding the foregoing, any amendment hereto or waiver hereof that adversely affects one Holder, solely in its capacity as a holder of the shares of capital stock of the Company, in a manner that is materially different from the other Holders (in such capacity) shall require the consent of the Holder so affected. No course of dealing between any Holder or the Company and any other party hereto or any failure or delay on the part of a Holder or the Company in exercising any rights or remedies under this Agreement shall operate as a waiver of any rights or remedies of any Holder or the Company. No single or partial exercise of any rights or remedies under this Agreement by a party shall operate as a waiver or preclude the exercise of any other rights or remedies hereunder or thereunder by such party.
Section 5.06 Other Registration Rights. The Company represents and warrants that no person, other than (i) a Holder of Registrable Securities, (ii) Riverstone Global Energy and Power Fund VI, L.P., a Delaware limited partnership (“ Fund VI ”), and any of its permitted transferees (who have registration rights pursuant to that certain Forward Purchase Agreement, dated as of March 17, 2017, between Fund VI and the Company and that certain Forward Purchase Agreement, dated as of August 16, 2017, between Fund VI and the Company), (iii) Silver Run Sponsor II, LLC, a Delaware limited liability company (the “ Sponsor ”), certain directors of the Company and any of their respective permitted transferees (who have registration rights pursuant to the Founders Registration Rights Agreement) and (iv) holders of the Company’s warrants purchased in connection with the Company’s initial public offering, has any right to require the Company to register any securities of the Company for sale or to include such securities of the Company in any Registration filed by the Company for the sale of securities for its own account or for the account of any other person. Further, the Company represents and warrants that this Agreement supersedes any other registration rights agreement or agreement with similar terms and conditions among the parties and in the event of a conflict between any such agreement or agreements and this Agreement, the terms of this Agreement shall prevail.
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Section 5.07 Term. This Agreement shall terminate upon the earlier of (i) the tenth anniversary of the date of this Agreement or (ii) the date as of which no Holders (or permitted assignees under Section 5.02) hold any Registrable Securities. The provisions of Section 3.05 and Article IV shall survive any termination.
[SIGNATURE PAGES FOLLOW]
19
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed as of the date first written above.
| COMPANY : | ||
| ALTA MESA RESOURCES, INC. | ||
| By: |
/s/ Stephen S. Coats |
|
| Name: Stephen S. Coats | ||
| Title: Secretary | ||
| HOLDERS : | ||
| HIGH MESA HOLDINGS, L.P. | ||
| By: High Mesa Holdings GP, LLC, its general partner | ||
| By: |
/s/ Harlan H. Chappelle |
|
| Name: Harlan H. Chappelle | ||
| Title: President and Chief Executive Officer | ||
| KFM HOLDCO, LLC | ||
| By: |
/s/ Michael S. Christopher |
|
| Name: Michael S. Christopher | ||
| Title: Secretary and Chief Financial Officer | ||
[Signature Page to Registration Rights Agreement]
| RIVERSTONE VI ALTA MESA HOLDINGS, L.P. | ||
| By: | Riverstone Energy VI Holdings GP, LLC, its general partner | |
| By: |
/s/ Peter Haskopoulos |
|
| Name: Peter Haskopoulos | ||
| Title: Managing Director | ||
[Signature Page to Registration Rights Agreement]
Exhibit 4.2
AMENDMENT NO. 1 TO
REGISTRATION RIGHTS AGREEMENT
This Amendment No. 1, dated as of February 9, 2018 (this “ Amendment ”) to the Registration Rights Agreement, dated as of March 23, 2017 (the “ Original Agreement ”), is by and among Silver Run Acquisition Corporation II, a Delaware corporation (the “ Company ”), Silver Run Sponsor II, LLC, a Delaware limited liability company (the “ Sponsor ”), and the undersigned parties listed under Holder on the signature page hereto. All capitalized terms used and not otherwise defined in this Amendment shall have the meanings ascribed to such terms in the Original Agreement.
RECITALS
WHEREAS, on March 23, 2017, the Company and the Holders entered into the Original Agreement, pursuant to which the Company granted the Holders certain registration rights with respect to certain securities of the Company;
WHEREAS, on the date hereof, the Company entered into that certain Registration Rights Agreement with High Mesa Holdings, L.P., a Delaware limited partnership, KFM Holdco, LLC, a Delaware limited liability company, and Riverstone VI Alta Mesa Holdings, L.P., a Delaware limited partnership (the “ Business Combination RRA ”); and
WHEREAS, in connection with the Company providing registration rights pursuant to the terms of the Business Combination RRA, the Parties desire to amend certain provisions of the Original Agreement as set forth herein.
NOW, THEREFORE, in consideration of the mutual undertakings and agreements contained in this Amendment and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
Section 1. Amendments .
| (a) | Article I shall be amended by inserting in alphabetical order the following definitions: |
“ Business Combination Holder ” has the meaning given to the term “Holder” in the Business Combination RRA.
“ Business Combination RRA ” means that certain Registration Rights Agreement, dated as of February 9, 2018, among the Company, High Mesa Holdings, L.P., a Delaware limited partnership, KFM Holdco, LLC, a Delaware limited liability company, and Riverstone VI Alta Mesa Holdings, L.P., a Delaware limited partnership.
“ Business Combination Registrable Security ” has the meaning given to the term “Registrable Security” under the Business Combination RRA.
| (b) | Section 2.2.2 is hereby amended and restated in its entirety as follows: |
1
“If the managing Underwriter or Underwriters in an Underwritten Registration that is to be a Piggyback Registration, in good faith, advises the Company and the Holders of Registrable Securities participating in the Piggyback Registration that the dollar amount or number of shares of Class A Common Stock that the Company desires to sell, taken together with (i) the shares of Class A Common Stock, if any, as to which Registration has been demanded pursuant to separate written contractual arrangements with persons or entities other than the Holders of Registrable Securities hereunder, (ii) the Registrable Securities as to which registration has been requested pursuant to Section 2.2 hereof, and (iii) the shares of Class A Common Stock, if any, as to which Registration has been requested pursuant to separate written contractual piggy-back registration rights of other stockholders of the Company, exceeds the Maximum Number of Securities, then:
(a) If the Registration is undertaken for the Company’s account, the Company shall include in any such Registration (A) first , shares of Class A Common Stock or other equity securities that the Company desires to sell, which can be sold without exceeding the Maximum Number of Securities; (B) second , to the extent that the Maximum Number of Securities has not been reached under the foregoing clause (A), pro rata to (1) the Registrable Securities of Holders exercising their rights to register their Registrable Securities pursuant to subsection 2.2.1 hereof, and (2) the Business Combination Registrable Securities of the Business Combination Holders exercising their rights to register their Business Combination Registrable Securities pursuant to the Business Combination RRA, which can be sold without exceeding the Maximum Number of Securities; and (C) third , to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (A) and (B), shares of Class A Common Stock, if any, as to which Registration has been requested pursuant to written contractual piggy-back registration rights of other stockholders of the Company, which can be sold without exceeding the Maximum Number of Securities; and
(b) If the Registration is pursuant to a request by persons or entities other than the Holders of Registrable Securities, then the Company shall include in any such Registration (A) first , shares of Class A Common Stock or other equity securities, if any, of such requesting persons or entities, other than the Holders of Registrable Securities, which can be sold without exceeding the Maximum Number of Securities; (B) second , to the extent that the Maximum Number of Securities has not been reached under the foregoing clause (A), pro rata to (1) the Registrable Securities of Holders exercising their rights to register their Registrable Securities pursuant to subsection 2.2.1 hereof, and (2) the Business Combination Registrable Securities of the Business Combination Holders exercising their rights to register their Business Combination Registrable Securities pursuant to the Business Combination RRA, which can be sold without exceeding the Maximum Number of Securities; (C) third , to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (A) and (B), shares of Class A Common Stock or other equity securities that the Company desires to sell, which can be sold without exceeding the Maximum Number of Securities; and (D) fourth , to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (A), (B) and (C), shares of Class A Common Stock or other equity securities for the account of other persons or entities that the Company is obligated to register pursuant to separate written contractual arrangements with such persons or entities, which can be sold without exceeding the Maximum Number of Securities.”
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Section 2. Remainder of Original Agreement . Except as expressly set forth herein, this Amendment shall not by implication or otherwise alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Original Agreement, all of which shall continue to be in full force and effect. Unless the context otherwise requires, after the execution and delivery hereof, any reference to the “Agreement” shall mean the Original Agreement as amended hereby.
Section 3. Governing Law . This Amendment shall be governed by, and interpreted in accordance with, the laws of the State of New York as applied to agreements among New York residents entered into and to be performed entirely within New York, without regard to the conflict of law provisions of such jurisdiction.
[ Signature page follows ]
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IN WITNESS WHEREOF, this Amendment has been executed as of the date first above written.
| COMPANY: | ||||
|
SILVER RUN ACQUISITION CORPORATION II, a Delaware corporation |
||||
| By: |
/s/ Stephen S. Coats |
|||
| Name: Stephen S. Coats | ||||
| Title: Secretary | ||||
| HOLDERS: | ||||
| SILVER RUN SPONSOR II, LLC, | ||||
| By: |
/s/ Peter Haskopoulos |
|||
| Name: Peter Haskopoulos | ||||
| Title: Managing Director | ||||
| By: |
/s/ William D. Gutermuth |
|||
| Name: William D. Gutermuth | ||||
| By: |
/s/ Jeffrey H. Tepper |
|||
| Name: Jeffrey H. Tepper | ||||
| By: |
/s/ Diana J. Walters |
|||
| Name: Diana J. Walters | ||||
[Signature Page to Amendment to Registration Rights Agreement]
Exhibit 10.1
Execution Version
CUSIP#: 02133HAE8
$1,000,000,000
EIGHTH AMENDED AND RESTATED CREDIT AGREEMENT
Among
ALTA MESA HOLDINGS, LP
as Borrower,
THE LENDERS PARTY HERETO FROM TIME TO TIME
as Lenders,
and
WELLS FARGO BANK, NATIONAL ASSOCIATION
as Administrative Agent and as Issuing Lender
February 9, 2018
Wells Fargo Securities, LLC
as Sole Lead Arranger and Sole Bookrunner
Capital One, National Association and Natixis
as Co-Syndication Agents
Toronto Dominion (New York) LLC and ING Capital LLC
as Co-Documentation Agent
TABLE OF CONTENTS
| Page | ||||||
| ARTICLE I DEFINITIONS AND ACCOUNTING TERMS | 1 | |||||
|
Section 1.01 |
Certain Defined Terms | 1 | ||||
|
Section 1.02 |
Computation of Time Periods | 29 | ||||
|
Section 1.03 |
Accounting Terms; Changes in GAAP | 29 | ||||
|
Section 1.04 |
Types of Advances | 30 | ||||
|
Section 1.05 |
Miscellaneous | 30 | ||||
|
Section 1.06 |
Letter of Credit Amounts | 30 | ||||
| ARTICLE II CREDIT FACILITIES | 30 | |||||
|
Section 2.01 |
Commitment for Advances | 30 | ||||
|
Section 2.02 |
Borrowing Base | 32 | ||||
|
Section 2.03 |
Method of Borrowing | 35 | ||||
|
Section 2.04 |
Reduction of the Commitments | 37 | ||||
|
Section 2.05 |
Prepayment of Advances | 39 | ||||
|
Section 2.06 |
Repayment of Advances | 41 | ||||
|
Section 2.07 |
Letters of Credit | 41 | ||||
|
Section 2.08 |
Fees | 45 | ||||
|
Section 2.09 |
Interest | 46 | ||||
|
Section 2.10 |
Payments and Computations | 47 | ||||
|
Section 2.11 |
Sharing of Payments, Etc. | 48 | ||||
|
Section 2.12 |
Breakage Costs | 48 | ||||
|
Section 2.13 |
Increased Costs | 49 | ||||
|
Section 2.14 |
Taxes | 50 | ||||
|
Section 2.15 |
Designation of a Different Lending Office | 53 | ||||
|
Section 2.16 |
Replacement of Lender | 53 | ||||
|
Section 2.17 |
Payments and Deductions to a Defaulting Lender | 54 | ||||
|
Section 2.18 |
Optional Increase of Aggregate Elected Commitment Amounts | 55 | ||||
| ARTICLE III CONDITIONS | 58 | |||||
|
Section 3.01 |
Conditions Precedent to Effectiveness | 58 | ||||
|
Section 3.02 |
Conditions Precedent to All Credit Extensions | 61 | ||||
-i-
TABLE OF CONTENTS
(continued)
| Page | ||||||
| ARTICLE IV REPRESENTATIONS AND WARRANTIES | 62 | |||||
|
Section 4.01 |
Existence; Restricted Subsidiaries | 62 | ||||
|
Section 4.02 |
Power | 63 | ||||
|
Section 4.03 |
Authorization and Approvals | 63 | ||||
|
Section 4.04 |
Enforceable Obligations | 63 | ||||
|
Section 4.05 |
Financial Statements | 63 | ||||
|
Section 4.06 |
True and Complete Disclosure | 64 | ||||
|
Section 4.07 |
Litigation; Compliance with Laws | 64 | ||||
|
Section 4.08 |
Use of Proceeds | 64 | ||||
|
Section 4.09 |
Investment Company Act | 64 | ||||
|
Section 4.10 |
Taxes; Reports and Payments | 64 | ||||
|
Section 4.11 |
Pension Plans | 65 | ||||
|
Section 4.12 |
Condition of Property; Casualties | 65 | ||||
|
Section 4.13 |
No Burdensome Restrictions; No Defaults | 65 | ||||
|
Section 4.14 |
Environmental Condition | 66 | ||||
|
Section 4.15 |
Permits, Licenses, Etc. | 66 | ||||
|
Section 4.16 |
Gas Contracts | 66 | ||||
|
Section 4.17 |
Liens; Titles, Leases, Etc. | 67 | ||||
|
Section 4.18 |
Solvency and Insurance; EEA Financial Institution | 67 | ||||
|
Section 4.19 |
Material Agreements | 67 | ||||
|
Section 4.20 |
Hedging Agreements | 67 | ||||
|
Section 4.21 |
Sanctions; Anti-Corruption Laws; Anti-Terrorism/Money Laundering Laws | 68 | ||||
| ARTICLE V AFFIRMATIVE COVENANTS | 68 | |||||
|
Section 5.01 |
Compliance with Laws, Etc. | 68 | ||||
|
Section 5.02 |
Maintenance of Insurance | 69 | ||||
|
Section 5.03 |
Preservation of Corporate Existence, Etc. | 70 | ||||
|
Section 5.04 |
Payment of Taxes, Etc. | 70 | ||||
|
Section 5.05 |
Visitation Rights | 70 | ||||
|
Section 5.06 |
Reporting Requirements | 70 | ||||
-ii-
TABLE OF CONTENTS
(continued)
| Page | ||||||
|
Section 5.07 |
Maintenance of Property | 74 | ||||
|
Section 5.08 |
Agreement to Pledge | 74 | ||||
|
Section 5.09 |
Use of Proceeds | 75 | ||||
|
Section 5.10 |
Title Evidence | 75 | ||||
|
Section 5.11 |
Further Assurances; Cure of Title Defects | 75 | ||||
|
Section 5.12 |
Material Agreements | 76 | ||||
|
Section 5.13 |
Leases; Development and Maintenance | 76 | ||||
|
Section 5.14 |
Designations with Respect to Subsidiaries | 77 | ||||
|
Section 5.15 |
Designation of Senior Debt | 78 | ||||
|
Section 5.16 |
Anti-Corruption Laws; Sanctions | 78 | ||||
| ARTICLE VI NEGATIVE COVENANTS | 78 | |||||
|
Section 6.01 |
Liens, Etc. | 78 | ||||
|
Section 6.02 |
Debts, Guaranties, and Other Obligations | 80 | ||||
|
Section 6.03 |
Agreements Restricting Liens and Distributions | 81 | ||||
|
Section 6.04 |
Merger or Consolidation; Asset Sales; Hedge Terminations | 82 | ||||
|
Section 6.05 |
Restricted Payments | 84 | ||||
|
Section 6.06 |
Investments | 85 | ||||
|
Section 6.07 |
Affiliate Transactions | 86 | ||||
|
Section 6.08 |
Compliance with ERISA | 86 | ||||
|
Section 6.09 |
Sale-and-Leaseback | 86 | ||||
|
Section 6.10 |
Change of Business | 87 | ||||
|
Section 6.11 |
Organizational Documents, Name Change; Change in Accounting | 87 | ||||
|
Section 6.12 |
Use of Proceeds; Letters of Credit | 87 | ||||
|
Section 6.13 |
Gas Imbalances, Take-or-Pay or Other Prepayments | 87 | ||||
|
Section 6.14 |
Limitation on Hedging | 88 | ||||
|
Section 6.15 |
[Reserved] | 90 | ||||
|
Section 6.16 |
Additional Subsidiaries | 90 | ||||
|
Section 6.17 |
Current Ratio | 90 | ||||
|
Section 6.18 |
Leverage Ratio | 90 | ||||
-iii-
TABLE OF CONTENTS
(continued)
| Page | ||||||
|
Section 6.19 |
[Reserved.] | 90 | ||||
|
Section 6.20 |
Anti-Terrorism | 91 | ||||
|
Section 6.21 |
Account Payables | 91 | ||||
|
Section 6.22 |
Additional Subordinated Debt | 91 | ||||
|
Section 6.23 |
Additional Liens | 91 | ||||
|
Section 6.24 |
Deposit Accounts; Securities Accounts | 91 | ||||
| ARTICLE VII EVENTS OF DEFAULT; REMEDIES | 92 | |||||
|
Section 7.01 |
Events of Default | 92 | ||||
|
Section 7.02 |
Optional Acceleration of Maturity | 94 | ||||
|
Section 7.03 |
Automatic Acceleration of Maturity | 94 | ||||
|
Section 7.04 |
Right of Set-off | 95 | ||||
|
Section 7.05 |
Non-exclusivity of Remedies | 95 | ||||
|
Section 7.06 |
Application of Proceeds | 95 | ||||
| ARTICLE VIII THE ADMINISTRATIVE AGENT AND THE ISSUING LENDERS | 96 | |||||
|
Section 8.01 |
Authorization and Action | 96 | ||||
|
Section 8.02 |
Administrative Agent’s Reliance, Etc. | 98 | ||||
|
Section 8.03 |
The Administrative Agent and Its Affiliates | 98 | ||||
|
Section 8.04 |
Subagents | 99 | ||||
|
Section 8.05 |
Lender Credit Decision | 99 | ||||
|
Section 8.06 |
Indemnification | 99 | ||||
|
Section 8.07 |
Successor Administrative Agent and Issuing Lenders | 100 | ||||
|
Section 8.08 |
No Other Duties, etc. | 101 | ||||
|
Section 8.09 |
Administrative Agent May File Proofs of Claim | 101 | ||||
|
Section 8.10 |
Collateral Matters | 102 | ||||
|
Section 8.11 |
Credit Bidding | 103 | ||||
| ARTICLE IX MISCELLANEOUS | 103 | |||||
|
Section 9.01 |
Amendments, Etc. | 103 | ||||
|
Section 9.02 |
Notices, Etc. | 104 | ||||
|
Section 9.03 |
No Waiver; Remedies | 105 | ||||
|
Section 9.04 |
Costs and Expenses | 106 | ||||
-iv-
TABLE OF CONTENTS
(continued)
| Page | ||||||
|
Section 9.05 |
Binding Effect | 106 | ||||
|
Section 9.06 |
Successors and Assigns | 106 | ||||
|
Section 9.07 |
Indemnification; Waiver | 109 | ||||
|
Section 9.08 |
Confidentiality | 111 | ||||
|
Section 9.09 |
Execution in Counterparts | 112 | ||||
|
Section 9.10 |
Survival of Representations, Etc. | 113 | ||||
|
Section 9.11 |
Severability | 113 | ||||
|
Section 9.12 |
Governing Law; Submission to Jurisdiction; Waiver of Venue | 113 | ||||
|
Section 9.13 |
WAIVER OF JURY TRIAL | 114 | ||||
|
Section 9.14 |
Usury Not Intended | 114 | ||||
|
Section 9.15 |
Payments Set Aside | 115 | ||||
|
Section 9.16 |
Performance of Duties | 115 | ||||
|
Section 9.17 |
All Powers Coupled with Interest | 115 | ||||
|
Section 9.18 |
No Third Party Beneficiaries | 115 | ||||
|
Section 9.19 |
Keepwell | 115 | ||||
|
Section 9.20 |
Independent Effect of Covenants | 116 | ||||
|
Section 9.21 |
Injunctive Relief | 116 | ||||
|
Section 9.22 |
No Advisory or Fiduciary Responsibility | 116 | ||||
|
Section 9.23 |
Inconsistencies with Other Documents | 117 | ||||
|
Section 9.24 |
Acknowledgement and Consent to Bail-In of EEA Financial Institutions | 117 | ||||
|
Section 9.25 |
USA Patriot Act | 117 | ||||
|
Section 9.26 |
Flood Insurance Regulations | 118 | ||||
|
Section 9.27 |
NON-RELIANCE | 118 | ||||
|
Section 9.28 |
PRIOR OR ORAL AGREEMENTS | 118 | ||||
-v-
TABLE OF CONTENTS
(continued)
| Page | ||||
| SCHEDULES: | ||||
|
Schedule I |
— | Borrower, Administrative Agent, and Lender Information | ||
|
Schedule II |
— | Maximum Credit Amount; Borrowing Base and Elected Commitment Amounts | ||
|
Schedule III |
— | Applicable Margin | ||
|
Schedule 1.02 |
— | Approved Counterparties | ||
|
Schedule 4.01 |
— | Equity Interests | ||
|
Schedule 4.05 |
— | Permitted Debt | ||
|
Schedule 4.19 |
— | Material Agreements | ||
|
Schedule 4.20 |
— | Hedging Agreements | ||
| EXHIBITS: | ||||
|
Exhibit A |
— | Form of Assignment and Acceptance | ||
|
Exhibit B |
— | Form of Compliance Certificate | ||
|
Exhibit C |
— | Form of Guaranty | ||
|
Exhibit D |
— | Form of Mortgage | ||
|
Exhibit E |
— | Form of Note | ||
|
Exhibit F |
— | Form of Notice of Borrowing | ||
|
Exhibit G |
— | Form of Notice of Conversion or Continuation | ||
|
Exhibit H |
— | Form of Pledge Agreement | ||
|
Exhibit I |
— | Form of Security Agreement | ||
|
Exhibit J |
— | Form of Transfer Letters | ||
|
Exhibit K |
— | Form of Borrower’s Counsel Opinion | ||
-vi-
EIGHTH AMENDED AND RESTATED CREDIT AGREEMENT
This Eighth Amended and Restated Credit Agreement dated as of February 9, 2018 (the “ Agreement ”) is among Alta Mesa Holdings, LP, a Texas limited partnership (“ Borrower ”), the lenders party hereto from time to time (“ Lenders ”), and Wells Fargo Bank, National Association, as administrative agent for such Lenders (in such capacity, the “ Administrative Agent ”) and as issuing lender (in such capacity, the “ Issuing Lender ”).
A. The Borrower is a party to that certain Seventh Amended and Restated Credit Agreement dated November 10, 2016 among the Borrower, the Administrative Agent, the Issuing Lender and the lenders party thereto on the date hereof (the “ Existing Lenders ”), as heretofore amended and modified (as so amended and modified, the “ Existing Credit Agreement ”).
B. In order to secure the full and punctual payment and performance of the loans under the Existing Credit Agreement, the Borrower and its Restricted Subsidiaries (as defined below) executed and delivered mortgages, collateral assignments, security agreements, financing statements and supplements thereto (collectively, the “ Existing Security Instruments ”) granting a mortgage lien and continuing security interest in and to the collateral described in such Existing Security Instruments.
C. The Borrower, certain of the Existing Lenders, Administrative Agent and the Issuing Lender desire to amend and restate (but not extinguish) the Existing Credit Agreement in its entirety as hereinafter set forth herein.
D. It is the intention of the parties hereto that this Agreement is an amendment and restatement of the Existing Credit Agreement, and is not a new or substitute credit agreement or novation of the Existing Credit Agreement.
NOW, THEREFORE, in consideration of the premises and agreements, provisions and covenants herein contained, the parties hereto (i) do hereby agree that the Existing Credit Agreement is amended and restated (but not substituted or extinguished) in its entirety as set forth herein, and (ii) do hereby agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
Section 1.01 Certain Defined Terms . As used in this Agreement, the terms defined above shall have the meanings set forth therein and the following terms shall have the following meanings (unless otherwise indicated, such meanings to be equally applicable to both the singular and plural forms of the terms defined):
“ Acceptable Security Interest ” in any Property means a Lien which (a) exists in favor of the Administrative Agent for the benefit of the Secured Parties, (b) is superior to all Liens or rights of any other Person in the Property encumbered thereby, other than Permitted Subject Liens, (c) secures the Obligations, and (d) is perfected and enforceable.
“ Account Control Agreement ” shall mean, as to any deposit account or security account of the Borrower or any Restricted Subsidiary held with a bank or other financial institution, an agreement or agreements governing such deposit account or security account, as applicable, in form and substance reasonably acceptable to the Administrative Agent, among such Loan Party owning such deposit account or security account, as applicable, the Administrative Agent, and such other bank or financial institution.
1
“ Acquisition ” means any transaction, or any series of related transactions, consummated on or after the date of this Agreement, by which the Borrower or any of its Restricted Subsidiaries (a) acquires any going business or all or substantially all of the assets of any firm, corporation, general partnership, limited liability partnership or limited liability company, or division thereof, whether through the purchase of assets, merger or otherwise or (b) directly or indirectly acquires (in one transaction or as the most recent transaction in a series of transactions) at least a majority (in number of votes) of the securities of a corporation which have ordinary voting power for the election of directors (other than securities having such power only by reason of the happening of a contingency) or a majority (by percentage or voting power) of the outstanding ownership interests of a partnership or limited liability company.
“ Additional Subordinated Debt ” means any term (and not “revolving”) indebtedness of the Borrower for borrowed money, including any such Debt evidenced by bonds, debentures, notes or other similar instruments, or any redeemable preferred equity of the Borrower, in any event, issued after the Effective Date and only to the extent such Debt complies with all of the following requirements:
(a) the agreements and instruments governing such Debt shall not contain (i) any affirmative or negative covenant (including financial covenants) that is materially more restrictive than those set forth in this Agreement; provided that the inclusion of any covenant that is customary with respect to such type of Debt and that is not found in this Agreement shall not be deemed to be more restrictive for purposes of this clause (a)(i), (ii) any restriction on the ability of the Borrower or any of its Restricted Subsidiaries to amend, modify, restate or otherwise supplement this Agreement or the other Loan Documents, (iii) any restrictions on the ability of any Restricted Subsidiary to guarantee the Obligations (as such Obligations may be amended, supplemented, modified, or amended and restated but not increased), provided that a requirement that any such Subsidiary also guarantee such Debt shall not be deemed to be a violation of this clause (ii), (iv) any restrictions on the ability of any Restricted Subsidiary or the Borrower to pledge assets as collateral security for the Obligations (as such Obligations may be amended, supplemented, modified, or amended and restated but not increased) other than, with respect to such Debt that is secured, any such restrictions which are otherwise satisfactory to the Administrative Agent and the Majority Lenders; provided that, in any event, (x) a requirement that such Debt be secured in compliance with clause (b) below shall not be deemed to be a violation of this clause (iv) and (y) a requirement that such Debt be secured by the same assets that serve as collateral security for the Obligations shall not be deemed to be a violation of this clause (iv), (v) any cap or restrictions on the ability of any Restricted Subsidiary or the Borrower to incur Debt under this Agreement or any other Loan Document (other than a cap as to the maximum principal amount of Debt incurred hereunder of not less than $300,000,000); (vi) a scheduled maturity date that is earlier than the date 180 days after the Maturity Date in effect at the time such Debt is incurred, or (vii) any amortization or other requirement to purchase, redeem, retire, defease or otherwise make any payment in respect thereof, other than at scheduled maturity thereof and mandatory prepayments or puts triggered upon a change in control, sale of all or substantially all assets and certain asset sales, in each case which are customary with respect to such type of Debt;
(b) if such Debt is secured, (i) the Liens securing such Debt covers the same assets which serve as collateral for the Obligations pursuant to the Loan Documents and are subordinated to the Liens securing the Obligations pursuant to an intercreditor agreement the terms of which are satisfactory to the Administrative Agent and the Majority Lenders and (ii) the Majority Lenders, in their sole discretion, shall have consented to such Debt;
(c) if such Debt is preferred equity, such Debt shall not be secured and shall not, by its terms (or by the terms of any security or instrument into which it is convertible or for which it is exchangeable or exercisable), or upon the happening of any event, (i) mature (excluding any maturity as the result of an optional redemption by the Borrower) or be mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or be redeemable at the option of the holder thereof, in whole or in part, on or
2
prior to the first anniversary of the Maturity Date in effect at the time such Debt is incurred, (ii) be convertible into or exchangeable or exercisable (unless at the sole option of the Borrower) for (A) debt securities or other Debt or (B) any Equity Interests with terms set forth in the immediately preceding clause (ii), in each case at any time on or prior to the first anniversary of the Maturity Date in effect at the time such Debt is incurred, or (iii) contain any repurchase or payment obligation which may come into effect prior to the first anniversary of the Maturity Date in effect at the time such Debt is incurred;
(d) on the date of incurrence of such Debt, immediately before and after giving effect to such incurrence and any concurrent repayment of Debt with the proceeds thereof, the Borrower is in compliance, on a pro forma basis, with Sections 6.17 and 6.18 of this Agreement; and
(e) no Default or Event of Default exists on the date of incurrence of such Debt or will occur immediately after, and as a result of, the issuance of such Debt.
“ Adjusted EBITDAX ” means:
(a) for the fiscal quarter ending June 30, 2018, EBITDAX for such fiscal quarter multiplied by four;
(b) for the fiscal quarter ending September 30, 2018, EBITDAX for the two fiscal quarters then ended multiplied by two;
(c) for the fiscal quarter ending December 31, 2018, EBITDAX for the three fiscal quarters then ended multiplied by 4/3; and
(d) for each fiscal quarter ending on or after March 31, 2019, EBITDAX for the four-fiscal quarter period then ended.
“ Adjusted Reference Rate ” means, for any day, the fluctuating rate per annum of interest equal to the greatest of (a) the Reference Rate in effect on such day, (b) the Federal Funds Rate in effect on such day plus 1 ⁄ 2 of 1% and (c) the Daily One-Month LIBOR plus 1.00%. Any change in the Adjusted Reference Rate due to a change in the Reference Rate, Daily One-Month LIBOR or the Federal Funds Rate shall be effective on the effective date of such change in the Reference Rate, Daily One-Month LIBOR or the Federal Funds Rate.
“ Administrative Agent ” means Wells Fargo Bank, National Association in its capacity as agent pursuant to Article VIII, and any successor agent pursuant to Section 8.07.
“ Administrative Questionnaire ” means an administrative questionnaire in a form supplied by the Administrative Agent.
“ Advance ” means an advance by a Lender to the Borrower pursuant to Section 2.01(a) or Section 2.01(b) as part of a Borrowing and refers to a Reference Rate Advance or a Eurodollar Rate Advance.
“ Affiliate ” means, as to any Person, any other Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such Person or any Subsidiary of such Person. The term “control” (including the terms “controlled by” or “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of a Control Percentage, by contract, or otherwise.
3
“ Agent Parties ” has the meaning specified in Section 9.02.
“ Agreement ” means this Eighth Amended and Restated Credit Agreement, as the same may be amended, supplemented, and otherwise modified from time to time.
“ Anticipated Production ” means the anticipated production of oil, gas or natural gas liquids volumes, as applicable, which are attributable to the Borrower’s and its Restricted Subsidiaries’ Proven Reserves, as reflected in the most recently delivered Engineering Report delivered pursuant to Section 2.02(b) and calculated on an aggregate basis for the Borrower and its Restricted Subsidiaries’, taken as a whole.
“ Anti-Corruption Laws ” means all laws, rules, and regulations of any jurisdiction applicable to the Borrower or any of its Subsidiaries from time to time concerning or relating to bribery or corruption, including the United States Foreign Corrupt Practices Act of 1977, as amended, assuming in all cases that such Act applies to the Borrower and its Subsidiaries.
“ Anti-Terrorism/Money Laundering Laws ” means any laws or regulations relating to money laundering or terrorist financing, including (a) the Bank Secrecy Act, 31 U.S.C. sections 5301 et seq.; (b) the Patriot Act; (c) Laundering of Monetary Instruments, 18 U.S.C. section 1956; (d) Engaging in Monetary Transactions in Property Derived from Specified Unlawful Activity, 18 U.S.C. section 1957; (e) the Financial Recordkeeping and Reporting of Currency and Foreign Transactions Regulations, 31 C.F.R. Part 103; (f) the Trading with the Enemy Act, any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V); (g) any similar laws or regulations currently in force or hereafter enacted; and (h) any enabling legislation or executive order relating to any of the foregoing.
“ Applicable Margin ” means with respect to any Advance, (a) other than as provided in the following clause (b), the rate per annum set forth in Schedule III for the relevant Type of such Advance based on the relevant Utilization Level applicable from time to time, and (b) at all times if a Borrowing Base Deficiency exists the rate per annum set forth in Schedule III for the relevant Type of such Advance based on the relevant Utilization Level applicable from time to time plus 2.00% per annum. The Applicable Margin for any Advance shall change when and as the relevant Utilization Level changes; provided, however, that if at any time the Borrower fails to deliver an Engineering Report pursuant to Section 2.02(b)(i) or (ii), then upon notice from the Administrative Agent, the “Applicable Margin” shall mean the rate per annum set forth in Schedule III when Utilization Level is at its highest level, until such Engineering Report is delivered and the Borrowing Base is redetermined as provided herein.
“ Approved Counterparty ” means (a) any Lender or any Affiliate of a Lender, (b) any other Person whose long term senior unsecured debt rating is, or any other Person who has an Affiliate that guarantees such Hedge Contract and such Affiliate has a long term senior unsecured debt rating of, A-/A3 by S&P or Moody’s (or their equivalent) or higher (at the time the Hedge Contract is entered into) and (c) any other Person listed on Schedule 1.02.
“ Approved Fund ” means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.
“ Arranger ” means Wells Fargo Securities, LLC in its capacity as the sole lead arranger.
“ Assignment and Acceptance ” means an assignment and acceptance entered into by a Lender and an Eligible Assignee, and accepted by the Administrative Agent, in substantially the form of the attached Exhibit A.
4
“ Banking Service Provider ” means any Lender or any Affiliate of a Lender that provides Banking Services to the Borrower or any Restricted Subsidiary.
“ Banking Services ” means each and any of the following bank services provided to the Borrower or any Restricted Subsidiary by any Lender or any Affiliate of a Lender: (a) commercial credit cards, (b) stored value cards and (c) treasury management services (including, without limitation, controlled disbursement, automated clearinghouse transactions, return items, overdrafts and interstate depository network services).
“ Banking Services Obligations ” means any and all obligations of the Borrower or any Restricted Subsidiary, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor) in connection with Banking Services.
“ Bail-In Action ” means the exercise of any Write-Down and Conversion Powers by the applicable EEA Resolution Authority in respect of any liability of an EEA Financial Institution.
“ Bail-In Legislation ” means, with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule.
“ Bayou City JDA ” means the Joint Development Agreement between BCE-STACK Development LLC and Oklahoma Energy Acquisitions, LP in such form and substance substantially similar to the draft thereof provided to the Administrative Agent on January 6, 2016, or such other form and substance reasonably acceptable to the Administrative Agent.
“ BCE ” means BCE-MESA Holdings LLC, a Delaware limited liability company.
“ Borrowing ” means a borrowing consisting of Advances made on the same day by the Lenders pursuant to Section 2.01(a) or Section 2.01(b).
“ Borrowing Base ” means at any particular time, the Dollar amount determined by the Lenders to be the Borrowing Base in accordance with Section 2.02.
“ Borrowing Base Deficiency ” means, at any time, an amount equal to the excess of (a) the sum of the aggregate outstanding amount of the Advances plus the Letter of Credit Exposure over (b) the aggregate Commitments.
“ Business Day ” means (a) a day of the year other than (i) a Saturday or a Sunday or (ii) a legal holiday on which banks are required or authorized to close in Houston, Texas or New York, New York and (b) if the applicable Business Day relates to any Eurodollar Rate Advances, then in addition to the requirements of clause (a) above, a day on which dealings are carried on by banks in the London interbank market.
“ Capital Expenditures ” means, for the Borrower and its Restricted Subsidiaries for any period, the aggregate of all expenditures and costs paid, or if applicable, budgeted to be paid, by the Borrower and such Restricted Subsidiaries during such period that are for items which should be capitalized in accordance with GAAP, including intangible drilling and development expenditures.
5
“ Capital Leases ” means, as applied to any Person, any lease of any Property by such Person as lessee that would, in accordance with GAAP, be required to be classified and accounted for as a capital lease on the balance sheet of such Person.
“ Cash Collateral Account ” means a special interest bearing cash collateral account pledged by the Borrower to the Administrative Agent containing cash deposited pursuant to Sections 2.04(e), 2.05, 2.17, 5.11, 7.02(b), or 7.03(b) or any other provision hereof to be maintained with the Administrative Agent in accordance with Section 2.07(g).
“ CERCLA ” means the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, state and local analogs, and all rules and regulations and requirements thereunder in each case as now or hereafter in effect.
“ Change in Control ” means the occurrence of any of the following events:
(a) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) other than a Permitted Investor becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person or group shall be deemed to have “beneficial ownership” of all securities that such person or group has the right to acquire (such right, an “option right”), whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of 35% or more of the Equity Interests of the Parent Company on a fully-diluted basis (and taking into account all such Voting Securities that such person or group has the right to acquire pursuant to any option right);
(b) the Parent Company shall cease to, directly or indirectly, have voting power (by contract or otherwise) over 100% of the Equity Interests (including the Voting Securities) of the Borrower;
(c) during any period of 12 consecutive months following the Effective Date, a majority of the members of the board of directors or other equivalent governing body of the Borrower or the Parent Company cease to be composed of individuals (i) who were members of that board or equivalent governing body on the first day of such period, (ii) whose election or nomination to that board or equivalent governing body was approved by individuals referred to in clause (i) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body or (iii) whose election or nomination to that board or other equivalent governing body was approved by individuals referred to in clauses (i) and (ii) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body; or
(d) any “change in control” or similar event occurs (as set forth in the indenture, agreement or other evidence of Debt or Equity Interests) which obligates the Borrower or any of its Restricted Subsidiaries to repurchase, redeem or repay, or to offer to repurchase, redeem or repay, all or any part of the Debt or Equity Interests provided for therein.
“ Change in Law ” means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation, implementation or application thereof by any Governmental Authority or (c) the making or issuance of any request, rule, guideline or directive (whether or not having the force of law) by any Governmental Authority; provided that notwithstanding anything herein to the contrary, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (ii) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted or issued.
6
“ Code ” means the Internal Revenue Code of 1986, as amended from time to time, and any successor statute and all regulations thereunder.
“ Collateral ” means (a) all “Collateral,” “Pledged Collateral,” and “Mortgaged Properties” (as defined in each of the Mortgages, the Security Agreements, and the Pledge Agreements, as applicable) or similar terms used in the Security Instruments, and (b) all amounts contained in the Borrower’s and its Restricted Subsidiaries’ Cash Collateral Accounts.
“ Commitment ” means, with respect to each Lender, the commitment of such Lender to make Advances and to acquire participations in Letters of Credit hereunder, expressed as an amount representing the maximum aggregate amount of such Lender’s Credit Exposure hereunder, as such commitment may be modified from time to time pursuant to Section 2.04, Section 2.18 or Article VII or otherwise under this Agreement, including pursuant to assignments by or to such Lender pursuant to Section 9.06(b). The amount representing each Lender’s Commitment shall at any time be the least of (a) such Lender’s Maximum Credit Amount, (b) such Lender’s Pro Rata Share of the then effective Borrowing Base, and (c) such Lender’s Elected Commitment Amount.
“ Commitment Termination Date ” means the earlier of (a) the Maturity Date and (b) the earlier termination in whole of the Commitments pursuant to Section 2.04 or Article VII.
“ Commodity Exchange Act ” means the Commodity Exchange Act (7 U.S.C. § 1 et seq.), as amended from time to time, and any successor statute or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof).
“ Communications ” has the meaning specified in Section 9.02.
“ Compliance Certificate ” means a compliance certificate in the form of the attached Exhibit B signed by a Responsible Officer of the Borrower.
“ Connection Income Taxes ” means Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.
“ Consolidated Net Income ” means, with respect to any Person and its consolidated Subsidiaries (or in the case of the Borrower, its consolidated Restricted Subsidiaries), for any period, the net income (or loss) for such period after Taxes, as determined in accordance with GAAP, excluding, however, (a) extraordinary items, including (i) any net non-cash gain or loss during such period arising from the sale, exchange, retirement or other disposition of capital assets (such term to include all fixed assets and all securities) other than in the ordinary course of business and (ii) any write-up or write-down of assets and (b) the cumulative effect of any change in GAAP.
“ Contribution Agreements ” means, collectively, (a) that certain Contribution Agreement dated as of August 16, 2017, among High Mesa Holdings, LP, High Mesa Holdings GP, LLC, the Borrower, the Parent Company, the General Partner, and solely for certain provisions therein, the equity owners of High Mesa Holdings, LP; (b) that certain Contribution Agreement dated as of August 16, 2017, among KFM Holdco, LLC, Kingfisher, the Parent Company, and solely for certain provisions therein, the equity owners of KFM Holdco, LLC; and (c) that certain Contribution Agreement dated as of August 16, 2017, between Riverstone VI Alta Mesa Holdings, L.P. and the Parent Company.
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“ Control Percentage ” means, with respect to any Person, the percentage of the outstanding Equity Interest (including any options, warrants or similar rights to purchase such Equity Interest) of such Person having ordinary voting power which gives the direct or indirect holder of such Equity Interest the power to elect a majority of the board of directors (or other applicable governing body) of such Person.
“ Controlled Group ” means all members of a controlled group of corporations and all businesses (whether or not incorporated) under common control which, together with the Borrower, are treated as a single employer under Section 414 of the Code.
“ Conversion Transaction ” means a conversion, whether by merger, statutory conversion or otherwise) of the Borrower from a limited partnership to a limited liability company or a corporation or an exchange of some or all of the outstanding partnership interest in the Borrower for Equity Interests in a corporation or a limited liability company.
“ Convert ,” “ Conversion ,” and “ Converted ” each refers to a conversion of Advances of one Type into Advances of another Type pursuant to Section 2.03(b).
“ Credit Exposure ” means, as to any Lender at any time, (i) aggregate outstanding principal amount of all Advances owed to such Lender at such time plus (ii) such Lender’s Pro Rata Share of the aggregate Letter of Credit Exposure at such time (including any such Letter of Credit Exposure that has been reallocated pursuant to Section 2.17(c)(i)).
“ Credit Extension ” means (a) an Advance made by any Lender and (b) the issuance, increase, or extension of any Letter of Credit by the applicable Issuing Lender.
“ Current Production ” means, for each month, the lesser of (a) the highest of the most recent three (3) prior months’ production volume of crude oil, natural gas liquids and natural gas, of the Borrower and the Restricted Subsidiaries and (b) the internally forecasted production of crude oil and natural gas, calculated on a natural gas equivalent basis, of the Borrower and the Restricted Subsidiaries for each month for the next 60 months.
“ Daily One-Month LIBOR ” means, for any day, the rate of interest equal to the Eurodollar Rate then in effect for delivery of funds for a one (1) month period.
“ Debt ,” for any Person, means without duplication:
(a) indebtedness of such Person for borrowed money, including, without limitation, obligations under letters of credit and agreements relating to the issuance of letters of credit or acceptance financing;
(b) obligations of such Person evidenced by bonds, debentures, notes or other similar instruments;
(c) obligations of such Person to pay the deferred purchase price of Property or services (including, without limitation, obligations that are non-recourse to the credit of such Person but are secured by the assets of such Person, but excluding trade accounts payable);
(d) obligations of such Person as lessee under Capital Leases and obligations of such Person in respect of synthetic leases;
(e) obligations of such Person under any Hedge Contract;
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(f) obligations of such Person owing in respect of redeemable preferred stock or other preferred equity interest of such Person;
(g) any obligations of such Person owing in connection with any volumetric or production prepayments;
(h) obligations of such Person under direct or indirect guaranties in respect of, and obligations (contingent or otherwise) of such Person to purchase or otherwise acquire, or otherwise to assure a creditor against loss in respect of, indebtedness or obligations of others of the kinds referred to in clauses (a) through (g) above;
(i) indebtedness or obligations of others of the kinds referred to in clauses (a) through (h) secured by any Lien on or in respect of any Property of such Person; and
(j) all liabilities of such Person in respect of unfunded vested benefits under any Plan.
“ Debt Incurrence Proceeds ” means, with respect to any Additional Subordinated Debt, all cash and cash equivalent investments received by the Borrower from such Additional Subordinated Debt after payment of, or provision for, all underwriter fees and expenses, original issue discount, securities and exchange commission and blue sky fees, printing costs, fees and expenses of accountants, lawyers and other professional advisors, brokerage commissions and other out-of-pocket fees and expenses actually incurred in connection with such Additional Subordinated Debt; provided that, an original issue discount shall not reduce the amount of such Debt Incurrence Proceeds unless such discount is due and payable at or immediately following the closing of such Additional Subordinated Debt and such discount has not already been taken into account to reduce the amount of proceeds received by the Borrower from such Additional Subordinated Debt.
“ Debtor Relief Law ” means the Bankruptcy Code of the United States of America, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief laws of the United States or other applicable jurisdictions from time to time in effect.
“ Default ” means (a) an Event of Default or (b) any event or condition which with notice or lapse of time or both would become an Event of Default.
“ Default Rate ” means a per annum rate equal to (a) in the case of principal of any Advance, 2.00% plus the rate otherwise applicable to such Advance as provided in Section 2.09(a), (b) in the case of any other Obligation other than Letter of Credit fees, 2.00% plus the non-default rate applicable to Reference Rate Advances as provided in Section 2.09(a), and (c) when used with respect to Letter of Credit fees, a rate equal to the Applicable Margin for Eurodollar Rate Advances plus 2.00% per annum.
“ Defaulting Lender ” means, subject to Section 2.17, any Lender that (a) has failed to (i) fund its Pro Rata Share of any Advance or participation in Letters of Credit required to be funded by it hereunder within two Business Days of the date required to be funded by it hereunder unless such Lender notifies the Administrative Agent and the Borrower in writing that such failure is the result of such Lender’s good faith determination that one or more conditions precedent to funding (each of which conditions precedent, together with any applicable default, shall be specifically identified in such writing) has not been satisfied, or (ii) pay to the Administrative Agent, any Issuing Lender or any other Lender any other amount required to be paid by it hereunder (including in respect of its participation in Letters of Credit) within three Business Days of the date when due, (b) has notified the Borrower, the Administrative Agent, or any Issuing Lender in writing that it does not intend to comply with its funding obligations
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hereunder, or has made a public statement to that effect (unless such writing or public statement relates to such Lender’s obligation to fund an Advance hereunder and states that such position is based on such Lender’s good faith determination that a condition precedent to funding (which condition precedent, together with any applicable default, shall be specifically identified in such writing or public statement) cannot be satisfied), (c) has failed, within three Business Days after written request by the Administrative Agent or the Borrower, to confirm in writing to the Administrative Agent and the Borrower that it will comply with its prospective funding obligations hereunder (provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon receipt of such written confirmation by the Administrative Agent and the Borrower in form and substance reasonably satisfactory to the Administrative Agent and the Borrower), or (d) has, or has a direct or indirect parent company that has, (i) become the subject of a proceeding under any Debtor Relief Law, (ii) had appointed for it a receiver, custodian, conservator, trustee, administrator, or assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or assets, including the Federal Deposit Insurance Corporation or any other state or federal regulatory authority acting in such a capacity, or (iii) become the subject of a Bail-In Action; provided that (x) a Lender shall not be a Defaulting Lender solely by virtue of the ownership or acquisition of any Equity Interest in that Lender or any direct or indirect parent company thereof by a Governmental Authority and (y) the appointment of an administrator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official by a supervisory authority or regulator with respect to a Lender or any direct or indirect parent company of a Lender under the Dutch Financial Supervision Act 2007 (as amended from time to time and including any successor legislation) shall not be deemed to result in an event described in (d)(i) or (ii) hereof, in each case under the foregoing clauses (x) and (y), so long as such ownership interest or such appointment, as applicable, does not result in or provide such Lender with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Lender (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made with such Lender. Any determination by the Administrative Agent that a Lender is a Defaulting Lender under any one or more of clauses (a) through (d) above shall be conclusive and binding absent manifest error, and such Lender shall be deemed to be a Defaulting Lender (subject to Section 2.17) upon delivery of written notice of such determination to the Borrower, any Issuing Lender and each Lender.
“ Disposition ” means any sale, lease, transfer, assignment, farm-out, conveyance, or other disposition of any Property (including any working interest, overriding royalty interest, production payments, net profits interest, royalty interest, or mineral fee interest).
“ Distribution Period ” has the meaning specified in Section 6.05.
“ Dollars ” and “ $ ” mean lawful money of the United States of America.
“ EBITDAX ” means without duplication, for any Person and its consolidated Subsidiaries (or in the case of the Borrower, its consolidated Restricted Subsidiaries) for any period (it being understood that, for the Borrower, no amounts of the Unrestricted Subsidiaries of the Borrower shall be taken into account in calculating EBITDAX),
(a) Consolidated Net Income for such period plus
(b) to the extent deducted in determining Consolidated Net Income, (i) Interest Expense, income Taxes, depreciation, depletion, amortization, and exploration expenses and costs (including customary expenditures such as geological and geophysical seismic expenditures, exploratory dry holes, surrendered and expired leasehold and plug and abandonment expenditures and delay rentals), accretion and impairment of Oil and Gas Properties, (ii) unrealized losses on Hedge Contracts and losses on Disposition of assets, including settlement of hedge contracts prior to contract expiry for such period outside the
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ordinary course of business (other than settlement of hedge contracts prior to contract expiry which would have otherwise been recognized within the 12-month period immediately following such period as a result of scheduled monthly settlements within such 12-month period), (iii) fees or expenses paid to counsel of Administrative Agent or the Lenders and reimbursement obligations incurred by Administrative Agent or the Lenders in connection with this Agreement, (iv) expenses with respect to liability or casualty events to the extent covered by insurance and actually reimbursed, or as to which the insurer has made a determination that such amount will be reimbursed by the insurer, and (v) other non-cash charges for such period, but excluding, in any event, to the extent that such non-cash charges are reserved for cash charges to be taken in the future, minus
(c) to the extent included in determining Consolidated Net Income: (i) non-cash income and other non-cash gains for such period (excluding any non-cash gain to the extent it represents the reversal of a reserve for a potential cash item that reduced EBITDAX in any prior period), including gains on asset acquisitions (bargain purchase gains), and (ii) unrealized gains on Hedge Contracts and gains on Disposition of assets (including settlement of hedge contracts prior to contract expiry outside the ordinary course of business (other than settlement of hedge contracts prior to contract expiry which were permitted under Section 6.14 and which would have otherwise been recognized within the 12-month period immediately following such period as a result of scheduled monthly settlements within such 12-month period);
provided that , such EBITDAX shall be subject to pro forma adjustments for Material Acquisitions (as defined below) and Material Dispositions (as defined below) assuming that such Acquisitions and/or Dispositions had occurred on the first day of the test period, which adjustments shall be calculated in a manner reasonably acceptable to the Administrative Agent. For purposes of this definition, as applied to the Borrower or any of its Restricted Subsidiaries, (1) “ Material Acquisition ” shall mean any Acquisition consummated by the Borrower or any of its Restricted Subsidiaries within the applicable test period, in which the consideration for such Acquisition exceeds: (A) $5,000,000 individually or (B) $10,000,000 in the aggregate when combined with all other Acquisitions consummated in such test period and (2) “ Material Disposition ” shall mean any Disposition consummated by the Borrower or any of its Restricted Subsidiaries within the applicable test period, in which the consideration for such Disposition exceeds: (A) $5,000,000 individually or (B) $10,000,000 in the aggregate when combined with all other Dispositions consummated in such test period.
“ EEA Financial Institution ” means (a) any credit institution or investment firm established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition, or (c) any financial institution established in an EEA Member Country which is a subsidiary of an institution described in clauses (a) or (b) of this definition and is subject to consolidated supervision with its parent.
“ EEA Member Country ” means any of the member states of the European Union, Iceland, Liechtenstein, and Norway.
“ EEA Resolution Authority ” means any public administrative authority or any person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.
“ Effective Date ” means February 9, 2018, which is the Closing Date referred to in the Fee Letters.
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“ Elected Commitment Amount ” means, as to each Lender, the amount set forth opposite such Lender’s name on Schedule II under the caption “Elected Commitment Amount”, as the same may be increased, reduced or terminated from time to time in connection with an optional increase, reduction or termination of the aggregate Elected Commitment Amounts pursuant to Section 2.04 or Section 2.18 or termination of such Lender’s Elected Commitment Amount pursuant to Article VII or otherwise under this Agreement. The aggregate amount of the Elected Commitment Amounts on the date hereof is $350,000,000.
“ Eligible Assignee ” means any Person that meets the requirements to be an assignee under Section 9.06(b)(iii), (v) and (vi) (subject to such consents, if any, as may be required under Section 9.06(b)(iii)).
“ Engineering Report ” means either an Independent Engineering Report or an Internal Engineering Report.
“ Environment ” or “ Environmental ” shall have the meanings set forth in 43 U.S.C. 9601(8) (1988).
“ Environmental Claim ” means any third party (including governmental agencies and employees) action, lawsuit, claim, demand, regulatory action or proceeding, order, decree, consent agreement or notice of potential or actual responsibility or violation (including claims or proceedings under the Occupational Safety and Health Acts or similar laws or requirements relating to health or safety of employees) that seeks to impose liability under any Environmental Law.
“ Environmental Law ” means, as to the Borrower or its Restricted Subsidiaries, all Legal Requirements or common law theories applicable to the Borrower or its Restricted Subsidiaries arising from, relating to, or in connection with the Environment, health, or safety, including without limitation CERCLA, relating to (a) pollution, contamination, injury, destruction, loss, protection, cleanup, reclamation or restoration of the air, surface water, groundwater, land surface or subsurface strata, or other natural resources; (b) solid, gaseous or liquid waste generation, treatment, processing, recycling, reclamation, cleanup, storage, disposal or transportation; (c) exposure to pollutants, contaminants, hazardous substances, medical infections, or toxic substances, materials or wastes; (d) the safety or health of employees; or (e) the manufacture, processing, handling, transportation, distribution in commerce, use, storage or disposal of hazardous substances, medical infections, or toxic substances, materials or wastes.
“ Environmental Permit ” means any permit, license, order, approval, registration or other authorization under any Environmental Law.
“ Equity Interest ” means with respect to any Person, any shares, interests, participation, or other equivalents (however designated) of corporate stock, membership interests or partnership interests (or any other ownership interests) of such Person, including any options, warrants or similar rights to purchase such Equity Interest.
“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated thereunder.
“ Eurocurrency Liabilities ” has the meaning assigned to that term in Regulation D of the Federal Reserve Board (or any successor), as in effect from time to time.
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“ Eurodollar Base Rate ” means, (a) in determining Eurodollar Base Rate for purposes of the “Daily One Month LIBOR”, the rate per annum for Dollar deposits quoted by the Administrative Agent for the purpose of calculating effective rates of interest for loans making reference to the “Daily One-Month LIBOR”, as the inter-bank offered rate in effect from time to time for delivery of funds for one (1) month in amounts approximately equal to the principal amount of the applicable Advances; provided that, the Administrative Agent may base its quotation of the inter-bank offered rate upon such offers or other market indicators of the inter-bank market as the Administrative Agent in its reasonable discretion deems appropriate including, but not limited to, the rate determined under the following clause (b), and (b) in determining Eurodollar Base Rate for all other purposes, with respect to any Eurodollar Rate Advance for any Interest Period, the rate appearing on the applicable Reuters page (or on any successor or substitute page or service providing quotations of interest rates applicable to dollar deposits in the London interbank market comparable to those currently provided on such page, as determined by the Administrative Agent from time to time) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, as the rate for dollar deposits with a maturity comparable to such Interest Period; provided that (i) if such rate is not available at such time for any reason, then the “Eurodollar Base Rate” with respect to such Eurodollar Rate Advance for such Interest Period shall be the Interpolated Rate, and (ii) if the Interpolated Rate is not available, the “Eurodollar Base Rate” with respect to such Eurodollar Rate Advance for such Interest Period shall be the offered quotation rate to first class banks in the London interbank market by the Person that is the Administrative Agent for deposits (for delivery on the first day of the relevant period) in Dollars of amounts in same day funds comparable to the principal amount of the applicable Advance of such Person, in its capacity as a Lender (or, if it is not a Lender of such Advance, in such amount determined by the Administrative Agent) for which the Eurodollar Rate is then being determined with maturities comparable to such Interest Period at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period. Notwithstanding the foregoing, if the Eurodollar Base Rate at any determination is less than zero, such rate shall be deemed to be zero for purposes of such determination under this Agreement.
“ Eurodollar Rate ” means for any Interest Period with respect to any Eurodollar Rate Advance (or with respect to the Daily One Month LIBOR), a rate per annum determined by the Administrative Agent (which determination shall be conclusive in the absence of manifest error) pursuant to the following formula:
| Eurodollar Rate = |
Eurodollar Base Rate 1.00 – Eurodollar Rate Reserve Percentage |
“ Eurodollar Rate Advance ” means an Advance that bears interest as provided in Section 2.09(a)(ii) (or if applicable, Section 2.09(d) with reference to Section 2.09(a)(ii)).
“ Eurodollar Rate Reserve Percentage ” of any Lender for the Interest Period for any Eurodollar Rate Advance means the reserve percentage applicable during such Interest Period (or if more than one such percentage shall be so applicable, the daily average of such percentages for those days in such Interest Period during which any such percentage shall be so applicable) under regulations issued from time to time by the Federal Reserve Board for determining the maximum reserve requirement (including, without limitation, any emergency, supplemental, or other marginal reserve requirement) for such Lender with respect to liabilities or assets consisting of or including Eurocurrency Liabilities having a term equal to such Interest Period.
“ Event of Default ” has the meaning specified in Section 7.01.
“ Excess Cash Flow ” means, for any fiscal quarter, (a) the Borrower’s consolidated EBITDAX for such fiscal quarter minus (b) without duplication within such fiscal quarter and without duplication of any amounts used in calculating Excess Cash Flow for any previous fiscal quarter, the sum of: (i) Capital Expenditures for such fiscal quarter, (ii) all Restricted Payments made in such fiscal quarter, (iii) the Borrower’s consolidated Interest Expense for such fiscal quarter, (iv) all optional repayments and prepayments of Debt made in such fiscal quarter, and (v) all repayments and prepayments of Debt required to be made in such fiscal quarter, regardless of whether such payment is actually made.
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“ Excluded Swap Obligation ” means, with respect to any Guarantor, any Swap Obligation if, and to the extent that, all or a portion of the Guaranty of such Guarantor of, or the grant by such Guarantor of a Lien to secure, such Swap Obligation (or any Guaranty thereof) is or becomes illegal under the Commodity Exchange Act by virtue of such Guarantor’s failure for any reason to constitute an “eligible contract participant” as defined in the Commodity Exchange Act at the time the Guaranty of such Guarantor or the grant of such Lien becomes effective with respect to such Swap Obligation. If a Swap Obligation arises under a master agreement governing more than one swap (as defined by the Commodity Exchange Act), such exclusion shall apply only to the portion of such Swap Obligation that is attributable to swaps (as defined by the Commodity Exchange Act) for which such Guaranty or Lien is or becomes illegal.
“ Excluded Taxes ” means any of the following Taxes imposed on or with respect to a Recipient or required to be withheld or deducted from a payment to a Recipient, (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case, (i) imposed as a result of such Recipient being organized under the laws of, or having its principal office or, in the case of any Lender, its applicable lending office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) in the case of a Foreign Lender (other than an assignee pursuant to a request by the Borrower hereunder), any U.S. federal withholding tax that is imposed on amounts payable to such Foreign Lender at the time (i) such Foreign Lender becomes a party hereto or (ii) designates a new Lending Office, except, in each case, to the extent that, pursuant to Section 2.14, amounts with respect to such Taxes were payable either to such Foreign Lender’s assignor immediately before such Lender became a party hereto or to such Lender immediately before it changed its lending office (c) Taxes attributable to such Recipient’s failure to comply with Section 2.14(e) and (d) any U.S. federal withholding Taxes imposed pursuant to FATCA.
“ Existing Advances ” has the meaning set forth in Section 2.01 hereof.
“ Existing Letters of Credit ” means all letters of credit issued by Wells Fargo as the issuing lender under the Existing Credit Agreement and outstanding on the Effective Date.
“ Exiting Lender ” has the meaning set forth in Section 2.01 hereof.
“ Expiration Date ” means, with respect to any Letter of Credit, the date on which such Letter of Credit will expire or terminate in accordance with its terms.
“ FATCA ” means Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof and any agreements entered into pursuant to Section 1471(b)(1) of the Code.
“ Federal Funds Rate ” means, for any day, the greater of (a) the rate calculated by the Federal Reserve Bank of New York based on such day’s Federal funds transactions by depositary institutions (as determined in such manner as the Federal Reserve Bank of New York shall set forth on its public website from time to time) and published on the next succeeding Business Day by the Federal Reserve Bank of New York as the Federal funds effective rate and (b) 0%.
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“ Federal Reserve Board ” means the Board of Governors of the Federal Reserve System or any of its successors.
“ Fee Letters ” means (a) that certain amended and restated engagement and fee letter agreement dated January 26, 2018 from Wells Fargo Securities, LLC to the Borrower and (b) that certain administrative agent fee letter agreement dated January 26, 2018 from Wells Fargo Bank to the Borrower.
“ Financial Statements ” means the unaudited consolidating financial statements including the balance sheet of the Borrower and its Restricted Subsidiaries for the fiscal year ended December 31, 2016 and the related statements of income, cash flow, and retained earnings of the Borrower and its consolidated Subsidiaries for such fiscal year end and referred to in Section 4.05, copies of which have been delivered to the Administrative Agent and the Lenders.
“ Flood Insurance Regulations ” has the meaning specified in Section 9.26.
“ Forecasted Production ” means the projected production of oil or gas or natural gas liquids (measured by volume unit or BTU equivalent, not sales price) contained in internal forecasts of the Borrower, for the term of the contracts or a particular month, as applicable, from Oil and Gas Properties owned by the Borrower or any Subsidiary Guarantor which are located in or offshore of the United States, as reasonably approved by the Administrative Agent.
“ Foreign Lender ” means a Lender that is not a U.S. Person.
“ Fund ” means any Person (other than a natural Person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its activities.
“ GAAP ” means United States generally accepted accounting principles as in effect from time to time, applied on a basis consistent with the requirements of Section 1.03.
“ General Partner ” means Alta Mesa Holdings GP, LLC, a Texas limited liability company.
“ Governmental Authority ” means, as to any Person in connection with any subject, any foreign, national, state or provincial governmental authority, or any political subdivision of any state thereof, or any agency, department, commission, board, authority or instrumentality, bureau or court, in each case having jurisdiction over such Person or such Person’s Property in connection with such subject.
“ Guarantor ” means each entity that is party to a Guaranty, including (a) the General Partner and (b) each Subsidiary Guarantor.
“ Guaranty ” means (a) a Guaranty in substantially the form of the attached Exhibit C and executed by a Guarantor, and (b) such other forms of guaranty acceptable to the Administrative Agent whereby the guarantors named therein guarantee the Obligations.
“ Hazardous Substance ” means the substances identified as such pursuant to CERCLA and those regulated under any other Environmental Law, including without limitation pollutants, contaminants, petroleum, petroleum products, radionuclides, radioactive materials, and medical and infectious waste.
“ Hazardous Waste ” means the substances regulated as such pursuant to any Environmental Law.
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“ Hedge Contract ” means (a) any and all interest rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, deferred premium commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement (any such master agreement, together with any related schedules, a “ Master Agreement ”).
“ Hedge Event ” means the novation, assignment, unwinding, termination, amendment or other monetization of a hedge position or Hedge Contract.
“ Highbridge ” means Highbridge Principal Strategies, LLC, a Delaware limited liability company.
“ Hydrocarbon Hedge Agreement ” means a Hedge Contract that is intended to reduce or eliminate the risk of fluctuations in the price of Hydrocarbons.
“ Hydrocarbons ” means oil, gas, coal seam gas, coalbed methane, casinghead gas, drip gasoline, natural gasoline, condensate, distillate, and all other liquid and gaseous hydrocarbons produced or to be produced in conjunction therewith from a well bore and all products, by-products, and other substances derived therefrom or the processing thereof, and all other minerals and substances produced in conjunction with such substances, including, but not limited to, sulfur, geothermal steam, water, carbon dioxide, helium, and any and all minerals, ores, or substances of value and the products and proceeds therefrom.
“ Increase Agreement ” has the meaning specified in Section 2.18.
“ Increase Date ” has the meaning specified in Section 2.18.
“ Increasing Lender ” has the meaning specified in Section 2.18.
“ Indemnified Party ” has the meaning specified in Section 9.07.
“ Indemnified Taxes ” means (a) Taxes other than Excluded Taxes imposed on or with respect to any payment made by or on account of any obligation of the Borrower under any Loan Document and (b) to the extent not otherwise described in (a), Other Taxes.
“ Independent Engineer ” means (a) Netherland, Sewell and Associates, Inc., (b) Ryder Scott Company, L.P., or (c) any other independent, third-party engineering firm acceptable to the Administrative Agent in its reasonable judgment.
“ Independent Engineering Report ” means a report, in form and substance satisfactory to the Administrative Agent and each of the Lenders, prepared by an Independent Engineer, addressed to the Administrative Agent and the Lenders with respect to the Oil and Gas Properties owned by the Borrower or its Restricted Subsidiaries (or to be acquired by the Borrower or any of its Restricted Subsidiaries, as applicable) that are or are to be included in the Borrowing Base, which report shall (a) specify the location, quantity, and type of the estimated Proven Reserves attributable to such Oil and Gas Properties,
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(b) contain a projection of the rate of production of such Oil and Gas Properties, (c) contain an estimate of the net operating revenues to be derived from the production and sale of Hydrocarbons from such Proven Reserves based on product price and cost escalation assumptions specified by the Administrative Agent and the Lenders, and (d) contain such other information as is customarily obtained from and provided in such reports or is otherwise reasonably requested by the Administrative Agent or any Lender. Notwithstanding the foregoing, a report audited by (rather than prepared by) an Independent Engineer shall qualify as an “Independent Engineering Report” so long as (x) such report otherwise meets the criteria set forth about in this definition and (y) such report is accompanied by an audit opinion of such Independent Engineer satisfactory to the Administrative Agent and each Lender covering, among other things, the estimate of Proven Reserves set forth in such report are within the ten percent (10%) tolerance threshold set forth in the SPE Standards Pertaining to the Estimated and Auditing of Oil and Gas Reserves Information.
“ Interest Expense ” means, for any Person and its consolidated Subsidiaries (or in the case of the Borrower, its consolidated Restricted Subsidiaries) for any period, total interest, letter of credit fees, and other fees and expenses incurred in connection with any Debt for such period, whether paid or accrued, including, without limitation, all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers’ acceptance financing and net costs under Interest Hedge Agreements, all as determined in conformity with GAAP.
“ Interest Hedge Agreement ” means a Hedge Contract between the Borrower and one or more financial institutions providing for the exchange of nominal interest obligations between the Borrower and such financial institution or the cap of the interest rate on any Debt of the Borrower.
“ Interest Period ” means, for each Eurodollar Rate Advance comprising part of the same Borrowing, the period commencing on the date of such Eurodollar Rate Advance or the date of the Conversion of any Reference Rate Advance into a Eurodollar Rate Advance and ending on the last day of the period selected by the Borrower pursuant to the provisions below and Section 2.03 and, thereafter, each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the last day of the period selected by the Borrower pursuant to the provisions below and Section 2.03. The duration of each such Interest Period shall be one month, three months, or six months, in each case as the Borrower may, upon notice received by the Administrative Agent not later than 12:00 p.m. (noon) (Houston, Texas time) on the third Business Day prior to the first day of such Interest Period, select; provided , however, that:
(a) the Borrower may not select any Interest Period that ends after the Maturity Date;
(b) Interest Periods commencing on the same date for Advances comprising part of the same Borrowing shall be of the same duration;
(c) whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall be extended to occur on the next succeeding Business Day, provided that if such extension would cause the last day of such Interest Period to occur in the next following calendar month, the last day of such Interest Period shall occur on the next preceding Business Day; and
(d) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month in which it would have ended if there were a numerically corresponding day in such calendar month.
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“ Internal Engineering Report ” means a report, in form and substance satisfactory to the Administrative Agent and each Lender, prepared by the Borrower and certified by a Responsible Officer of the Borrower, addressed to the Administrative Agent and the Lenders with respect to the Oil and Gas Properties owned by the Borrower or any Restricted Subsidiary (or to be acquired by the Borrower or any Restricted Subsidiary, as applicable), that are or are to be included in the Borrowing Base, which report shall (a) specify the location, quantity, and type of the estimated Proven Reserves attributable to such Oil and Gas Properties, (b) contain a projection of the rate of production of such Oil and Gas Properties, (c) contain an estimate of the net operating revenues to be derived from the production and sale of Hydrocarbons from such Proven Reserves based on product price and cost escalation assumptions specified by the Administrative Agent and the Lenders, and (d) contain such other information as is customarily obtained from and provided in such reports or is otherwise reasonably requested by the Administrative Agent or any Lender.
“ Interpolated Rate ” means, at any time, the rate per annum determined by the Administrative Agent (which determination shall be conclusive and binding absent manifest error) to be equal to the rate that results from interpolating on a linear basis between: (a) the rate as displayed on the applicable Reuters page (or on any successor or substitute page or service providing quotations of interest rates applicable to dollar deposits in the London interbank market comparable to those currently provided on such page, as determined by the Administrative Agent from time to time; in each case the “ Screen Rate ”) for the longest period (for which that Screen Rate is available) that is shorter than the Interest Period and (b) the Screen Rate for the shortest period (for which that Screen Rate is available) that exceeds the Interest Period, in each case, at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period.
“ IRS ” means the United States Internal Revenue Service.
“ Issuing Lender ” means (a) Wells Fargo and any successor issuing bank pursuant to Section 8.07, and (b) at the option of the Borrower, one other Lender selected by Borrower and agreed to by such other Lender and reasonably acceptable to the Administrative Agent, and any successor issuing bank pursuant to Section 8.07.
“ Kingfisher ” means Kingfisher Midstream, LLC, a Delaware limited liability company.
“ Leases ” means all oil and gas leases, oil, gas and mineral leases, oil, gas and casinghead gas leases or any other instruments, agreements, or conveyances under and pursuant to which the lessee thereof has or obtains the right to enter upon lands and explore for, drill, and develop such lands for the production of Hydrocarbons.
“ Legal Requirement ” means, as to any Person, any law, statute, ordinance, decree, requirement, order, judgment, rule, regulation (or official interpretation of any of the foregoing) of, and the terms of any license or permit issued by, any Governmental Authority, including, but not limited to, Regulations D, T, U, and X, that is applicable to such Person.
“ Lender Parties ” means Lenders, the Issuing Lenders, and the Administrative Agent.
“ Lenders ” means a party hereto that (a) is a lender listed on the signature pages of this Agreement on the date hereof or (b) is an Eligible Assignee that became a lender under this Agreement pursuant to Section 2.16, 2.18 or 9.06.
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“ Lending Office ” means, as to any Lender, the office or offices of such Lender described as such in such Lender’s Administrative Questionnaire, or such other office or offices as a Lender may from time to time notify the Borrower and the Administrative Agent.
“ Letter of Credit ” means, individually, any standby letter of credit issued or deemed issued by an Issuing Lender for the account of the Borrower or any Restricted Subsidiary thereof in connection with the Commitments and that is subject to this Agreement, including the Existing Letters of Credit, and “ Letters of Credit ” means all such letters of credit collectively.
“ Letter of Credit Application ” means the applicable Issuing Lender’s standard form letter of credit application for standby letters of credit that has been executed by the Borrower and accepted by such Issuing Lender in connection with the issuance of a Letter of Credit.
“ Letter of Credit Documents ” means all Letters of Credit, Letter of Credit Applications, and agreements, documents, and instruments entered into in connection therewith or relating thereto.
“ Letter of Credit Exposure ” means, at any time, the sum of (a) the aggregate undrawn maximum face amount of each Letter of Credit at such time plus (b) the aggregate unpaid amount of all Reimbursement Obligations at such time.
“ Letter of Credit Obligations ” means any obligations of the Borrower under this Agreement in connection with the Letters of Credit, including the Reimbursement Obligations.
“ Letter of Credit Sublimit ” means (a) as to Wells Fargo as an Issuing Lender, $30,000,000 or such lesser amount as may be agreed to between such Issuing Lender and the Borrower after the Effective Date, and (b) as to any other Issuing Lender, such amount as agreed to between such Issuing Lender and the Borrower from time to time; provided that, in any event, the aggregate Letter of Credit Sublimit for all Issuing Lenders shall not exceed $30,000,000 unless a lesser amount is agreed to by all the Issuing Lenders and the Borrower.
“ Leverage Ratio ” means, as of the last day of any fiscal quarter, the ratio of (a) all Debt (other than obligations under Hedge Contracts) of the Borrower and its Restricted Subsidiaries as of such day to (b) Adjusted EBITDAX.
“ Lien ” means any mortgage, lien, pledge, assignment, charge, deed of trust, security interest, hypothecation, preference, deposit arrangement or encumbrance (or other type of arrangement having the practical effect of the foregoing) to secure or provide for the payment of any obligation of any Person, whether arising by contract, operation of law, or otherwise (including, without limitation, the interest of a vendor or lessor under any conditional sale agreement, synthetic lease, Capital Lease, or other title retention agreement).
“ Liquid Investments ” means:
(a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States maturing within 180 days from the date of any acquisition thereof;
(b) (i) negotiable or nonnegotiable certificates of deposit, time deposits, or other similar banking arrangements maturing within 180 days from the date of acquisition thereof (“bank debt securities”), issued by (A) any Lender (or any Affiliate of any Lender) or (B) any other bank or trust company so long as such certificate of deposit is pledged to secure the Borrower’s or any Restricted
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Subsidiaries’ ordinary course of business bonding requirements, or any other bank or trust company which has primary capital of not less than $500,000,000, if at the time of deposit or purchase, such bank debt securities are rated not less than “AA” (or the then equivalent) by the rating service of Standard & Poor’s Ratings Group or of Moody’s Investors Service, Inc., and (ii) commercial paper issued by (A) any Lender (or any Affiliate of any Lender) or (B) any other Person if at the time of purchase such commercial paper is rated not less than “A-1” (or the then equivalent) by the rating service of Standard & Poor’s Ratings Group or not less than “P-1” (or the then equivalent) by the rating service of Moody’s Investors Service, Inc., or upon the discontinuance of both of such services, such other nationally recognized rating service or services, as the case may be, as shall be selected by the Borrower with the consent of the Majority Lenders;
(c) deposits in money market funds investing exclusively in investments described in clauses (a) and (b) above; and
(d) repurchase agreements relating to investments described in clauses (a) and (b) above with a market value at least equal to the consideration paid in connection therewith, with any Person who regularly engages in the business of entering into repurchase agreements and has a combined capital surplus and undivided profit of not less than $500,000,000, if at the time of entering into such agreement the debt securities of such Person are rated not less than “AA” (or the then equivalent) by the rating service of Standard & Poor’s Ratings Group or of Moody’s Investors Service, Inc.
“ Loan Documents ” means this Agreement, the Notes, the Letter of Credit Documents, the Guaranties, the Security Instruments, the Fee Letters, Account Control Agreements and each other agreement, instrument, or document executed by the General Partner, the Borrower or any of its Restricted Subsidiaries or any other Loan Party or any of their officers at any time in connection with this Agreement or any other Loan Document.
“ Loan Party ” means the Borrower and each Guarantor.
“ Lost Interest ” has the meaning specified in Section 2.09.
“ Majority Lenders ” means Lenders holding more than 50.0% of the aggregate amount of the Commitments; provided that, if there are two or more Lenders, the Commitment of, and the portion of the Advances and Letter of Credit Exposure held or deemed held by, any Defaulting Lender shall be excluded for purposes of making a determination of Majority Lenders unless all Lenders are Defaulting Lenders.
“ Material Adverse Change ” means any event, development or circumstance that has had or could reasonably be expected to have a material adverse effect on (a) the business, assets (including the Oil and Gas Properties of the Borrower and its Restricted Subsidiaries (when taken as a whole)), condition (financial or otherwise), or results of operations of the Borrower and its Restricted Subsidiaries, (b) the Borrower’s ability to perform its obligations under this Agreement, any Note, any other Loan Document, (c) the Borrower’s ability to perform its obligations under Hedge Contracts with Swap Counterparties, taken as a whole, (d) the Restricted Subsidiaries’ and the Parent Pledgors’ (when taken as a whole) ability to perform their obligations under this Agreement, any Guaranty, any Note, any other Loan Document, or any Hedge Contract with a Swap Counterparty, (e) the validity or enforceability of any of the Loan Documents, or (f) the rights or remedies of or benefits available to the Administrative Agent, any Issuing Lender or any Lender under any of the Loan Documents.
“ Maturity Date ” means February 9, 2023.
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“ Maximum Credit Amount ” means, as to each Lender, the amount set forth opposite such Lender’s name on Schedule II under the caption “Maximum Credit Amounts”, as such amount may be increased, reduced or terminated pursuant to Section 2.04, Section 2.18 or Article VII or otherwise under this Agreement. The aggregate amount of the Maximum Credit Amount on the date hereof is $1,000,000,000.
“ Maximum Rate ” means the maximum nonusurious interest rate under applicable law (determined under such laws after giving effect to any items which are required by such laws to be construed as interest in making such determination, including without limitation if required by such laws, certain fees and other costs).
“ Measurement Date ” has the meaning specified in Section 6.14.
“ Merger Net Equity ” means the net equity raised as a direct result of the Merger Transaction.
“ Merger Transaction ” means the business combination of the Borrower, the Parent Company, and Kingfisher, pursuant to the Contribution Agreements.
“ Mortgage ” means any mortgage or deed of trust executed by any one or more of the Borrower or its Restricted Subsidiaries in favor of the Administrative Agent for the ratable benefit of the Secured Parties in substantially the form of the attached Exhibit D or such other form as may be requested by the Administrative Agent, in each case as the same may be amended, modified, partially released or cancelled, restated or supplemented from time-to-time, together with any assumptions or assignments of the Obligations thereunder by the Borrower or its Restricted Subsidiaries, and “ Mortgages ” shall mean all of such Mortgages collectively.
“ Multiemployer Plan ” means a “multiemployer plan” as defined in Section 4001(a)(3) of ERISA.
“ Net Cash Proceeds ” means (a) with respect to any Disposition of Oil and Gas Properties of the Borrower or any Restricted Subsidiary that have a positive value in the most recently delivered Engineering Report or in the Engineering Report evaluated for the then effective Borrowing Base, all cash and Liquid Investments received by the Borrower or any of its Restricted Subsidiaries from such Disposition after payment of, or provision for, all estimated cash taxes attributable to such Disposition and payable by the Borrower or such Restricted Subsidiary, and other reasonable out of pocket fees and expenses actually incurred by the Borrower or such Restricted Subsidiary directly in connection with such Disposition, and (b) with respect to any novation, assignment, unwinding, termination, or amendment of any hedge position or any other Hedge Contract by the Borrower or any Restricted Subsidiary, the sum of the cash and Liquid Investments received by the Borrower or any Restricted Subsidiary in connection with such transaction after giving effect to any netting agreements.
“ New Lender ” has the meaning specified in Section 2.18.
“ Non-Consenting Lender ” means any Lender that does not consent to a proposed amendment, waiver, consent or release with respect to this Agreement or any other Loan Document that requires the consent of each Lender.
“ Non-Defaulting Lender ” means any Lender that is not then a Defaulting Lender.
“ Non-Funding Lender ” has the meaning specified in Section 2.03.
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“ Note ” means a promissory note of the Borrower payable to the order of any Lender, in substantially the form of the attached Exhibit E, evidencing indebtedness of the Borrower to such Lender resulting from Advances owing to such Lender.
“ Notice of Borrowing ” means a notice of borrowing in the form of the attached Exhibit F signed by a Responsible Officer of the Borrower.
“ Notice of Conversion or Continuation ” means a notice of conversion or continuation in the form of the attached Exhibit G signed by a Responsible Officer of the Borrower.
“ Obligations ” means (a) all principal, interest, fees, reimbursements, indemnifications, and other amounts payable by the Parent Pledgors, the Borrower or any Restricted Subsidiary to the Administrative Agent, the Issuing Lenders or the Lenders under the Loan Documents, including without limitation, the Letter of Credit obligations and to the extent legally permitted, all interest accrued thereon after the commencement of any bankruptcy, insolvency, reorganization or similar proceeding under any Debtor Relief Law at the rate, including without limitation any applicable post-default rate, allowable or allowed as a claim in such proceeding, (b) all obligations of the Borrower or any of its Restricted Subsidiaries owing to any Swap Counterparty under any Hedge Contract; provided that, (i) when any Swap Counterparty assigns or otherwise transfers any interest held by it under any Hedge Contract to any other Person pursuant to the terms of such agreement, the obligations thereunder shall constitute obligations only if such assignee or transferee is also then a Lender or an Affiliate of a Lender and (ii) if a Swap Counterparty ceases to be a Lender hereunder or an Affiliate of a Lender hereunder, obligations owing to such Swap Counterparty shall be included as obligations only to the extent such obligations arise from transactions under such individual Hedge Contracts (and not the Master Agreement between such parties) entered into at the time such Swap Counterparty was a Lender hereunder or an Affiliate of a Lender hereunder (or lender under the Existing Credit Agreement, or an Affiliate thereof, at the time such Hedge Contract was entered into), without giving effect to any extension, increases, or modifications thereof which are made after such Swap Counterparty ceases to be a Lender hereunder or an Affiliate of a Lender hereunder, and (c) the Banking Services Obligations. Notwithstanding anything herein to the contrary, no Excluded Swap Obligation shall constitute an Obligation.
“ OFAC ” means The Office of Foreign Assets Control of the U.S. Department of the Treasury.
“ Oil and Gas Properties ” means fee mineral interests, term mineral interests, Leases, subleases, farm-outs, royalties, overriding royalties, net profit interests, carried interests, production payments and similar mineral interests, and all unsevered and unextracted Hydrocarbons in, under, or attributable to such oil and gas Properties and interests, or any interest therein.
“ Other Connection Taxes ” means, with respect to any Recipient, Taxes imposed as a result of a present or former connection between such Recipient and the jurisdiction imposing such Tax (other than connections arising from such Recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in any Advance or Loan Document).
“ Other Taxes ” means all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Loan Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment (other than an assignment made pursuant to Section 2.16 or Section 2.18).
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“ Parent Company ” means Alta Mesa Resources, Inc., a Delaware corporation.
“ Parent Pledge Agreement ” means a parent pledge agreement executed by each Parent Pledgor in such form and substance reasonably satisfactory to the Administrative Agent.
“ Parent Pledgors ” means such Persons directly owning, or having the right to control the vote of, any Equity Interests of the Borrower.
“ Participant ” has the meaning set forth in Section 9.06.
“ Participant Register ” has the meaning set forth in Section 9.06.
“ Partnership Agreement ” means the Fourth Amended and Restated Agreement of Limited Partnership of Alta Mesa Holdings, LP.
“ Patriot Act ” means the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)).
“ PBGC ” means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA.
“ PDP Reserves ” means Proven Reserves which are categorized as both “Developed” and “Producing” in the definitions promulgated by the Society of Petroleum Evaluation Engineers and the World Petroleum Congress as in effect at the time in question.
“ Permit ” means any approval, certificate of occupancy, consent, waiver, exemption, variance, franchise, order, permit, authorization, right or license of or from any Governmental Authority, including without limitation, an Environmental Permit.
“ Permitted Asset Swap ” has the meaning specified in Section 6.04(b)(vi).
“ Permitted Investor ” means each of (a) Michael Ellis, (b) Harlan Chappelle, (c) Highbridge and each Affiliate fund managed by Highbridge, (d) BCE and each Affiliate fund managed by BCE or Affiliates of BCE, (e) Riverstone, (f) High Mesa Holdings, LP and (g) High Mesa Inc.
“ Permitted Liens ” means the Liens permitted to exist pursuant to Section 6.01.
“ Permitted Subject Liens ” means Permitted Liens other than the judgment Liens permitted under clause (l) of Section 6.01.
“ Permitted Tax Distributions ” means, for any taxable period or portion thereof in which the Borrower is a pass through entity for federal income tax purposes, payments and distributions which are distributed to the direct or indirect members of the Borrower on or prior to each estimated payment date as well as each other applicable due date to enable such holders to timely make payments of federal, state and local taxes for such taxable period as a result of the operations of the Borrower not to exceed the product of (a) the net taxable income of the Borrower for such taxable period, and (b) the highest applicable marginal U.S. federal, state and local tax rates applicable to an individual or corporation, as applicable, residing in New York City, New York.
“ Person ” means an individual, partnership, corporation (including a business trust), joint stock company, limited liability corporation or company, limited liability partnership, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof or any trustee, receiver, custodian or similar official.
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“ Plan ” (whether or not capitalized) means an employee benefit plan (other than a Multiemployer Plan) maintained for employees of the Borrower or any member of the Controlled Group and covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code.
“ Platform ” has the meaning specified in Section 9.02.
“ Pledge Agreements ” means (a) the amended and restated pledge agreement in substantially the form of the attached Exhibit H, executed by the Borrower or any of its Restricted Subsidiaries or any of the Guarantors, as the same may be amended, modified, restated or supplemented from time to time, and (b) the Parent Pledge Agreement.
“ Pro Rata Share ” means, with respect to any Lender, (a) with respect to amounts owing under the Commitments, (i) if such Commitments have not been canceled, the ratio (expressed as a percentage) of such Lender’s uncancelled Commitment at such time to the aggregate uncancelled Commitments at such time or (ii) if the aggregate Commitments have been terminated, the Pro Rata Share of such Lender as determined pursuant to the preceding clause (i) immediately prior to such termination, or (b) with respect to amounts owing generally under this Agreement and the other Loan Documents, the ratio (expressed as a percentage) of the Commitment of such Lender to the aggregate Commitments of all the Lenders (or if such Commitments have been terminated, the ratio (expressed as a percentage) of Credit Extensions owing to such Lender to the aggregate Credit Extensions owing to all such Lenders).
“ Property ” of any Person means any property or assets (whether real, personal, or mixed, tangible or intangible) of such Person.
“ Proven Reserves ” means, at any particular time, the estimated quantities of Hydrocarbons which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs attributable to Oil and Gas Properties under then existing economic and operating conditions (i.e., prices and costs as of the date the estimate is made).
“ PV -10 ” means, on any date of determination, with respect to any Proven Reserves, the net present value, discounted at 10% per annum, of the future net revenues expected to accrue to the Borrower’s and the Restricted Subsidiaries’ collective interests in such Proven Reserves during the remaining expected economic lives of such reserves.
“ Qualified ECP Guarantor ” means, in respect of any Swap Obligation, (a) each Loan Party that has total assets exceeding $10,000,000 at the time the relevant Guaranty or grant of the relevant Lien becomes effective with respect to such Swap Obligation or (b) a Loan Party for which another Person who constitutes an “eligible contract participant” under the Commodity Exchange Act or any regulations promulgated thereunder can cause such Loan Party to qualify as an “eligible contract participant” at such time by entering into a keepwell under Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.
“ Recipient ” means (a) the Administrative Agent, (b) any Lender or (c) any Issuing Lender, as applicable.
“ Reference Rate ” means the fluctuating per annum rate of interest established from time to time by the Administrative Agent at its principal office in San Francisco as its prime rate, which rate may not be the lowest rate of interest charged by such Lender to its customers and whether or not the Borrower has notice thereof. Notwithstanding the foregoing, if the Reference Rate at any determination is less than zero, such rate shall be deemed to be zero for purposes of such determination under this Agreement.
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“ Reference Rate Advance ” means an Advance which bears interest as provided in Section 2.09(a)(i) (or if applicable, Section 2.09(d) with reference to Section 2.09(a)(i)).
“ Refinancing Debt ” means Senior Unsecured Notes but only to the extent the proceeds thereof refinance (a) Senior Unsecured Notes outstanding on the Effective Date, (b) Specified Additional Subordinated Debt incurred after the Effective Date, and (c) Refinancing Debt which refinanced the Debt described in the foregoing clause (a) or (b).
“ Register ” has the meaning set forth in paragraph (c) of Section 9.06.
“ Regulations D, T, U, and X ” mean Regulations D, T, U, and X of the Federal Reserve Board, as the same is from time to time in effect, and all official rulings and interpretations thereunder or thereof.
“ Reimbursement Obligations ” means all of the obligations of the Borrower to reimburse any Issuing Lender for amounts paid by such Issuing Lender under Letters of Credit as established by the Letter of Credit Applications and Section 2.07(d).
“ Related Parties ” means, with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents, trustees, administrators, managers, advisors and representatives of such Person and of such Person’s Affiliates.
“ Release ” has the meaning set forth in CERCLA or under any other Environmental Law.
“ Removal Effective Date ” has the meaning specified in Section 8.07.
“ Required Lenders ” means, at any time, Lenders holding not less than 66 2/3% of the Commitments or, if the Commitments have been terminated, the outstanding principal amount of the Advances and Letter of Credit Exposure; provided that, if there are two or more Lenders, the Commitment of, and the portion of the Advances and Letter of Credit Exposure held or deemed held by, any Defaulting Lender shall be excluded for purposes of making a determination of Required Lenders unless all Lenders are Defaulting Lenders.
“ Resignation Effective Date ” has the meaning specified in Section 8.07.
“ Response ” has the meaning set forth in CERCLA or under any other Environmental Law.
“ Responsible Officer ” means (a) with respect to any Person that is a corporation, such Person’s Chief Executive Officer, President, Chief Financial Officer (or other financial officer), or Vice President, (b) with respect to any Person that is a limited liability company, a manager or the Responsible Officer of such Person’s managing member or manager, and (c) with respect to any Person that is a general partnership or a limited liability partnership, the Responsible Officer of such Person’s general partner or partners.
“ Restricted Payment ” means, with respect to any Person, (a) any direct or indirect dividend or distribution (whether in cash, securities or other Property) in respect of the Equity Interest of such Person or any direct or indirect payment of any kind or character (whether in cash, securities or other Property) on account of any Equity Interest of such Person, including in consideration for or otherwise in connection with any retirement, purchase, redemption or other acquisition of any Equity Interest of such Person, or any options, warrants or rights to purchase or acquire any such Equity Interest of such Person, or (b) principal or interest payments (in cash, Property or otherwise) on, or redemptions of, subordinated debt of such Person; provided that the term “Restricted Payment” shall not include any dividend or distribution payable solely in common Equity Interests of the Borrower or warrants, options or other rights to purchase such Equity Interests.
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“ Restricted Subsidiary ” means each Subsidiary of the Borrower that is not an Unrestricted Subsidiary.
“ Riverstone ” means Riverstone Manager, and Riverstone Global Energy and Power Fund VI, L.P., together with the parallel investment entities and alternative investment entities of the foregoing, and any other investment fund or co-investment fund managed by the Riverstone Manager or any of its Affiliates, and any Affiliates of one or more of the foregoing.
“ Riverstone Manager ” means Riverstone Investment Group LLC, a Delaware limited liability company.
“ Sanctioned Country ” means at any time, a country or territory which is itself the subject or target of any Sanctions.
“ Sanctioned Person ” means, at any time, (a) any Person listed in any Sanctions-related list of designated Persons maintained by OFAC, the U.S. Department of State, the United Nations Security Council, the European Union, Her Majesty’s Treasury, or other relevant sanctions authority, (b) any Person operating, organized or resident in a Sanctioned Country or (c) any Person owned or controlled by any such Person or Persons described in clauses (a) and (b).
“ Sanctions ” means economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by the U.S. government (including those administered by OFAC), the European Union, Her Majesty’s Treasury, or other relevant sanctions authority.
“ SEC ” means the Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions.
“ Secured Parties ” means the Administrative Agent, the Issuing Lenders, the Lenders, the Swap Counterparties and the Lenders and Banking Service Providers.
“ Security Agreements ” means the Security Agreements, each in substantially the form of the attached Exhibit I, executed by the Borrower or any Restricted Subsidiary, as the same may be amended, modified, partially released, or supplemented from time to time.
“ Security Instruments ” means, collectively, (a) the Mortgages, (b) the Transfer Letters, (c) the Pledge Agreements, (d) the Security Agreements, (e) each other agreement, instrument or document executed at any time in connection with the Pledge Agreements, the Security Agreements, or the Mortgages, (f) each agreement, instrument or document executed in connection with the Cash Collateral Account, and (g) each other agreement, instrument or document executed at any time in connection with securing the Obligations.
“ Senior Unsecured Notes ” means (a) senior, unsecured notes issued by the Borrower outstanding on the Effective Date and (b) Additional Subordinated Debt issued by the Borrower in the form of senior, unsecured notes after the Effective Date.
“ Solvent ” means, with respect to any Person as of the date of any determination, that on such date (a) the fair value of the Property of such Person (both at fair valuation and at present fair saleable value) is greater than the total liabilities, including contingent liabilities, of such Person, (b) the present fair
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saleable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person is able to realize upon its assets and pay its debts and other liabilities, contingent obligations, and other commitments as they mature in the normal course of business, (d) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay as such debts and liabilities mature, and (e) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person’s Property would constitute unreasonably small capital after giving due consideration to current and anticipated future capital requirements and current and anticipated future business conduct and the prevailing practice in the industry in which such Person is engaged. In computing the amount of contingent liabilities at any time, such liabilities shall be computed at the amount which, in light of the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.
“ Specified Additional Subordinated Debt ” means Senior Unsecured Notes incurred after the Effective Date in an aggregate principal amount not to exceed $300,000,000.
“ Subject Increase ” has the meaning specified in Section 2.18.
“ Subject Lender ” has the meaning specified in Section 2.16.
“ Subject Quarter ” has the meaning specified in Section 6.05.
“ Subsidiary ” of a Person means any corporation or other entity of which more than 50% of the outstanding Equity Interests having ordinary voting power under ordinary circumstances to elect a majority of the board of directors or similar governing body of such corporation or other entity (irrespective of whether at such time Equity Interests of any other class or classes of such corporation or other entity shall or might have voting power upon the occurrence of any contingency) is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more Subsidiaries of such Person or by one or more Subsidiaries of such Person. Unless otherwise indicated herein, each reference to the term “Subsidiary” shall mean a Subsidiary of the Borrower.
“ Subsidiary Guarantor ” means each Restricted Subsidiary of the Borrower that is party to a Guaranty.
“ Swap Counterparty ” means (a) any Lender or Affiliate of a Lender that is a counterparty to any Hedge Contract with the Borrower or any Restricted Subsidiary listed on Schedule 4.20 and (b) any counterparty to any other Hedge Contract with the Borrower or any Restricted Subsidiary; provided that such counterparty is a Lender or an Affiliate of a Lender. For the avoidance of doubt, “Swap Counterparty” shall not include any participant of a Lender pursuant to Section 9.06(d) other than to the extent such participant is otherwise a Lender or an Affiliate of a Lender.
“ Swap Obligation ” means, with respect to any Guarantor, any obligation to pay or perform under any agreement, contract or transaction that constitutes a “swap” within the meaning of section 1a(47) of the Commodity Exchange Act.
“ Tax Group ” has the meaning specified in Section 4.10.
“ Tax Returns ” mean any federal, state, local, or foreign report, estimate, declaration of estimated Tax, information statement or return relating to, or filed or required to be filed in connection with, any Taxes, including any information return or report with respect to backup withholding or other payments of third parties.
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“ Taxes ” means all present or future taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.
“ Termination Event ” means (a) a Reportable Event described in Section 4043 of ERISA and the regulations issued thereunder (other than a Reportable Event not subject to the provision for 30-day notice to the PBGC under such regulations), (b) the withdrawal of the Borrower or any of its Affiliates from a Plan during a plan year in which it was a “substantial employer” as defined in Section 4001(a)(2) of ERISA, (c) the filing of a notice of intent to terminate a Plan or the treatment of a Plan amendment as a termination under Section 4041 of ERISA, (d) the institution of proceedings to terminate a Plan by the PBGC, or (e) any other event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan.
“ Test Date ” means (a) each date that the financial statements are required to be delivered pursuant to Sections 5.06(a) or (b) and (b) the last day of any calendar month if the aggregate notional volume covered by Hedge Contracts in respect of commodities (other than basis differential hedges so long as the volumes of such basis differential hedges are not in excess of the volumes of the underlying commodity hedges) for the immediately preceding calendar month exceeds 100% of the actual production for each of crude oil, natural gas and natural gas liquids, calculated separately, in such preceding calendar month.
“ Trade Date ” has the meaning specified in Section 9.06.
“ Transactions ” means, collectively, (a) the initial borrowings and other extensions of credit under this Agreement (including any deemed borrowings and any deemed issuances of Letters of Credit), including the renewal, extension, and rearrangement (but not substitution or extinguishment) of advances under the Existing Credit Agreement as Advances under this Agreement pursuant to the terms of this Agreement, and (b) the payment of fees, commissions and expenses in connection with each of the foregoing.
“ Transfer Letters ” means, collectively, the letters in lieu of transfer orders in substantially the form of the attached Exhibit J and executed by the Borrower or any Restricted Subsidiary executing a Mortgage, as each of the same may be amended, modified or supplemented from time-to-time.
“ Triggering Event ” means (a) the Disposition of Oil and Gas Properties of the Borrower or any Restricted Subsidiary that have a positive value in the most recently delivered Engineering Report or in the Engineering Report evaluated for the then effective Borrowing Base or the Disposition of the Equity Interests issued by any Restricted Subsidiary that owns such Oil and Gas Properties and (b) a Hedge Event of a hedge position or Hedge Contract considered by the Administrative Agent in determining the then effective Borrowing Base to the extent that after giving to any new hedge position or new Hedge Contract (or in the case of an amendment, an amended hedge position or amended Hedge Contract) entered into since the most recent redetermination of the Borrowing Base or concurrently with or immediately following such hedge event, the Borrower’s hedged positions would result in a lower Borrowing Base (as determined by the Administrative Agent in its sole discretion). For the avoidance of doubt, a Permitted Asset Swap which involves the Disposition of Oil and Gas Properties to which Proven Reserves are attributable constitutes a Triggering Event only as to such Oil and Gas Properties.
“ Type ” has the meaning set forth in Section 1.04.
“ Unrestricted Subsidiary ” means any Subsidiary of the Borrower that has been designated as an Unrestricted Subsidiary in compliance with Section 5.14.
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“ Unused Commitment Amount ” means, with respect to a Lender at any time, (a) such Lender’s Commitment at such time minus , (b) such Lender’s Credit Exposure.
“ U.S. Person ” means any Person that is a “United States Person” as defined in Section 7701(a)(30) of the Code.
“ Utilization Level ” means the applicable category (being Level I, Level II, Level III, Level IV or Level V) of pricing criteria contained in Schedule III, which is based, at any time of its determination, on the percentage obtained by dividing (a) the outstanding principal amount of the Advances and the Letter of Credit Exposure at such time by (b) the aggregate Commitments.
“ Voting Securities ” means (a) with respect to any corporation, Equity Interest of the corporation having general voting power under ordinary circumstances to elect directors of such corporation (irrespective of whether at the time stock of any other class or classes shall have or might have special voting power or rights by reason of the happening of any contingency), (b) with respect to any partnership, any Equity Interest thereof having general voting power to elect the general partner or other management of the partnership or other Person, and (c) with respect to any limited liability company, any Equity Interests thereof having general voting power under ordinary circumstances to elect managers of such limited liability company.
“ Wells ” has the meaning set forth in Section 2.02.
“ Wells Fargo ” means Wells Fargo Bank, National Association, a national banking association.
“ Withholding Agent ” means any Loan Party and the Administrative Agent.
“ Write-Down and Conversion Powers ” means, with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule.
Section 1.02 Computation of Time Periods . In this Agreement, with respect to the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including” and the words “to” and “until” each means “to but excluding.”
Section 1.03 Accounting Terms; Changes in GAAP . Except as otherwise expressly provided herein, all accounting terms used herein shall be interpreted, and all financial statements and certificates and reports as to financial matters required to be delivered to the Lenders hereunder shall (unless otherwise disclosed to the Lenders in writing at the time of delivery thereof) be prepared, in accordance with GAAP applied on a basis consistent with those used in the preparation of the latest financial statements furnished to the Lenders hereunder (which prior to the delivery of the first financial statements under Section 5.06 hereof, shall mean the Financial Statements). All calculations made for the purposes of determining compliance with this Agreement shall (except as otherwise expressly provided herein) be made by application of GAAP applied on a basis consistent with those used in the preparation of the annual or quarterly financial statements furnished to the Lenders pursuant to Section 5.06 hereof most recently delivered prior to or concurrently with such calculations (or, prior to the delivery of the first financial statements under Section 5.06 hereof, used in the preparation of the Financial Statements). If at any time any change in GAAP would affect the computation of any financial ratio or requirement set forth herein, and either the Borrower or the Majority Lenders shall so request, the Administrative Agent, the Lenders and the Borrower shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP (subject to the approval of the Majority Lenders); provided that, until so amended, (a) such ratio or requirement shall continue to be computed in
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accordance with GAAP prior to such change therein, and (b) the Borrower shall provide to the Administrative Agent and the Lenders financial statements and other documents required under this Agreement or as reasonably requested hereunder setting forth a reconciliation between calculations of such ratio or requirement made before and after giving effect to such change in GAAP. In addition, all calculations and defined accounting terms used herein shall, unless expressly provided otherwise, when referring to any Person, refer to such Person on a consolidated basis and mean such Person and its consolidated Subsidiaries.
Section 1.04 Types of Advances . Advances are distinguished by “Type”. The “Type” of an Advance refers to the determination whether such Advance is a Eurodollar Rate Advance or Reference Rate Advance.
Section 1.05 Miscellaneous . Article, Section, Schedule, and Exhibit references are to Articles and Sections of and Schedules and Exhibits to this Agreement, unless otherwise specified. All references to instruments, documents, contracts, and agreements are references to such instruments, documents, contracts, and agreements as the same may be amended, supplemented, and otherwise modified from time to time, unless otherwise specified and shall include all schedules and exhibits thereto unless otherwise specified. The words “hereof,” “herein,” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The term “including” means “including, without limitation,”. Paragraph headings have been inserted in this Agreement as a matter of convenience for reference only and it is agreed that such paragraph headings are not a part of this Agreement and shall not be used in the interpretation of any provision of this Agreement.
Section 1.06 Letter of Credit Amounts . Unless otherwise specified, all references herein to the amount of a Letter of Credit at any time shall be deemed to mean the maximum face amount of such Letter of Credit after giving effect to all increases thereof contemplated by such Letter of Credit or the Letter of Credit Application therefor (at the time specified therefor in such applicable Letter of Credit or Letter of Credit Application and as such amount may be reduced by (a) any permanent reduction of such Letter of Credit or (b) any amount which is drawn, reimbursed and no longer available under such Letter of Credit).
ARTICLE II
CREDIT FACILITIES
Section 2.01 Commitment for Advances .
(a) Advances . Each Lender severally agrees, on the terms and conditions set forth in this Agreement, to make Advances to the Borrower from time to time on any Business Day during the period from the date of this Agreement until the Commitment Termination Date in an amount for each Lender not to exceed such Lender’s Unused Commitment Amount. Each Borrowing shall, in the case of Borrowings consisting of Reference Rate Advances, be in an aggregate amount not less than the lesser of (i) $500,000 and (ii) the Unused Commitment Amount, and in integral multiples of $100,000 in excess thereof, and in the case of Borrowings consisting of Eurodollar Rate Advances, be in an aggregate amount not less than $1,000,000 and in integral multiples of $500,000 in excess thereof, and in each case shall consist of Advances of the same Type made on the same day by the Lenders ratably according to their respective Commitments. Within the limits of each Lender’s Commitment, and subject to the terms of this Agreement, the Borrower may from time to time borrow, prepay, and reborrow Advances.
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(b) Existing Advances under the Existing Credit Agreement . The parties hereto acknowledge and agree that, effective as of the Effective Date, in order to accommodate and orderly effect the reallocations, adjustments, acquisitions and decreases under this (b), (i) all outstanding Eurodollar Rate Advances (as defined in the Existing Credit Agreement) on the date hereof are (and shall be deemed to be) Converted to Reference Rate Advances under, and as defined in, the Existing Credit Agreement (and the Borrower agrees to pay to each Exiting Lender and each Existing Lender such costs and expenses would have been due under Section 2.12 of the Existing Credit Agreement as a result of such Conversion unless waived by such Exiting Lender or Existing Lender), and (ii) after giving effect to clause ( i ) above, all outstanding Advances (as defined in the Existing Credit Agreement) under the Existing Credit Agreement on the date hereof (the “ Existing Advances ”) are (and shall be deemed to be) continued as the initial Reference Rate Advances (as defined in this Agreement) made under this Agreement on the Effective Date. The outstanding Debt under the Existing Credit Agreement shall be assigned, renewed, extended, modified, and rearranged as Obligations outstanding under and pursuant to the terms of this Agreement. The Existing Lenders have agreed among themselves, in consultation with the Borrower, to adjust their respective Commitments and to pay-off in full such Existing Lenders, if any, which will not become a Lender hereunder (each an “ Exiting Lender ”). The Administrative Agent, the Lenders, the Borrower and each Exiting Lender (by receipt of the payment in full of the Advances as defined in, and owing to it under, the Existing Credit Agreement and under a separate exiting agreement executed by such Exiting Lender) consent to such reallocation and each Existing Lender’s adjustment of, and each Existing Lender’s assignment of, an interest in the Existing Commitments and the Existing Lenders’ partial assignments of their respective Existing Commitments (pursuant to this Section 2.01). On the Effective Date and after giving effect to such reallocations, adjustments, assignments and decreases, the Maximum Credit Amounts and Elected Commitment Amounts of each Lender shall be as set forth on Schedule II. The Lenders shall make all appropriate adjustments and payments between and among themselves to account for the revised pro rata shares resulting from the initial allocation of the Lenders’ Commitments under this Agreement. The Borrower and each Existing Lender party hereto hereby agrees and this Section 2.01 and any exiting agreement executed by an Exiting Lender that is acceptable to the Administrative Agent shall be deemed approved assignment forms as required under the Existing Credit Agreement.
(c) Evidence of Indebtedness . The Advances made by each Lender shall be evidenced by one or more accounts or records maintained by such Lender and by the Administrative Agent in the ordinary course of business. The accounts or records maintained by the Administrative Agent and the Lenders shall be conclusive absent manifest error of the amount of the Advances made by such Lenders to the Borrower and the interest and payments thereon. Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Borrower hereunder to pay any amount owing with respect to the Obligations. In the event of any conflict between the accounts and records maintained by any Lender and the accounts and records of the Administrative Agent in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error. Upon the request of any Lender to the Borrower made through the Administrative Agent, the Borrower shall execute and deliver to such Lender (through the Administrative Agent) the applicable Notes which shall evidence such Lender’s Advances to the Borrower in addition to such accounts or records. Each Lender may attach schedules to such Notes and endorse thereon the date, Type (if applicable), amount, and maturity of its Advances and payments with respect thereto. Failure to make any such endorsement or to attach a schedule shall not affect any Lender’s or the Borrower’s rights or obligations in respect of such Advances or affect the validity of such transfer by any Lender of its Note. In addition to the accounts and records referred to in the immediately preceding sentences, each Lender, the applicable Issuing Lender and Administrative Agent shall maintain in accordance with its usual practice accounts or records evidencing the purchases and sales by such Lender of participations in Letters of Credit. In the event of any conflict between the accounts and records maintained by the Administrative Agent and the accounts and records of any Lender (other than the applicable Issuing
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Lender) in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error. In the event of any conflict among the accounts and records maintained by the Administrative Agent, the accounts and records maintained by the applicable Issuing Lender as to Letters of Credit issued by it, and the accounts and records of any other Lender in respect of such matters, the accounts and records of such Issuing Lender shall control in the absence of manifest error. In the event that any Lender’s Maximum Credit Amount increases or decreases for any reason, the Borrower shall, upon request of such Lender, deliver or cause to be delivered on the effective date of such increase or decrease, a new Note payable to such Lender in a principal amount equal to its Maximum Credit Amount after giving effect to such increase or decrease, and otherwise duly completed, against the return to the Borrower of the Note so replaced.
Section 2.02 Borrowing Base .
(a) Borrowing Base . The initial Borrowing Base in effect as of the Effective Date has been set by the Administrative Agent and the Lenders and acknowledged by the Borrower as $350,000,000 and each Lender’s Pro Rata Share of such Borrowing Base, as of the Effective Date, are set forth on Schedule II. Such Borrowing Base shall remain in effect until the next redetermination made pursuant to this Section 2.02. The Borrowing Base shall be determined in accordance with the standards set forth in Section 2.02(d) and is subject to periodic redetermination pursuant to Sections 2.02(b) and 2.02(c) and is subject to mandatory reductions pursuant to Section 2.02(e).
(b) Calculation of Borrowing Base .
(i) The Borrower shall deliver to the Administrative Agent and each of the Lenders on or before each April 1, beginning April 1, 2018, an Independent Engineering Report dated effective as of the immediately preceding January 1, and, in any case, such other information as may be reasonably requested by the Administrative Agent or any Lender with respect to the Oil and Gas Properties included or to be included in the Borrowing Base. Within 30 days after the Administrative Agent and the Lenders’ receipt of such Independent Engineering Report and other information, (A) the Administrative Agent shall deliver to each Lender the Administrative Agent’s recommendation for the redetermined Borrowing Base, (B) the Administrative Agent and the Required Lenders shall redetermine the Borrowing Base in accordance with Section 2.02(d) (except that any increase in the Borrowing Base shall require the consent of all the Lenders), and (C) the Administrative Agent shall promptly notify the Borrower in writing of the amount of the Borrowing Base as so redetermined.
(ii) The Borrower shall deliver to the Administrative Agent and each Lender on or before each October 1, beginning October 1, 2018, an Internal Engineering Report dated effective as of the immediately preceding July 1, and such other information as may be reasonably requested by the Administrative Agent or any Lender with respect to the Oil and Gas Properties included or to be included in the Borrowing Base. Within 30 days after the Administrative Agent and the Lenders’ receipt of such Internal Engineering Report and other information, (A) the Administrative Agent shall deliver to each Lender the Administrative Agent’s recommendation for the redetermined Borrowing Base, (B) the Administrative Agent and the Required Lenders shall redetermine the Borrowing Base in accordance with Section 2.02(d) (except that any increase in the Borrowing Base shall require the consent of all the Lenders), and (C) the Administrative Agent shall promptly notify the Borrower in writing of the amount of the Borrowing Base as so redetermined.
(iii) In the event that the Borrower does not furnish to the Administrative Agent and the Lenders the Independent Engineering Report, Internal Engineering Report, or other information specified in clauses (i) and (ii) above by the date specified therein, the Administrative Agent and the Required Lenders (except that any increase in the Borrowing Base shall require the consent of all the
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Lenders) may nonetheless redetermine the Borrowing Base and redesignate the Borrowing Base from time-to-time thereafter in their sole discretion until the Administrative Agent and the Lenders receive the relevant Independent Engineering Report, Internal Engineering Report, or other information, as applicable, whereupon the Administrative Agent and the Required Lenders (except that any increase in the Borrowing Base shall require the consent of all the Lenders) shall redetermine the Borrowing Base as otherwise specified in this Section 2.02.
(iv) Each delivery of an Engineering Report by the Borrower to the Administrative Agent and the Lenders shall constitute a representation and warranty by the Borrower to the Administrative Agent and the Lenders that (A) the Borrower and its Restricted Subsidiaries, as applicable, own the Oil and Gas Properties specified therein with at least 90% (by value) of the PV-10 of the Proven Reserves covered therein subject to an Acceptable Security Interest and free and clear of any Liens (except Permitted Liens), (B) on and as of the date of such Engineering Report, the PDP Reserves identified therein were developed for Hydrocarbons, and the wells pertaining to such Oil and Gas Properties that are described therein as producing wells (“ Wells ”), were each producing Hydrocarbons in paying quantities, except for Wells that were utilized as water or gas injection wells or as water disposal wells, (C) the descriptions of quantum and nature of the record title interests of the Borrower and its Restricted Subsidiaries, as applicable, set forth in such Engineering Report include the entire record title interests of the Borrower and its Restricted Subsidiaries in such Oil and Gas Properties, are complete and accurate in all respects, and take into account all Permitted Liens, (D) there are no “back-in” or “reversionary” interests held by third parties which could reduce the interests of the Borrower or any of its Subsidiaries in such Oil and Gas Properties except as set forth in Engineering Report, (E) no operating or other agreement to which the Borrower or any of its Restricted Subsidiaries is a party or by which the Borrower or any of its Restricted Subsidiaries is bound affecting any part of such Oil and Gas Properties requires the Borrower or any of its Restricted Subsidiaries to bear any of the costs relating to such Oil and Gas Properties greater than the record title interest of the Borrower or any of its Restricted Subsidiaries in such portion of the such Oil and Gas Properties as set forth in such Engineering Report, except in the event the Borrower or any of its Restricted Subsidiaries is obligated under an operating agreement to assume a portion of a defaulting party’s share of costs, and (F) the Borrower’s and the Restricted Subsidiaries’ ownership of the Hydrocarbons and the undivided interests in the Oil and Gas Properties as specified in such Engineering Report (i) will, after giving full effect to all Permitted Liens afford the Borrower or the applicable Restricted Subsidiary not less than those net interests (expressed as a fraction, percentage or decimal) in the production from or which is allocated to such Hydrocarbons specified as net revenue interest in such Engineering Report and (ii) will cause the Borrower or the applicable Restricted Subsidiary to bear not more than that portion (expressed as a fraction, percentage or decimal), specified as working interest in such Engineering Report, of the costs of drilling, developing and operating the wells identified in such Engineering Report or identified in the exhibits to the Mortgages encumbering such Oil and Gas Properties.
(c) Interim Redeterminations . In addition to the Borrowing Base redeterminations provided for in Section 2.02(b) and based on such information as the Administrative Agent and the Lenders deem relevant (but in accordance with Section 2.02(d)):
(i) at the election of the Required Lenders, the Administrative Agent and the Lenders may make one additional redetermination of the Borrowing Base during any six-month period between scheduled redeterminations; and
(ii) at the request of the Borrower, the Administrative Agent and the Lenders may make one additional redetermination of the Borrowing Base during any six-month period between scheduled redeterminations.
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The party requesting the redetermination under this paragraph (c) shall give the other party at least 10 days’ prior written notice that a redetermination of the Borrowing Base pursuant to this paragraph (c) is to be performed (or such shorter period as the Administrative Agent and the Borrower may agree to in their sole discretion); provided that, no such prior written notice shall be required for any redetermination made by the Lenders during the existence of a Default. In connection with any redetermination of the Borrowing Base under this Section 2.02(c), the Borrower shall provide the Administrative Agent and the Lenders with such information regarding the Borrower and the Guarantors’ business (including, without limitation, its Oil and Gas Properties, the Proven Reserves, and production relating thereto) as the Administrative Agent or any Lender may reasonably request; provided that, in the case of requests for an increase to the Borrowing Base of an amount in excess of 5% of the Borrowing Base then in effect, the request of an updated Independent Engineering Report is deemed to be reasonable. The Administrative Agent shall promptly notify the Borrower in writing of each redetermination of the Borrowing Base pursuant to this Section 2.02(c) and the amount of the Borrowing Base as so redetermined.
(d) Standards for Redetermination . Each redetermination of the Borrowing Base by the Administrative Agent and the Lenders pursuant to this Section 2.02 shall be made (i) in the sole discretion of the Administrative Agent and the Lenders (but in accordance with the other provisions of this Section 2.02(d)), (ii) in accordance with the Administrative Agent’s and the Lenders’ customary internal standards and practices for valuing and redetermining the value of Oil and Gas Properties in connection with reserve based oil and gas loan transactions, (iii) in conjunction with the most recent Independent Engineering Report or Internal Engineering Report, as applicable, or other information received by the Administrative Agent and the Lenders relating to the Proven Reserves of the Borrower and the Subsidiary Guarantors, and (iv) based upon the estimated value of the Proven Reserves owned by the Borrower and the Subsidiary Guarantors as determined by the Administrative Agent and the Lenders. In valuing and redetermining the Borrowing Base, the Administrative Agent and the Lenders may also consider the business, financial condition, and Debt obligations of the Borrower and its Restricted Subsidiaries and such other factors as the Administrative Agent and the Lenders customarily deem appropriate, including without limitation, commodity price assumptions, projections of production, operating expenses, general and administrative expenses, capital costs, working capital requirements, liquidity evaluations, dividend payments, environmental costs, and legal costs. In that regard, the Borrower acknowledges that the determination of the Borrowing Base contains a value cushion (market value in excess of loan value), which is essential for the adequate protection of the Administrative Agent and the Lenders. No Proven Reserves shall be included or considered for inclusion in the Borrowing Base unless the Administrative Agent shall have received, at the Borrower’s expense, (A) evidence of title reasonably satisfactory in form and substance to the Administrative Agent covering at least 80% (by value) of the PV-10 of the Proven Reserves and the Oil and Gas Properties relating thereto, and (B) Mortgages and such other Security Instruments requested by the Administrative Agent to the extent necessary to cause the Administrative Agent to have an Acceptable Security Interest in at least 90% (by value) of the PV-10 of the Proven Reserves and the Oil and Gas Properties relating thereto. At all times after the Administrative Agent has given the Borrower notification of a redetermination of the Borrowing Base under this Section 2.02, the Borrowing Base shall be equal (i) to the redetermined amount or (ii) such lesser amount designated by the Borrower and disclosed in writing to the Administrative Agent and the Lenders, provided that the Borrower shall not request that the Borrowing Base be reduced to a level that would result in a Borrowing Base Deficiency, until the Borrowing Base is subsequently redetermined in accordance with this Section 2.02.
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(e) Mandatory Reductions in the Borrowing Base . In addition to the Borrowing Base redeterminations provided for otherwise in this Section 2.02, the Borrowing Base shall be automatically reduced as follows:
(i) effective immediately upon the issuance of any Additional Subordinated Debt (including Specified Additional Subordinated Debt) by the Borrower or any Restricted Subsidiary and unless otherwise consented to by the Required Lenders, the Borrowing Base shall automatically reduce on the effective date of such issuance by an amount equal to 25% of (A) the principal amount of such Additional Subordinated Debt minus (B) to the extent such Additional Subordinated Debt constitutes Refinancing Debt, the principal amount of other Senior Unsecured Notes being refinanced thereby; and
(ii) if any Triggering Event occurs which results in the aggregate amount of all Triggering Events (including such Triggering Event) effected since the most recent redetermination of the Borrowing Base to exceed 5% of the Borrowing Base then in effect, then effective immediately upon the occurrence of such Triggering Event, the Borrowing Base shall automatically reduce on the date such Triggering Event is effected by an amount equal to (A) in the case of a Disposition of Oil and Gas Properties (or any Restricted Subsidiary that owns Oil and Gas Properties), the value, if any, assigned such Oil and Gas Properties under the then effective Borrowing Base, as reasonably determined by the Administrative Agent, and (B) in the case of Hedge Event, the value, if any, assigned to such applicable hedge position or Hedge Contract under the then effective Borrowing Base, as reasonably determined by the Administrative Agent.
For the avoidance of doubt, the automatic reductions of the Borrowing Base provided for in this Section 2.02 shall not constitute nor be construed as a consent to any Disposition, Hedge Event or Debt that would not be permitted under the terms of this Agreement.
Section 2.03 Method of Borrowing .
(a) Notice . Each Borrowing shall be made pursuant to a Notice of Borrowing (or by telephone notice promptly confirmed in writing by a Notice of Borrowing), given not later than 11:00 a.m. (Houston, Texas time) (i) on the third Business Day before the date of the proposed Borrowing, in the case of a Borrowing comprised of Eurodollar Rate Advances or (ii) on the Business Day of the proposed Borrowing, in the case of a Borrowing comprised of Reference Rate Advances, by the Borrower to the Administrative Agent, which shall in turn give to each Lender prompt notice of such proposed Borrowing by telecopier. Each Notice of a Borrowing shall be given in writing, including by telecopier, specifying the information required therein. In the case of a proposed Borrowing comprised of Eurodollar Rate Advances, the Administrative Agent shall promptly notify each Lender of the applicable interest rate under Section 2.09(a)(ii). Each Lender shall, before 11:00 a.m. (Houston, Texas time) on the date of such Borrowing, make available for the account of its applicable Lending Office to the Administrative Agent at its address referred to in Section 9.02, or such other location as the Administrative Agent may specify by notice to the Lenders, in same day funds, in the case of a Borrowing, such Lender’s Pro Rata Share of such Borrowing. After the Administrative Agent’s receipt of such funds and upon fulfillment of the applicable conditions set forth in Article III, the Administrative Agent shall make such funds available to the Borrower at its account with the Administrative Agent.
(b) Conversions and Continuations . The Borrower may elect to Convert or continue any Borrowing under this Section 2.03 by delivering an irrevocable Notice of Conversion or Continuation to the Administrative Agent at the Administrative Agent’s office no later than 11:00 a.m. (Houston, Texas time) (i) on the date which is at least three Business Days in advance of the proposed Conversion or continuation date in the case of a Conversion to or a continuation of a Borrowing comprised of Eurodollar Rate Advances and (ii) on the Business Day of the proposed Conversion in the case of a Conversion to a Borrowing comprised of Reference Rate Advances. Each such Notice of Conversion or Continuation shall be in writing or by telephone notice promptly confirmed immediately in writing specifying the information required therein. Promptly after receipt of a Notice of Conversion or Continuation under this Section, the Administrative Agent shall provide each Lender with a copy thereof and, in the case of a Conversion to or a continuation of a Borrowing comprised of Eurodollar Rate Advances, notify each Lender of the applicable interest rate under Section 2.09(a)(ii).
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(c) Certain Limitations . Notwithstanding anything to the contrary contained in paragraphs (a) and (b) above:
(i) at no time shall there be more than four Interest Periods applicable to outstanding Eurodollar Rate Advances and the Borrower may not select Eurodollar Rate Advances for any Borrowing at any time that a Default has occurred and is continuing;
(ii) if any Lender shall, at least one Business Day before the date of any requested Borrowing, Conversion, or continuation, notify the Administrative Agent that the introduction of or any change in or in the interpretation of any law or regulation makes it unlawful, or that any central bank or other Governmental Authority asserts that it is unlawful, for such Lender or its applicable Lending Office to perform its obligations under this Agreement to make Eurodollar Rate Advances or to fund or maintain Eurodollar Rate Advances, the right of the Borrower to select Eurodollar Rate Advances from such Lender shall be suspended until such Lender shall notify the Administrative Agent that the circumstances causing such suspension no longer exist, and the Advance made by such Lender in respect of such Borrowing, Conversion, or continuation shall be a Reference Rate Advance;
(iii) if the Administrative Agent is unable to determine the Eurodollar Rate for Eurodollar Rate Advances comprising any requested Borrowing, the right of the Borrower to select Eurodollar Rate Advances for such Borrowing or for any subsequent Borrowing shall be suspended until the Administrative Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist, and each Advance comprising such Borrowing shall be a Reference Rate Advance;
(iv) if the Majority Lenders shall, at least one Business Day before the date of any requested Borrowing, notify the Administrative Agent that the Eurodollar Rate for Eurodollar Rate Advances comprising such Borrowing will not adequately reflect the cost to such Lenders of making or funding their respective Eurodollar Rate Advances, as the case may be, for such Borrowing, the right of the Borrower to select Eurodollar Rate Advances for such Borrowing or for any subsequent Borrowing shall be suspended until the Administrative Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist, and each Advance comprising such Borrowing shall be a Reference Rate Advance; and
(v) if the Borrower shall fail to select the duration or continuation of any Interest Period for any Eurodollar Rate Advances in accordance with the provisions contained in the definition of “Interest Period” in Section 1.01 and paragraph (b) above, the Administrative Agent shall forthwith so notify the Borrower and the Lenders and such Advances shall be made available to the Borrower on the date of such Borrowing as Reference Rate Advances or, if existing Eurodollar Rate Advances, Convert into Reference Rate Advances.
(d) Notices Irrevocable . Each Notice of Borrowing and Notice of Conversion or Continuation shall be irrevocable and binding on the Borrower. In the case of any Borrowing for which the related Notice of Borrowing specifies is to be comprised of Eurodollar Rate Advances, the Borrower shall indemnify each Lender against any loss, out-of-pocket cost, or expense incurred by such Lender as a result of any failure by the Borrower to fulfill on or before the date specified in such Notice of Borrowing for such Borrowing the applicable conditions set forth in Article III including, without limitation, any loss (including any loss of anticipated profits), cost, or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund the Advance to be made by such Lender as part of such Borrowing when such Advance, as a result of such failure, is not made on such date.
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(e) Administrative Agent Reliance . Unless the Administrative Agent shall have received notice from a Lender before the date of any Borrowing that such Lender shall not make available to the Administrative Agent such Lender’s Pro Rata Share of a Borrowing, the Administrative Agent may assume that such Lender has made its Pro Rata Share of such Borrowing available to the Administrative Agent on the date of such Borrowing in accordance with paragraph (a) of this Section 2.03 and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that any Lender shall not have so made its Pro Rata Share of such Borrowing available to the Administrative Agent (the “Non-Funding Lender”), such Non-Funding Lender and the Borrower severally agree to immediately repay to the Administrative Agent on demand such corresponding amount, together with interest on such amount, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Administrative Agent, at (i) in the case of the Borrower, the interest rate applicable on such day to Advances comprising such Borrowing and (ii) in the case of such Non-Funding Lender, the Federal Funds Rate for such day. If such Non-Funding Lender shall repay to the Administrative Agent such corresponding amount and interest as provided above, such corresponding amount so repaid shall constitute such Non-Funding Lender’s Advance as part of such Borrowing for purposes of this Agreement even though not made on the same day as the other Advances comprising such Borrowing.
(f) Lender Obligations Several . The failure of any Non-Funding Lender to make the Advance to be made by it as part of any Borrowing shall not relieve any other Lender of its obligation, if any, to make its Advance on the date of such Borrowing. No Lender shall be responsible for the failure of any other Lender to make the Advance to be made by such other Lender on the date of any Borrowing.
Section 2.04 Reduction of the Commitments .
(a) Reductions of Maximum Credit Amounts; Corresponding Reductions to Elected Commitment Amounts . The Borrower shall have the right, upon at least three Business Days’ notice to the Administrative Agent, to terminate in whole or reduce ratably in part the unused portion of the Maximum Credit Amounts; provided that each partial reduction shall be in the aggregate amount of $3,000,000 or in integral multiples of $1,000,000 in excess thereof. The Borrower shall not terminate or reduce the aggregate Maximum Credit Amounts if, after giving effect to any concurrent prepayment of the Advances thereof, the aggregate Credit Exposure would exceed the total Commitments. Upon any reduction of the aggregate Maximum Credit Amounts that would otherwise result in the aggregate Maximum Credit Amounts being less than the aggregate Elected Commitment Amounts, the aggregate Elected Commitment Amounts shall be automatically reduced ratably among the Lenders in accordance with each Lender’s Pro Rata Share so that they equal the aggregate Maximum Credit Amounts as so reduced. The Borrower shall notify the Administrative Agent of any election to terminate or reduce the aggregate Maximum Credit Amounts under Section 2.04(a) at least three Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the Lenders of the contents thereof. Each notice delivered by the Borrower pursuant to this Section 2.04(a) shall be irrevocable.
(b) Optional Reductions and Terminations of Aggregate Elected Commitment Amounts . The Borrower may from time to time terminate or reduce the aggregate Elected Commitment Amounts; provided that (i) each reduction of the aggregate Elected Commitment Amounts shall be in an amount that is an integral multiple of $3,000,000 and not less than $1,000,000 and (ii) the Borrower shall not reduce the aggregate Elected Commitment Amounts if, after giving effect to any concurrent prepayment of the
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Advances, the aggregate Credit Exposures would exceed the aggregate Elected Commitment Amounts. The Borrower shall notify the Administrative Agent of any election to terminate or reduce the aggregate Elected Commitment Amounts under Section 2.04(b) at least three Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the Lenders of the contents thereof. Each notice delivered by the Borrower pursuant to this Section 2.04(b) shall be irrevocable.
(c) Automatic Reduction in Aggregate Elected Commitment Amounts . Upon any redetermination or other adjustment in the Borrowing Base pursuant to this Agreement that would otherwise result in the Borrowing Base becoming less than the aggregate Elected Commitment Amounts, the aggregate Elected Commitment Amounts shall be automatically reduced (ratably among the Lenders in accordance with each Lender’s Pro Rata Share) so that they equal such redetermined Borrowing Base (and Schedule II shall be deemed amended to reflect such amendments to each Lender’s Elected Commitment Amount and the aggregate Elected Commitment Amounts).
(d) Ratable Application; No Obligation to Reinstate . Other than as provided in Section 2.04(e) below, any reduction and termination of the Commitments pursuant to this Section 2.04 shall be applied ratably to each Lender’s Commitment and shall be permanent, with no obligation of the Lenders to reinstate such Commitments.
(e) Defaulting Lender . In the event of a Defaulting Lender, the Borrower, at the Borrower’s election may elect to terminate such Defaulting Lender’s Commitment hereunder; provided that (i) such termination must be of the Defaulting Lender’s entire Commitment, (ii) subject to the set-off rights set forth in the immediately following sentence, the Borrower shall pay all amounts owed by the Borrower to such Defaulting Lender under this Agreement and under the other Loan Documents (including principal of and interest on the Advances owed to such Defaulting Lender, accrued commitment fees, and letter of credit fees but specifically excluding any amounts owing under Section 2.12 as result of such payment of Advances) and shall deposit with the Administrative Agent into the Cash Collateral Account cash collateral in the amount equal to such Defaulting Lender’s ratable share of the Letter of Credit Exposure, including any such Letter of Credit Exposure that has been reallocated pursuant to Section 2.17(c)(i); (iii) a Defaulting Lender’s Commitment may be terminated by the Borrower under this Section 2.04(e) if and only if at such time, the Borrower has elected, or is then electing, to terminate the Commitments of all then existing Defaulting Lenders. With respect to the amounts described in clause (ii) above which would be payable by the Borrower to the Defaulting Lender (but not including any deposits that the Borrower is required to make with respect to the Letter of Credit Exposure), the Borrower may set-off and apply any amounts owing from such Defaulting Lender or Affiliate thereof to the Borrower under any Hedge Contract against any such amounts payable to the Defaulting Lender. Upon written notice to the Defaulting Lender and Administrative Agent of the Borrower’s election to terminate a Defaulting Lender’s Commitment pursuant to this clause (c) and the payment and deposit of amounts required to be made by the Borrower under clause (ii) above, (A) such Defaulting Lender shall cease to be a “Lender” hereunder for all purposes except that such Lender’s rights under Sections 2.13, 2.14, and 9.07 shall continue with respect to events and occurrences occurring before or concurrently with its ceasing to be a “Lender” hereunder, (B) such Defaulting Lender’s Commitment shall be deemed terminated, and (C) such Defaulting Lender shall be relieved of its obligations hereunder, provided that, any such termination will not be deemed to be a waiver or release of any claim by Borrower, the Administrative Agent or any Lender may have against such Defaulting Lender.
(f) Scheduled Termination of Commitments . Unless previously terminated, the Commitments shall terminate on the Commitment Termination Date. If at any time the aggregate Maximum Credit Amounts, the Borrowing Base or the aggregate Elected Commitment Amounts is terminated or reduced to zero, then the Commitments shall terminate on the effective date of such termination or reduction.
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Section 2.05 Prepayment of Advances .
(a) Optional . The Borrower may prepay the Advances, after giving by 10:00 a.m. (Houston, Texas time) (i) in the case of Eurodollar Rate Advances, at least three Business Days’ or (ii) in the case of Reference Rate Advances, same Business Day’s, irrevocable prior written notice (or irrevocable telephone notice promptly confirmed in writing) to the Administrative Agent stating the proposed date and aggregate principal amount of such prepayment. If any such notice is given, the Borrower shall prepay the Advances in whole or ratably in part in an aggregate principal amount equal to the amount specified in such notice, together with accrued interest to the date of such prepayment on the principal amount prepaid and amounts, if any, required to be paid pursuant to Section 2.12 as a result of such prepayment being made on such date; provided , however, that each partial prepayment with respect to: (A) any amounts prepaid in respect of Eurodollar Rate Advances shall be applied to Eurodollar Rate Advances comprising part of the same Borrowing; (B) any amounts prepaid in respect of Reference Rate Advances shall be made in a minimum amount of $1,000,000 and in integral multiples of $500,000 in excess thereof, and (C) any prepayments made in respect of Borrowings comprised of Eurodollar Rate Advances shall be made in a minimum amount of $3,000,000 and in integral multiples of $1,000,000 in excess thereof and in an aggregate principal amount such that after giving effect thereto such Borrowing shall have a remaining principal amount outstanding with respect to such Borrowings of at least $1,000,000. Full prepayments of any Borrowing are permitted without restriction of amounts.
(b) Borrowing Base Deficiencies .
(i) Other than as provided in clause (ii) and clause (iii) below, in Section 2.05(c) and in Section 5.11, if a Borrowing Base Deficiency exists, then the Borrower shall, after receipt of written notice from the Administrative Agent regarding such deficiency, take any of the following actions (and the failure of the Borrower to take such actions to remedy such Borrowing Base Deficiency shall constitute an Event of Default):
(A) prepay the Advances or, if the Advances have been repaid in full, make deposits into the Cash Collateral Account to provide cash collateral for the Letter of Credit Exposure, such that such Borrowing Base Deficiency is cured within 10 days after the date such deficiency notice is received by the Borrower from the Administrative Agent;
(B) pledge as Collateral for the Obligations additional Oil and Gas Properties acceptable to the Administrative Agent and the Required Lenders such that the applicable Borrowing Base Deficiency is cured within 10 days after the date of such notice by the Administrative Agent is received;
(C) (1) deliver within 10 days after the date such deficiency notice is received by the Borrower from the Administrative Agent, written notice to the Administrative Agent indicating the Borrower’s election to repay the Advances and make deposits into the Cash Collateral Account to provide cash collateral for the Letters of Credit, each in five monthly installments equal to one-fifth of such Borrowing Base Deficiency with the first such installment due 30 days after the date such deficiency notice is received by the Borrower from the Administrative Agent and each following installment due 30 days after the preceding installment and (2) make such payments and deposits within such time period; or
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(D) (1) deliver within 10 days after the date such deficiency notice is received by the Borrower to the Administrative Agent written notice to the Administrative Agent indicating the Borrower’s election to combine the options provided in clause (B) and clause (C) above, and also indicating the amount to be prepaid in installments and the amount to be provided as additional Collateral, and (2) make such five equal consecutive monthly installments and deliver such additional Collateral within the time required under clause (B) and clause (C) above.
The failure of the Borrower to deliver an election notice pursuant to the terms of this clause (b)(i) shall be deemed to be an election by the Borrower of the option set forth in clause (C) above.
(ii) Upon each reduction of the Borrowing Base under Section 2.02(e)(i) resulting from the issuance of Additional Subordinated Debt, if a Borrowing Base Deficiency then exists or results therefrom, then the Borrower shall prepay the Advances or, if the Advances have been repaid in full, make deposits into the Cash Collateral Account to provide cash collateral for the Letter of Credit Exposure, in an amount equal to (A) such portion of the Borrowing Base Deficiency resulting from such reduction plus (B) if a Borrowing Base Deficiency exists prior to such reduction, then an amount equal to the lesser of (i) the Debt Incurrence Proceeds of such Additional Subordinated Debt and (ii) such portion of the Borrowing Base Deficiency in existence immediately prior to such reduction.
(iii) Upon each reduction of the Borrowing Base under Section 2.02(e)(ii) from the occurrence of a Triggering Event, if a Borrowing Base Deficiency then exists or results therefrom, then the Borrower shall prepay the Advances or, if the Advances have been repaid in full, make deposits into the Cash Collateral Account to provide cash collateral for the Letter of Credit Exposure, in an amount equal to (A) such portion of the Borrowing Base Deficiency resulting from such reduction plus (B) if a Borrowing Base Deficiency exists prior to such reduction, then an amount equal to the lesser of (i) the Net Cash Proceeds of such Triggering Event and (ii) such portion of the Borrowing Base Deficiency in existence immediately prior to such reduction.
(iv) Each prepayment pursuant to this Section 2.05(b) shall be accompanied by accrued interest on the amount prepaid to the date of such prepayment and amounts, if any, required to be paid pursuant to Section 2.12 as a result of such prepayment being made on such date. Each prepayment under this Section 2.05(b) shall be applied to the Advances as determined by the Administrative Agent.
(c) Reduction of Commitments .
(i) On the date of each reduction of the aggregate Commitments pursuant to Section 2.04, the Borrower agrees to first, make a prepayment in respect of the outstanding amount of the Advances and second, deposit funds into the Cash Collateral Account the extent, if any, that the aggregate unpaid principal amount of all Advances plus the Letter of Credit Exposure exceeds the aggregate Commitments, as so reduced.
(ii) Each prepayment pursuant to this Section 2.05(c) shall be accompanied by accrued interest on the amount prepaid to the date of such prepayment and amounts, if any, required to be paid pursuant to Section 2.12 as a result of such prepayment being made on such date. Each prepayment under this Section 2.05(c) shall be applied to the Advances as determined by the Administrative Agent and agreed to by the Lenders in their sole discretion.
(d) Illegality . If any Lender shall notify the Administrative Agent and the Borrower that the adoption of or any change in any applicable Legal Requirement or in the interpretation of any applicable Legal Requirement by any Governmental Authority makes it unlawful, or that any central bank or other Governmental Authority asserts that it is unlawful for such Lender or its applicable Lending Office to
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perform its obligations under this Agreement to maintain any Eurodollar Rate Advances of such Lender then outstanding hereunder, (i) the Borrower shall, no later than 11:00 a.m. (Houston, Texas time) and if not prohibited by law, (A) on the last day of the Interest Period for each outstanding Eurodollar Rate Advance made by such Lender, or (B) if required by such notice, on the second Business Day following its receipt of such notice, either prepay all of the Eurodollar Rate Advances made by such Lender then outstanding or Convert all of the Eurodollar Rate Advances made by such Lender then outstanding to Reference Rate Advances, and, in either case, pay all accrued interest on the principal amount prepaid or Converted to the date of such prepayment or Conversion and amounts, if any, required to be paid pursuant to Section 2.12 as a result of such prepayment or Conversion being made on such date, (ii) to the extent the principal amount of Eurodollar Rate Advances are prepaid, such Lender shall simultaneously make a Reference Rate Advance to the Borrower on such date in an amount equal to the aggregate principal amount of the Eurodollar Rate Advances prepaid to such Lender, and (iii) the right of the Borrower to select Eurodollar Rate Advances from such Lender for any subsequent Borrowing shall be suspended until such Lender giving notice referred to above shall notify the Administrative Agent that the circumstances causing such suspension no longer exist.
(e) No Additional Right; Ratable Prepayment . The Borrower shall have no right to prepay any principal amount of any Advance except as provided in Section 2.04(e) and this Section 2.05, and all notices given pursuant to this Section 2.05 shall be irrevocable and binding upon the Borrower. Each payment of any Advance pursuant to this Section 2.05 shall be made in a manner such that all Advances comprising part of the same Borrowing are paid in whole or ratably in part other than Advances owing to a Defaulting Lender as provided in Section 2.17.
Section 2.06 Repayment of Advances . The Borrower shall repay to the Administrative Agent for the ratable benefit of the Lenders the outstanding principal amount of each Advance, together with any accrued interest on the Commitment Termination Date or such earlier date pursuant to Section 7.02 or Section 7.03.
Section 2.07 Letters of Credit .
(a) Commitment . From time to time from the date of this Agreement until 30 days prior to the Commitment Termination Date, at the request of the Borrower, the applicable Issuing Lender shall, on the terms and conditions hereinafter set forth, issue, increase, or extend the Expiration Date of, Letters of Credit for the account of the Borrower or any Restricted Subsidiary on any Business Day. No Letter of Credit will be issued, increased, or extended:
(i) if such issuance, increase, or extension would cause the Letter of Credit Exposure to exceed the lesser of (A) the Letter of Credit Sublimit and (B) the aggregate Commitments at such time minus the sum of the aggregate outstanding principal amount of all Advances at such time;
(ii) if such Letter of Credit has an Expiration Date later than the earlier of (A) one year after the date of issuance thereof (or, in the case of any extension thereof, one year after the date of such extension, including automatic renewal for additional one (1) year periods pursuant to the terms of the Letter of Credit Application or other documentation acceptable to the applicable Issuing Lender) and (B) in any event, ten days prior to the Commitment Termination Date;
(iii) unless the Letter of Credit Documents are in form and substance acceptable to the applicable Issuing Lender in its sole discretion;
(iv) unless such Letter of Credit is a standby letter of credit not supporting the repayment of indebtedness for borrowed money of any Person;
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(v) unless the Borrower has delivered to the applicable Issuing Lender a completed and executed Letter of Credit Application; provided that, if the terms of any such Letter of Credit Application conflicts with the terms of this Agreement, the terms of this Agreement shall control;
(vi) unless such Letter of Credit is governed by (A) the Uniform Customs and Practice for Documentary Credits (2007 Revision), International Chamber of Commerce Publication No. 600, or (B) the International Standby Practices (ISP98), International Chamber of Commerce Publication No. 590, in either case, including any subsequent revisions thereof approved by a Congress of the International Chamber of Commerce and adhered to by the applicable Issuing Lender;
(vii) if any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain the applicable Issuing Lender from issuing such Letter of Credit, or any Legal Requirement applicable to the applicable Issuing Lender or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over the applicable Issuing Lender shall prohibit, or request that the applicable Issuing Lender refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon the applicable Issuing Lender with respect to such Letter of Credit any restriction, reserve or capital requirement (for which the applicable Issuing Lender is not otherwise compensated hereunder) not in effect on the date hereof, or shall impose upon the applicable Issuing Lender any unreimbursed loss, cost or expense which was not applicable on the date hereof and which the applicable Issuing Lender in good faith deems material to it;
(viii) if the issuance of such Letter of Credit would violate one or more policies of the applicable Issuing Lender applicable to letters of credit generally;
(ix) except as otherwise agreed by the applicable Issuing Lender, if Letter of Credit is to be denominated in a currency other than Dollars;
(x) if such Letter of Credit supports the obligations of any Person in respect of (x) a lease of real property, or (y) an employment contract if such Issuing Lender reasonably determines that the Borrower’s obligation to reimburse any draws under such Letter of Credit may be limited; or
(xi) a default of any Lender’s obligations to fund under Section 2.07(d) exists or any Lender is at such time a Defaulting Lender hereunder, unless the applicable Issuing Lender has entered into satisfactory arrangements with the Borrower or such Lender to eliminate the applicable Issuing Lender’s risk with respect to such Lender.
(b) Participations . Upon (A) the date of the issuance or increase of a Letter of Credit, and (B) the date hereof as to the deemed issuance of the Existing Letters of Credit under Section 2.07(h), the applicable Issuing Lender shall be deemed to have sold to each other Lender having a Commitment and each other Lender having a Commitment shall have been deemed to have purchased from such Issuing Lender a participation in the related Letter of Credit Obligations equal to such Lender’s Pro Rata Share at such date and such sale and purchase shall otherwise be in accordance with the terms of this Agreement. The applicable Issuing Lender shall promptly notify each such participant Lender having a Commitment by telephone or telecopy of each Letter of Credit issued, increased, or extended or converted and the actual dollar amount of such Lender’s participation in such Letter of Credit.
(c) Issuing . Each Letter of Credit shall be issued, increased, or extended pursuant to a Letter of Credit Application (or by telephone notice promptly confirmed in writing by a Letter of Credit Application), given not later than 10:00 a.m. (Houston, Texas time) on the fifth Business Day before the date of the proposed issuance, increase, or extension of the Letter of Credit, and the applicable Issuing
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Lender shall give to each other Lender prompt notice thereof by telex, telephone or telecopy. Each Letter of Credit Application shall be delivered by facsimile or by mail specifying the information required therein; provided that if such Letter of Credit Application is delivered by facsimile, the Borrower shall follow such facsimile with an original by mail. After the applicable Issuing Lender’s receipt of such Letter of Credit Application (by facsimile or by mail) and upon fulfillment of the applicable conditions set forth in Article III, such Issuing Lender shall issue, increase, or extend such Letter of Credit for the account of the Borrower. Each Letter of Credit Application shall be irrevocable and binding on the Borrower.
(d) Reimbursement . The Borrower hereby agrees to pay on demand to each Issuing Lender an amount equal to any amount paid by such Issuing Lender under any Letter of Credit. In the event an Issuing Lender makes a payment pursuant to a request for draw presented under a Letter of Credit and such payment is not promptly reimbursed by the Borrower upon demand, such Issuing Lender shall give the Administrative Agent notice of the Borrower’s failure to make such reimbursement and the Administrative Agent shall promptly notify each Lender having a Commitment of the amount necessary to reimburse such Issuing Lender. Upon such notice from the Administrative Agent, each Lender shall promptly reimburse such Issuing Lender for such Lender’s Pro Rata Share of such amount, and such reimbursement shall be deemed for all purposes of this Agreement to be an Advance to the Borrower transferred at the Borrower’s request to such Issuing Lender. If such reimbursement is not made by any Lender to such Issuing Lender on the same day on which the Administrative Agent notifies such Lender to make reimbursement to such Issuing Lender hereunder, such Lender shall pay interest on its Pro Rata Share thereof to such Issuing Lender at a rate per annum equal to the Federal Funds Rate. The Borrower hereby unconditionally and irrevocably authorizes, empowers, and directs the Administrative Agent and the Lenders to record and otherwise treat such reimbursements to any Issuing Lender as Reference Rate Advances under a Borrowing requested by the Borrower to reimburse the applicable Issuing Lender that have been transferred to such Issuing Lender at the Borrower’s request.
(e) Obligations Unconditional . The obligations of the Borrower under this Agreement in respect of each Letter of Credit shall be unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, including, without limitation, the following circumstances:
(i) any lack of validity or enforceability of any Letter of Credit Documents;
(ii) any amendment or waiver of, or any consent to or departure from, any Letter of Credit Documents;
(iii) the existence of any claim, set-off, defense, or other right which the Borrower may have at any time against any beneficiary or transferee of such Letter of Credit (or any Persons for whom any such beneficiary or any such transferee may be acting), any Issuing Lender, or any other Person, whether in connection with this Agreement, the transactions contemplated in this Agreement or in any Letter of Credit Documents, or any unrelated transaction;
(iv) any statement or any other document presented under such Letter of Credit proving to be forged, fraudulent, invalid, or insufficient in any respect or any statement therein being untrue or inaccurate in any respect;
(v) payment by any Issuing Lender under such Letter of Credit against presentation of a draft or certificate which does not comply with the terms of such Letter of Credit; or
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(vi) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing.
provided , however, that nothing contained in this paragraph (e) shall be deemed to constitute a waiver of the Borrower’s rights under Section 2.07(f) below.
(f) Liability of Issuing Lenders . The Borrower assumes all risks of the acts or omissions of any beneficiary or transferee of any Letter of Credit with respect to its use of such Letter of Credit. No Issuing Lender and no Related Party of any Issuing Lender shall be liable or responsible for:
(i) the use which may be made of any Letter of Credit or any acts or omissions of any beneficiary or transferee in connection therewith;
(ii) the validity, sufficiency, or genuineness of documents, or of any endorsement thereon, even if such documents should prove to be in any or all respects invalid, insufficient, fraudulent, or forged;
(iii) payment by any Issuing Lender against presentation of documents which do not comply with the terms of a Letter of Credit, including failure of any documents to bear any reference or adequate reference to the relevant Letter of Credit; or
(iv) any other circumstances whatsoever in making or failing to make payment under any Letter of Credit (INCLUDING ANY ISSUING LENDER’S OWN NEGLIGENCE),
except that the Borrower shall have a claim against the applicable Issuing Lender, and the applicable Issuing Lender shall be liable to the Borrower, to the extent of any direct, as opposed to consequential, damages suffered by the Borrower which a court determines in a final, non-appealable judgment were caused by an Issuing Lender’s willful misconduct or gross negligence in determining whether documents presented under a Letter of Credit comply with the terms of such Letter of Credit. In furtherance and not in limitation of the foregoing, an Issuing Lender may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary.
(g) Cash Collateral Account .
(i) If the Borrower is required to deposit funds in the Cash Collateral Account pursuant to Sections 2.04(e), 2.05, 2.17, 7.02(b), or 7.03(b) or any other provision under this Agreement, then the Borrower and the Administrative Agent shall establish the Cash Collateral Account and the Borrower shall execute any documents and agreements, including the Administrative Agent’s standard form assignment of deposit accounts, that the Administrative Agent requests in connection therewith to establish the Cash Collateral Account and grant the Administrative Agent a first priority security interest in such account and the funds therein. The Borrower hereby pledges to the Administrative Agent and grants the Administrative Agent a security interest in the Cash Collateral Account, whenever established, all funds held in the Cash Collateral Account from time to time, and all proceeds thereof as security for the payment of the Obligations.
(ii) So long as no Default or Event of Default exists, (A) the Administrative Agent may apply the funds held in the Cash Collateral Account only to the reimbursement of any Letter of Credit Obligations, and (B) the Administrative Agent shall release to the Borrower at the Borrower’s written request any funds held in the Cash Collateral Account in an amount up to but not exceeding the excess, if any (immediately prior to the release of any such funds), of the total amount of funds held in the
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Cash Collateral Account over the Letter of Credit Exposure. During the existence of any Default or Event of Default, the Administrative Agent may apply any funds held in the Cash Collateral Account to the Obligations in any order determined by the Administrative Agent, regardless of any Letter of Credit Exposure that may remain outstanding.
(iii) The Administrative Agent shall exercise reasonable care in the custody and preservation of any funds held in the Cash Collateral Account which may bear interest or be invested in the Administrative Agent’s reasonable discretion and the Administrative Agent shall be deemed to have exercised such care if such funds are accorded treatment substantially equivalent to that which the Administrative Agent accords its own Property, it being understood that the Administrative Agent shall not have any responsibility for taking any necessary steps to preserve rights against any parties with respect to any such funds.
(h) Existing Letters of Credit . The Issuing Lenders, the Lenders and the Borrower agree that effective as of the Effective Date, the Existing Letters of Credit shall be deemed to have been issued and maintained under, and to be governed by the terms and conditions of, this Agreement.
(i) Defaulting Lender . If, at any time, a Defaulting Lender exists hereunder, then, at the request of any Issuing Lender subject to Section 2.17(c), the Borrower shall deposit funds with Administrative Agent into the Cash Collateral Account an amount equal to such Defaulting Lender’s Pro Rata Share of the Letter of Credit Exposure.
(j) Letters of Credit Issued for Guarantors or any Restricted Subsidiary . Notwithstanding that a Letter of Credit issued or outstanding hereunder is in support of any obligations of, or is for the account of, a Subsidiary Guarantor or any Restricted Subsidiary, the Borrower shall be obligated to reimburse the Issuing Lender hereunder for any and all drawings under such Letter of Credit issued hereunder by the Issuing Lender. The Borrower hereby acknowledges that the issuance of Letters of Credit for the account of any Subsidiary Guarantor, the Borrower or any Restricted Subsidiary inures to the benefit of the Borrower, and that the Borrower’s business (indirectly or directly) derives substantial benefits from the businesses of such other Persons.
Section 2.08 Fees .
(a) Commitment Fees . The Borrower agrees to pay to the Administrative Agent for the account of each Lender having a Commitment a commitment fee in an amount equal to the Applicable Margin on the daily Unused Commitment Amount of such Lender, from the date of this Agreement until the Commitment Termination Date; provided that, no commitment fee shall accrue on the Commitment of a Defaulting Lender during the period such Lender remains a Defaulting Lender. The commitment fees shall be due and payable quarterly in arrears on the last day of each March, June, September, and December commencing on June 30, 2018, and continuing thereafter through and including the Commitment Termination Date.
(b) Letter of Credit Fees .
(i) Letter of Credit Fees . Subject to Sections 2.17(c)(iii) and (iv), the Borrower agrees to pay (A) to the Administrative Agent for the pro rata benefit of the Lenders having a Commitment a per annum letter of credit fee for each Letter of Credit issued hereunder in an amount equal to the greater of (1) Applicable Margin for Eurodollar Rate Advances times the daily maximum amount available to be drawn under such Letter of Credit and (2) $750, and (B) to the applicable Issuing Lender, a fronting fee for each Letter of Credit equal to 0.25% per annum times on the face amount of such Letter of Credit. The fronting fee shall be payable annually in advance on the date of the issuance of
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the Letter of Credit, and, in the case of an increase or extension only, on the date of such increase or such extension. The fee set forth in (A) above shall be computed on a quarterly basis in arrears and be due and payable on the last day of each March, June, September, and December commencing June 30, 2018, and on the Commitment Termination Date. Notwithstanding the foregoing, (A) upon the occurrence and during the continuance of an Event of Default under Section 7.01(a) or Section 7.01(e), the foregoing per annum letter of credit fee shall be automatically increased to the Default Rate, after as well as before judgment, and (B) upon the occurrence and during the continuance of any other Event of Default (excluding under Section 7.01(a) or Section 7.01(e)), upon the request of the Majority Lenders, the foregoing per annum letter of credit fee shall be increased to the Default Rate, after as well as before judgment.
(ii) The Borrower also agrees to pay to each Issuing Lender such other usual and customary fees associated with any transfers, amendments, drawings, negotiations or reissuances of any Letters of Credit issued or to be issued by such Issuing Lender.
(c) Facility and Other Fees . To the extent not otherwise included under Section 2.08(a) and (b), the Borrower agrees to pay to the Administrative Agent the fees required to be paid under the Fee Letters.
Section 2.09 Interest .
(a) Applicable Interest Rates . The Borrower shall pay interest on the unpaid principal amount of each Advance made by each Lender from the date of such Advance until such principal amount shall be paid in full, at the following rates per annum:
(i) Reference Rate Advances . If such Advance is a Reference Rate Advance, a rate per annum equal at all times to the Adjusted Reference Rate in effect from time to time plus the Applicable Margin in effect from time to time, payable quarterly in arrears on the last day of each calendar quarter and on the date such Reference Rate Advance shall be paid in full.
(ii) Eurodollar Rate Advances . If such Advance is a Eurodollar Rate Advance, a rate per annum equal at all times during the Interest Period for such Advance to the Eurodollar Rate for such Interest Period plus the Applicable Margin in effect from time to time, payable on the last day of such Interest Period, and, in the case of six-month Interest Periods, on the day that occurs during such Interest Period three months from the first day of such Interest Period.
(b) Usury Recapture .
(i) If, with respect to any Lender, the effective rate of interest contracted for under the Loan Documents, including the stated rates of interest and fees contracted for hereunder and any other amounts contracted for under the Loan Documents that are deemed to be interest, at any time exceeds the Maximum Rate, then the outstanding principal amount of the loans made by such Lender hereunder shall bear interest at a rate which would make the effective rate of interest for such Lender under the Loan Documents equal the Maximum Rate until the difference between the amounts which would have been due at the stated rates and the amounts that were due at the Maximum Rate (the “Lost Interest”) has been recaptured by such Lender.
(ii) If, when the loans made hereunder are repaid in full, the Lost Interest has not been fully recaptured by such Lender pursuant to the preceding paragraph, then, to the extent permitted by law, for the loans made hereunder by such Lender the interest rates charged under Section 2.09 hereunder shall be retroactively increased such that the effective rate of interest under the Loan Documents was at
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the Maximum Rate since the effectiveness of this Agreement to the extent necessary to recapture the Lost Interest not recaptured pursuant to the preceding sentence and, to the extent allowed by law, the Borrower shall pay to such Lender the amount of the Lost Interest remaining to be recaptured by such Lender.
(III) NOTWITHSTANDING THE FOREGOING OR ANY OTHER TERM IN THIS AGREEMENT AND THE LOAN DOCUMENTS TO THE CONTRARY, IT IS THE INTENTION OF EACH LENDER AND THE BORROWER TO CONFORM STRICTLY TO ANY APPLICABLE USURY LAWS. ACCORDINGLY, IF ANY LENDER CONTRACTS FOR, CHARGES, OR RECEIVES ANY CONSIDERATION THAT CONSTITUTES INTEREST IN EXCESS OF THE MAXIMUM RATE, THEN ANY SUCH EXCESS SHALL BE CANCELED AUTOMATICALLY AND, IF PREVIOUSLY PAID, SHALL AT SUCH LENDER’S OPTION BE APPLIED TO THE OUTSTANDING AMOUNT OF THE ADVANCES MADE HEREUNDER BY SUCH LENDER OR BE REFUNDED TO THE BORROWER.
(c) [ Reserved .]
(d) Default Rate . Notwithstanding the foregoing, (i) upon the occurrence and during the continuance of an Event of Default under Section 7.01(a) or Section 7.01(e), all Obligations shall bear interest, after as well as before judgment, at the Default Rate and (ii) upon the occurrence and during the continuance of any Event of Default (other than an Event of Default addressed in the foregoing clause (i)), upon the request of the Majority Lenders, all Obligations shall bear interest, after as well as before judgment, at the Default Rate. Interest accrued pursuant to this Section 2.09(d) and all interest accrued but unpaid on or after the Commitment Termination Date shall be due and payable on demand (and if no such demand is made, then due and payable on the otherwise due dates provided herein or if no such due dates are provided herein on the last day of each calendar quarter). Interest shall continue to accrue on the Obligations after the filing by or against any Loan Party of any petition seeking any relief in bankruptcy or under any Debtor Relief Law.
Section 2.10 Payments and Computations .
(a) Payment Procedures . The Borrower shall make each payment under this Agreement not later than 12:00 p.m. (noon) (Houston, Texas time) on the day when due in Dollars in immediately available funds to the Administrative Agent at the location referred to in the Notes (or such other location as the Administrative Agent shall designate in writing to the Borrower) in same day funds without deduction, setoff, or counterclaim of any kind. The Administrative Agent shall promptly thereafter cause to be distributed like funds relating to the payment of principal, interest or fees ratably (other than amounts payable solely to the Administrative Agent, a specific Issuing Lender, or a specific Lender pursuant to Section 2.08(c), 2.12, 2.13, 2.14, 2.16, 2.17, 8.05, or 9.07, but after taking into account payments effected pursuant to Section 9.04) in accordance with each Lender’s Pro Rata Share to the Lenders for the account of their respective applicable Lending Offices, and like funds relating to the payment of any other amount payable to any Lender or any Issuing Lender to such Lender for the account of its applicable Lending Office, in each case to be applied in accordance with the terms of this Agreement.
(b) Computations . All computations of interest and fees shall be made by the Administrative Agent, on the basis of a year of 360 days for the actual number of days (including the first day, but excluding the last day) occurring in the period for which such interest or fees are payable. Each determination by the Administrative Agent of an interest rate or fee shall be conclusive and binding for all purposes, absent manifest error.
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(c) Non -Business Day Payments . Whenever any payment shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or fees, as the case may be; provided , however, that if such extension would cause payment of interest on or principal of Eurodollar Rate Advances to be made in the next following calendar month, such payment shall be made on the next preceding Business Day.
(d) Administrative Agent Reliance . Unless the Administrative Agent shall have received written notice from the Borrower prior to the date on which any payment is due to the Lenders that the Borrower shall not make such payment in full, the Administrative Agent may assume that the Borrower has made such payment in full to the Administrative Agent on such date and the Administrative Agent may, in reliance upon such assumption, cause to be distributed to each Lender on such date an amount equal to the amount then due such Lender. If and to the extent the Borrower shall not have so made such payment in full to the Administrative Agent, each Lender shall repay to the Administrative Agent forthwith on demand such amount distributed to such Lender, together with interest, for each day from the date such amount is distributed to such Lender until the date such Lender repays such amount to the Administrative Agent, at the Federal Funds Rate for such day.
Section 2.11 Sharing of Payments, Etc . If any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of the Advances or Letter of Credit Obligations made by it in excess of its Pro Rata Share of payments on account of the Advances or Letter of Credit Obligations obtained by all the Lenders (other than as a result of a termination of a Defaulting Lender’s Commitment under Section 2.04(c)), such Lender shall notify the Administrative Agent and forthwith purchase from the other Lenders such participations in the Advances made by them or Letter of Credit Obligations held by them as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them; provided , however, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase from each Lender shall be rescinded and such Lender shall repay to the purchasing Lender the purchase price to the extent of such Lender’s ratable share (according to the proportion of (a) the amount of the participation sold by such Lender to the purchasing Lender as a result of such excess payment to (b) the total amount of such excess payment) of such recovery, together with an amount equal to such Lender’s ratable share (according to the proportion of (i) the amount of such Lender’s required repayment to the purchasing Lender to (ii) the total amount of all such required repayments to the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. The Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section 2.11 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation. The provisions of this Section 2.11 shall not be construed to apply to any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Advances or participations in Letter of Credit Exposure to any assignee or participant, other than to the Borrower or any Subsidiary or Affiliate thereof (as to which the provisions of this Section 2.11 shall apply).
Section 2.12 Breakage Costs . Upon demand of any Lender (with a copy to the Administrative Agent) from time to time, the Borrower shall promptly compensate such Lender for and hold such Lender harmless from any loss, cost or expense incurred by it as a result of:
(a) any continuation, Conversion, payment or prepayment (including any deemed payment or repayment and any reallocated repayment to Non-Defaulting Lenders provided for herein) of any Advance other than a Reference Rate Advance on a day other than the last day of the Interest Period for such Advance (whether voluntary, mandatory, automatic, by reason of acceleration, or otherwise);
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(b) any failure by the Borrower (for a reason other than the failure of such Lender to make an Advance) to prepay, borrow, continue or Convert any Advance other than a Reference Rate Advance on the date or in the amount notified by the Borrower; or
(c) any assignment of an Eurodollar Rate Advance on a day other than the last day of the Interest Period therefor as a result of a request by the Borrower pursuant to Section 2.04, Section 2.16, or Section 2.18;
including any loss of anticipated profits, any foreign exchange losses and any loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain such Advance, from fees payable to terminate the deposits from which such funds were obtained or from the performance of any foreign exchange contract. The Borrower shall also pay any customary administrative fees charged by such Lender in connection with the foregoing. For purposes of calculating amounts payable by the Borrower to the Lenders under this Section 2.12, the requesting Lender shall be deemed to have funded the Eurodollar Rate Advances made by it at the Eurodollar Base Rate used in determining the Eurodollar Rate for such Advance by a matching deposit or other borrowing in the offshore interbank market for Dollars for a comparable amount and for a comparable period, whether or not such Eurodollar Rate Advance was in fact so funded.
Section 2.13 Increased Costs . If any Change in Law shall (a) impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, any Lender (except any reserve requirement reflected in the Eurodollar Rate) or any Issuing Lender; (b) subject any Lender or any Issuing Lender to any Tax of any kind whatsoever with respect to this Agreement, any Letter of Credit, any participation in a Letter of Credit or any Eurodollar Rate Advance made by it, or change the basis of taxation of payments to such Lender or such Issuing Lender in respect thereof (other than (A) Indemnified Taxes, (B) Taxes described in clauses (b) through (d) of the definition of Excluded Taxes and (C) Connection Income Taxes); or (c) impose on any Lender or any Issuing Lender or the London interbank market any other condition, cost or expense affecting this Agreement or Eurodollar Rate Advances made by such Lender or any Letter of Credit or participation therein; and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurodollar Advance (or of maintaining its obligation to make any such Advance), or to increase the cost to such Lender or such Issuing Lender of participating in, issuing or maintaining any Letter of Credit (or of maintaining its obligation to participate in or to issue any Letter of Credit), or to reduce the amount of any sum received or receivable by such Lender or such Issuing Lender hereunder (whether of principal, interest or any other amount) then, within thirty (30) days after demand by such Lender or such Issuing Lender, the Borrower will pay to such Lender or such Issuing Lender, as the case may be, such additional amount or amounts as will compensate such Lender or such Issuing Lender, as the case may be, for such additional costs incurred or reduction suffered. A certificate as to the amount of such increased cost and detailing the calculation of such cost submitted to the Borrower and the Administrative Agent by such Lender or such Issuing Lender shall be conclusive and binding for all purposes, absent manifest error.
(a) Capital Adequacy . If any Lender or any Issuing Lender determines that any Change in Law affecting such Lender or such Issuing Lender or any lending office of such Lender or such Lender’s or such Issuing Lender’s holding company, if any, regarding capital or liquidity requirements has or would have the effect of reducing the rate of return on such Lender’s or such Issuing Lender’s capital or on the capital of such Lender’s or such Issuing Lender’s holding company, if any, as a consequence of this Agreement, the Commitments of such Lender or the Advances made by, or participations in Letters of
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Credit held by, such Lender, or the Letters of Credit issued by such Issuing Lender, to a level below that which such Lender or such Issuing Lender or such Lender’s or such Issuing Lender’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s or such Issuing Lender’s policies and the policies of such Lender’s or such Issuing Lender’s holding company with respect to capital adequacy), then from time to time the Borrower will pay to such Lender or such Issuing Lender, as the case may be, such additional amount or amounts as will compensate such Lender or such Issuing Lender or such Lender’s or such Issuing Lender’s holding company for any such reduction suffered. A certificate as to such amounts and detailing the calculation of such amounts submitted to the Borrower by such Lender or such Issuing Lender shall be conclusive and binding for all purposes, absent manifest error. The Borrower shall pay such Lender or such Issuing Lender, as the case may be, the amount shown as due on any such certificate within thirty (30) days after receipt thereof.
(b) Letters of Credit . If any Change in Law shall either (i) impose, modify, or deem applicable any reserve, special deposit, or similar requirement against letters of credit issued by, or assets held by, or deposits in or for the account of, any Issuing Lender or (ii) impose on any Issuing Lender any other condition regarding the provisions of this Agreement relating to the Letters of Credit or any Letter of Credit Obligations, and the result of any event referred to in the preceding clause (i) or (ii) shall be to increase the cost to any Issuing Lender of issuing or maintaining any Letter of Credit (which increase in cost shall be determined by such Issuing Lender’s reasonable allocation of the aggregate of such cost increases resulting from such event), then, upon demand by such Issuing Lender, the Borrower shall pay to such Issuing Lender, from time to time as specified by such Issuing Lender, additional amounts which shall be sufficient to compensate such Issuing Lender for such increased cost. A certificate as to such increased cost incurred by any Issuing Lender, as a result of any event mentioned in clause (i) or (ii) above, and detailing the calculation of such increased costs submitted by such Issuing Lender to the Borrower, shall be conclusive and binding for all purposes, absent manifest error.
(c) Delay in Requests . Failure or delay on the part of any Lender or any Issuing Lender to demand compensation pursuant to this Section 2.13 shall not constitute a waiver of such Lender’s or such Issuing Lender’s right to demand such compensation, provided that the Borrower shall not be required to compensate a Lender or an Issuing Lender pursuant to this Section 2.13 for any increased costs incurred or reductions suffered more than nine months prior to the date that such Lender or such Issuing Lender, as the case may be, notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender’s or such Issuing Lender’s intention to claim compensation therefor (except that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the nine-month period referred to above shall be extended to include the period of retroactive effect thereof).
Section 2.14 Taxes .
(a) No Deduction for Certain Taxes . Any and all payments by or on account of any obligation of the Borrower hereunder or under any other Loan Document shall be made free and clear of and without reduction or withholding for Taxes, except as required by applicable law. If any withholding or deduction of Tax is required by applicable Legal Requirement (as determined in the good faith discretion of an applicable Withholding Agent), then (i) to the extent such Taxes are Indemnified Taxes (including, for the avoidance of doubt, Other Taxes), the sum payable by the Borrower shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Administrative Agent, any Lender or any Issuing Lender, as the case may be, receives an amount equal to the sum it would have received had no such deductions been made, (ii) the applicable Withholding Agent shall make such deductions and (iii) the applicable Withholding Agent shall timely pay the full amount deducted to the relevant Governmental Authority in accordance with Legal Requirement.
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(b) Other Taxes . Without limiting the provisions of clause (a) above, the Borrower agrees to (i) pay any Other Taxes, or (ii) or at the option of the Administrative Agent, to timely reimburse the Administrative Agent, or applicable Lender or applicable Issuing Lender for the payment of any Other Taxes.
(c) Indemnification . THE BORROWER INDEMNIFIES EACH LENDER, EACH ISSUING LENDER, AND THE ADMINISTRATIVE AGENT FOR THE FULL AMOUNT OF INDEMNIFIED TAXES OR OTHER TAXES (INCLUDING, WITHOUT LIMITATION, ANY INDEMNIFIED TAXES OR OTHER TAXES IMPOSED BY ANY JURISDICTION ON AMOUNTS PAYABLE UNDER THIS SECTION 2.14) PAID BY SUCH LENDER, SUCH ISSUING LENDER, OR THE ADMINISTRATIVE AGENT (AS THE CASE MAY BE) AND ANY LIABILITY (INCLUDING INTEREST AND EXPENSES) ARISING THEREFROM OR WITH RESPECT THERETO, WHETHER OR NOT SUCH TAXES OR OTHER TAXES WERE CORRECTLY OR LEGALLY ASSERTED. EACH PAYMENT REQUIRED TO BE MADE BY THE BORROWER IN RESPECT OF THIS INDEMNIFICATION SHALL BE MADE TO THE ADMINISTRATIVE AGENT FOR THE BENEFIT OF ANY PARTY CLAIMING SUCH INDEMNIFICATION WITHIN 30 DAYS FROM THE DATE THE BORROWER RECEIVES WRITTEN DEMAND THEREFOR FROM THE ADMINISTRATIVE AGENT ON BEHALF OF ITSELF AS ADMINISTRATIVE AGENT, SUCH ISSUING LENDER, OR ANY SUCH LENDER. A CERTIFICATE AS TO THE AMOUNT OF ANY SUCH PAYMENT OR LIABILITY DELIVERED TO THE BORROWER BY A LENDER (WITH A COPY TO THE ADMINISTRATIVE AGENT) OR BY THE ADMINISTRATIVE AGENT ON ITS OWN ON BEHALF OF A LENDER SHALL BE CONCLUSIVE ABSENT MANIFEST ERROR.
(d) Indemnification by the Lender . Each Lender shall severally indemnify the Administrative Agent, within 10 days after demand therefor, for (i) any Indemnified Taxes attributable to such Lender (but only to the extent that the Borrower has not already indemnified the Administrative Agent for such Indemnified Taxes and without limiting the obligation of the Borrower to do so), (ii) any Taxes attributable to such Lender’s failure to comply with the provisions of Section 9.06(d) relating to the maintenance of a Participant Register and (iii) any Excluded Taxes attributable to such Lender, in each case, that are payable or paid by the Administrative Agent in connection with any Loan Document, and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to any Lender by the Administrative Agent shall be conclusive absent manifest error. Each Lender hereby authorizes the Administrative Agent to set off and apply any and all amounts at any time owing to such Lender under any Loan Document or otherwise payable by the Administrative Agent to the Lender from any other source against any amount due to the Administrative Agent under this paragraph (d).
(e) Status of Lenders . Any Foreign Lender that is entitled to an exemption from or reduction of withholding Tax under the law of the jurisdiction in which the Borrower is resident for Tax purposes, or any treaty to which such jurisdiction is a party, with respect to payments hereunder or under any other Loan Document shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law or reasonably requested by the Borrower or the Administrative Agent, copies of such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate of withholding. Without limiting the generality of the foregoing, any Foreign Lender shall deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the request of the Borrower or the Administrative Agent, but only if such Foreign Lender is legally entitled to do so), whichever of the following is applicable: (i) duly completed copies of Internal Revenue Service Form W-8BEN (or W-8BEN-E, as applicable) claiming eligibility for benefits of an
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income Tax treaty to which the United States of America is a party; (ii) duly completed copies of Internal Revenue Service Form W-8ECI, (iii) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under section 881(c) of the Code, (x) a certificate to the effect that such Foreign Lender is not (A) a “bank” within the meaning of section 881(c)(3)(A) of the Code, (B) a “10 percent shareholder” of the Borrower within the meaning of section 881(c)(3)(B) of the Code, or (C) a “controlled foreign corporation” described in section 881(c)(3)(C) of the Code and (y) duly completed copies of Internal Revenue Service Form W-8BEN (or W-8BEN-E, as applicable), or (v) any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in United States Federal withholding Tax duly completed together with such supplementary documentation as may be prescribed by applicable law to permit the Borrower or the Administrative Agent to determine the withholding or deduction required to be made. To the extent a Foreign Lender is not the beneficial owner, such Foreign Lender shall deliver executed copies of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN (or IRS Form W-8BEN-E, as applicable), IRS Form W-9, and/or other certification documents from each beneficial owner, as applicable.
Any Lender that is a U.S. Person shall deliver to the Borrower and the Administrative Agent on or prior to the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), executed copies of IRS Form W-9 certifying that such Lender is exempt from U.S. federal backup withholding Tax.
If a payment made to a Lender under any Loan Document would be subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Borrower and the Administrative Agent at the time or times prescribed by law and at such time or times reasonably requested by the Borrower or the Administrative Agent such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Borrower or the Administrative Agent as may be necessary for the Borrower and the Administrative Agent to comply with their obligations under FATCA and to determine that such Lender has complied with such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this Section 2.14(e), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.
For purposes of determining withholding Taxes imposed under FATCA from and after the Effective Date, the Borrower and Administrative Agent shall treat (and the Lenders herby authorize Administrative Agent to treat) the Obligations under this Agreement as not qualifying as a “grandfathered obligation” within the meaning of Treasury Regulation Section 1.1471-2(b)(2)(i).
(f) Treatment of Certain Refunds . If any party determines, in its sole discretion, that it has received a refund of any Taxes as to which it has been indemnified or been paid additional amounts pursuant to this Section 2.14, it shall pay to the indemnifying party an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower under this Section 2.14 with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including Taxes) of such indemnified party and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund), provided that the indemnifying party, upon the request of the indemnified party, agrees to repay the amount paid over pursuant to this paragraph (f) in the event the indemnified party is required to repay such refund to such Governmental Authority. Notwithstanding anything to the contrary in this paragraph (f), in no event will the indemnified party be required to pay any amount to an indemnifying party pursuant to this paragraph (f) the payment of which would place the indemnified party in a less favorable net after-Tax position than the indemnified party would have been in if the Tax subject to indemnification and giving rise to such refund had not been
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deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such Tax had never been paid. This paragraph shall not be construed to require the indemnified party to make available its Tax Returns (or any other information relating to its Taxes that it deems confidential) to the indemnifying party or any other Person.
(g) Survival . Each party’s obligations under this Section 2.14 shall survive the resignation or replacement of the Administrative Agent or any assignment of rights by, or the replacement of, a Lender, the termination of the Commitments and the repayment, satisfaction or discharge of all obligations under any Loan Document.
Section 2.15 Designation of a Different Lending Office . If any Lender requests compensation under Section 2.13, or requires the Borrower to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.14, then such Lender shall (at the request of the Borrower) use reasonable efforts to designate a different lending office for funding or booking its Advances hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.13 or 2.14, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.
Section 2.16 Replacement of Lender . If (i) any Lender requests compensation under Section 2.13 or requires that the Borrower pay any additional amount pursuant to Section 2.14, and, in each case such Lender has declined or is unable to designate a different Lending Office, (ii) any Lender suspends its obligation to continue, or Convert Advances into, Eurodollar Rate Advances pursuant to Section 2.03(c)(ii) or Section 2.11, (iii) any Lender is a Defaulting Lender, or (iv) any Lender is a Non-Consenting Lender (any such Lender, a “ Subject Lender ”), then (A) in the case of a Defaulting Lender, the Administrative Agent may, upon notice to the Subject Lender and the Borrower, require such Subject Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in, and consents required by, Section 9.06), all of its interests, rights (other than its existing rights to payments pursuant to Section 2.13 or Section 2.14) and obligations under this Agreement and the related Loan Documents to an Eligible Assignee that shall assume such obligations (which Eligible Assignee may be another Lender, if a Lender accepts such assignment) and (B) in the case of any Subject Lender, including a Defaulting Lender, the Borrower may, upon notice to the Subject Lender and the Administrative Agent and at the Borrower’s sole cost and expense, require such Subject Lender to assign, without recourse (in accordance with and subject to the restrictions contained in, and consents required by, Section 9.06), all of its interests, rights and obligations under this Agreement and the related Loan Documents to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment), provided that:
(A) as to assignments required by the Borrower, the Borrower shall have paid to the Administrative Agent the assignment fee specified in Section 9.06;
(B) such Subject Lender shall have received payment of an amount equal to the outstanding principal of its Advances and participations in outstanding Letter of Credit Obligations, accrued interest thereon, accrued fees and all other amounts payable to it hereunder and under the other Loan Documents (including any amounts under Section 2.12) from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Applicable Borrower (in the case of all other amounts);
(C) in the case of any such assignment resulting from a claim for compensation under Section 2.13, such assignment will result in a reduction in such compensation or payments thereafter;
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(D) such assignment does not conflict with applicable Legal Requirements; and
(E) with respect to a Non-Consenting Lender, the proposed amendment, waiver, consent or release with respect to this Agreement or any other Loan Document has been approved by the Majority Lenders and such amendment, waiver, consent or release can be effected as a result of the assignment contemplated by this Section.
A Lender shall not be required to make any such assignment or delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply. Solely for purposes of effecting the assignment required for a Defaulting Lender under this Section 2.16 and to the extent permitted under applicable Legal Requirements, each Lender hereby designates and appoints the Administrative Agent as true and lawful agent and attorney-in-fact, with full power and authority, for and on behalf of and in the name of such Lender to execute, acknowledge and deliver the Assignment and Acceptance required hereunder if such Lender was a Defaulting Lender and such Lender shall be bound thereby as fully and effectively as if such Lender had personally executed, acknowledged and delivered the same. In lieu of the Borrower or the Administrative Agent replacing a Defaulting Lender as provided in this Section 2.16, the Borrower may terminate such Defaulting Lender’s Commitment as provided in Section 2.04.
Section 2.17 Payments and Deductions to a Defaulting Lender .
(a) If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.01(a), Section 2.07(d), or Section 2.10(d) then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for the account of such Lender to satisfy such Lender’s obligations under such Sections until all such unsatisfied obligations are fully paid in cash.
(b) If a Defaulting Lender as a result of the exercise of a set-off shall have received a payment in respect of its outstanding Advances or pro rata share of Letter of Credit Exposure which results in its outstanding Advances and share of Letter of Credit Exposure being less than its Pro Rata Share of the aggregate outstanding Advances and Letter of Credit Exposure, then no payments will be made to such Defaulting Lender until such time as all amounts due and owing to the Lenders have been equalized in accordance with each Lender’s respective pro rata share of the aggregate outstanding Advances and Letter of Credit Exposure. Further, if at any time prior to the acceleration or maturity of the Advances, the Administrative Agent shall receive any payment in respect of principal of an Advance or a Reimbursement Obligation while one or more Defaulting Lenders shall be party to this Agreement, the Administrative Agent shall apply such payment first to the Borrowings for which such Defaulting Lender(s) shall have failed to fund its pro rata share until such time as such Borrowing(s) are paid in full or each Lender (including each Defaulting Lender) is owed its Pro Rata Share of all Advances then outstanding. After acceleration or maturity of the Advances, subject to the first sentence of this Section 2.17(b), all principal will be paid ratably as provided in Section 2.11.
(c) If any Letter of Credit Exposure exists at the time a Lender becomes a Defaulting Lender then:
(i) such Letter of Credit Exposure shall be automatically reallocated among the Non-Defaulting Lenders in accordance with their respective Pro Rata Share of such Defaulting Lender’s share of the Letter of Credit Exposure (and each Lender is deemed to have purchased and assigned such participation interest in such reallocated portion of the Letter of Credit Exposure) but only to the extent that (A) the sum of each Non-Defaulting Lender’s outstanding Advances plus its share of the Letter of Credit Exposure, after giving effect to the reallocation provided herein, does not exceed such Non-
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Defaulting Lender’s Commitment, and (B) the conditions set forth in Section 3.02 are satisfied at such time; provided that, subject to Section 9.24, such reallocation will not constitute a waiver or release of any claim the Borrower, the Administrative Agent, any Issuing Lender or any other Lender may have against such Defaulting Lender or cause such Defaulting Lender to be a Non-Defaulting Lender;
(ii) if the reallocation described in clause (i) above cannot, or can only partially, be effected, then the Borrower shall, within one Business Day following notice by the Administrative Agent, cash collateralize such Defaulting Lender’s share of the Letter of Credit Exposure (after giving effect to any partial reallocation pursuant to clause (i) above) in accordance with the procedures set forth in Section 2.07(g) for so long as such Letter of Credit Exposure is outstanding;
(iii) if the Borrower cash collateralizes any portion of such Defaulting Lender’s Letter of Credit Exposure pursuant to this Section 2.17 then the Borrower shall not be required to pay any fees to such Defaulting Lender pursuant to Section 2.08 (b) with respect to such Defaulting Lender’s Letter of Credit Exposure during the period such Defaulting Lender’s Letter of Credit Exposure is cash collateralized;
(iv) if the Letter of Credit Exposure of the Non-Defaulting Lenders is reallocated pursuant to clause (i) above, then the fees payable to the Lenders pursuant to Section 2.08(b) shall be adjusted in accordance with such Non-Defaulting Lenders’ Pro Rata Share;
(v) if any Defaulting Lender’s share of the Letter of Credit Exposure is neither cash collateralized nor reallocated pursuant to the preceding provisions, then, without prejudice to any rights or remedies of any Issuing Lender or any Lender hereunder, all letter of credit fees payable under Section 2.08(b) with respect to such Defaulting Lender’s share of the Letter of Credit Exposure shall be payable to the applicable Issuing Lender until such Letter of Credit Exposure is cash collateralized and/or reallocated.
(d) In the event that the Administrative Agent, the Borrower and the Issuing Lenders each agrees that a Defaulting Lender has adequately remedied all matters that caused such Lender to be a Defaulting Lender, then (i) the Letter of Credit Exposure of the Lenders shall be readjusted to reflect the inclusion of such Lender’s Commitment and on such date such Lender shall be deemed to have purchased at par such of the Advances or participations in Letters of Credit of the other Lenders as the Administrative Agent shall determine may be necessary in order for such Lender to hold such Advances and Letter of Credit Exposure in accordance with its Pro Rata Share, and (ii) if no Default exists, then any cash collateral posted by the Borrower pursuant to clause (c)(ii) above with respect to such Lender shall be returned to the Borrower.
Section 2.18 Optional Increase of Aggregate Elected Commitment Amounts .
(a) Subject to the conditions set forth in Section 2.18(b) below, the Borrower may increase the aggregate Elected Commitment Amounts then in effect by increasing the Elected Commitment Amount of a Lender or by causing an Eligible Assignee that at such time is not a Lender to become a Lender (a “ New Lender ”, and any such New Lender or existing Lender increasing its Elected Commitment Amount, a “ Increasing Lender ”, and each such increase, a “ Subject Increase ”). Notwithstanding anything to the contrary contained in this Agreement, in no case shall a New Lender be the Borrower, an Affiliate of the Borrower or a natural person. Nothing in this Section 2.18(a) shall be construed to create any obligation on any Lender to increase its Elected Commitment Amount, to advance or to commit to advance any credit to the Borrower or to arrange for any Person to increase its Elected Commitment Amount or to advance or to commit to advance any credit to the Borrower.
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(b) Any increase in the aggregate Elected Commitment Amounts shall be subject to the following additional conditions:
(i) such increase shall not be less than $25,000,000 unless the Administrative Agent otherwise consents, and no such increase shall be permitted if immediately after giving effect thereto the aggregate Elected Commitment Amounts would exceed the Borrowing Base then in effect;
(ii) the Borrower may not increase the aggregate Elected Commitment Amounts more than once between scheduled redeterminations of the Borrowing Base (for the sake of clarity, all increases in the aggregate Elected Commitment Amount effective on a single date shall be deemed a single increase in the aggregate Elected Commitment Amount for purposes of this Section 2.18(b)(ii));
(iii) no Event of Default shall have occurred and be continuing on the effective date of such increase;
(iv) on the effective date of such increase, no Eurodollar Rate Advances shall be outstanding or if any Eurodollar Rate Advances are outstanding with a single Interest Period, then the effective date of such increase shall be the last day of such Interest Period unless the Borrower pays any compensation that may be required by Section 2.12 (in any event, such date being the “ Increase Date ”);
(v) no Lender’s Elected Commitment Amount may be increased without the consent of such Lender;
(vi) the Borrower and each applicable Increasing Lender shall execute and deliver to the Administrative Agent an increase agreement in such form acceptable to the Administrative Agent and such Increasing Lender (the “ Increase Agreement ”) (which Increase Agreement shall contain, among other provisions, a representation and warranty by the Borrower that all representations and warranties contained in Article IV of this Agreement and the representations and warranties contained in the Security Instruments, the Guaranties, and each of the other Loan Documents are true and correct in all material respects (except that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof) on and as of the effective date of the Subject Increase (except in the case of representations and warranties which are made solely as of an earlier date or time, which representations and warranties shall be true and correct in all material respects as of such earlier date or time, except that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof), and in the case of any New Lender, together with an Administrative Questionnaire and a processing and recordation fee of $5,000, and the Borrower shall (1) if requested by the Increasing Lender, deliver a Note payable to such Increasing Lender in a principal amount equal to its Maximum Credit Amount, and otherwise duly completed and (2) pay any applicable fees as may have been agreed to between the Borrower, the Increasing Lender and/or the Administrative Agent;
(vii) any arrangement or upfront fees payable in connection with such increase shall be determined by mutual agreement of the Borrower, the Arranger, and the Increasing Lender, as applicable; and
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(viii) the Administrative Agent shall consent to such increase, such consent not to be unreasonably withheld or delayed.
(c) Subject to acceptance and recording thereof pursuant to Sections 2.18(a) and 2.18(b), from and after each Increase Date: (i) the amount of the aggregate Elected Commitment Amounts shall be increased as set forth therein, and (ii) in the case of a New Lender, such New Lender shall be a party to this Agreement and have the rights and obligations of a Lender under this Agreement and the other Loan Documents.
(d) The parties hereto acknowledge and agree that, effective as of each Increase Date and concurrently with the Subject Increase being made effective thereon, in order to accommodate and orderly effect such Subject Increase, each Lender that is not an Increasing Lender is deemed to have assigned to each Increasing Lender and each Increasing Lender is deemed to have acquired and accepted, such percentage in and to all of such assigning Lender’s rights and obligations in its capacity as a Lender under this Agreement and any other documents or instruments delivered pursuant thereto that would result in each assigning Lender and each Increasing Lender having the respective Commitments and applicable percentages of the Borrowing Base, in each case, as set forth in the Increase Agreement. The Administrative Agent, each Lender, and the Borrower consent to the foregoing deemed assignment. The assigning Lenders and the Increasing Lenders shall make all appropriate adjustments and payments between and among themselves to account for the revised Pro Rata Shares resulting from the assignments between them. From and after each Increase Date, all calculations and payments of interest on the Advances shall take into account the actual Commitments of each Lender and the principal amount outstanding of each Advance made by such Lender during the relevant period of time. Furthermore, (i) on each Increase Date, each Lender’s share of the applicable Letter of Credit Exposure on such date shall automatically be deemed to equal such Lender’s Pro Rata Share of such Letter of Credit Obligations (such Pro Rata Share for such Lender to be determined as of such Increase Date after giving effect to the Subject Increase effected thereon) without further action by any party, and (ii) in order to orderly effectuate each Subject Increase, the Borrower shall prepay any Advances outstanding on the Increase Date for such Subject Increase to the extent necessary to keep the outstanding Advances ratable to reflect the revised Pro Rata Share of the Lenders arising from such Subject Increase and deemed assignments. Any prepayment required to be made by the Borrower in accordance with this clause (d) may be made with the proceeds of Advances made by the Increasing Lenders occurring simultaneously with the prepayment.
(e) Upon its receipt of a duly executed Increase Agreement, the processing and recording fee referred to above, the Administrative Questionnaire referred to above, and the break-funding payments from the Borrower, if any, required by Section 2.12, if applicable, the Administrative Agent shall accept such Increase Agreement and record the information contained therein in the Register required to be maintained by the Administrative Agent pursuant to Section 9.06(c).
(f) Upon any increase in the aggregate Elected Commitment Amounts pursuant to this Section 2.18, (i) each Lender’s Maximum Credit Amount shall be automatically deemed amended to the extent necessary so that each such Lender’s Pro Rata Share equals the percentage of the aggregate Elected Commitment Amounts represented by such Lender’s Elected Commitment Amount, in each case after giving effect to such increase, and (ii) Schedule II to this Agreement shall be deemed amended to reflect the Elected Commitment Amount of each Lender (including any New Lender) as thereby increased, any changes in the Lenders’ Maximum Credit Amounts pursuant to the foregoing clause (i), and any resulting changes in the Lenders’ Pro Rata Share.
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(g) Contemporaneously with any increase in the Borrowing Base pursuant to this Agreement, if (i) the Borrower elects to increase the aggregate Elected Commitment Amounts and (ii) each Lender has consented to such increase in its Elected Commitment Amount, then the aggregate Elected Commitment Amounts shall be increased (ratably among the Lenders in accordance with each Lender’s Pro Rata Share) by the amount requested by the Borrower (subject to the limitations set forth in Section 2.18 above) without the requirement that any Lender deliver an Increase Agreement, and Schedule II shall be deemed amended to reflect such amendments to each Lender’s Elected Commitment Amount and the aggregate Elected Commitment Amounts. The Administrative Agent shall record the information regarding such increases in the Register required to be maintained by the Administrative Agent pursuant to Section 9.06(c).
ARTICLE III
CONDITIONS
Section 3.01 Conditions Precedent to Effectiveness. The effectiveness of this Agreement and the amendment and restatement of the Existing Credit Agreement is subject to the conditions precedent that:
(a) Documentation . The Administrative Agent shall have received the following duly executed by all the parties thereto, in form and substance satisfactory to the Administrative Agent, and where applicable, in sufficient copies for each Lender:
(i) this Agreement, a Note payable to each Lender that requests a Note in the amount of its Maximum Credit Amount, the Guaranties, the Pledge Agreements, the Security Agreements, and supplements and reaffirmation of existing Mortgages or amended and restated Mortgages which collectively encumber (A) at least 90% of the PV-10 of all of the Borrower’s and its Restricted Subsidiaries’ Proven Reserves and Oil and Gas Properties, and (B) all of the Borrower’s and its Restricted Subsidiaries’ Oil and Gas Properties located in Kingfisher County, Oklahoma, and each of the other Loan Documents, and all attached exhibits and schedules;
(ii) a favorable opinion of the Borrower’s and the Restricted Subsidiaries’ counsel dated as of the date of this Agreement and substantially in the form of the attached Exhibit K, covering the matters discussed in such Exhibit and such other matters as the Administrative Agent, on behalf of the Lenders, may reasonably request;
(iii) copies, certified as of the date of this Agreement by a Responsible Officer of the Borrower of (A) the resolutions of the board of directors of the General Partner, as general partner of the Borrower, approving the Loan Documents to which the Borrower is a party and authorizing the entering into of Hedge Contracts, (B) the Partnership Agreement, (C) the certificate of limited partnership of the Borrower duly certified by the Secretary of State of the State of Texas, and (D) the limited liability company agreement of the General Partner, (E) the certificate of formation of the General Partner duly certified by the Secretary of State of the State of Texas, (F) all other documents evidencing other necessary corporate action and governmental approvals, if any, with respect to this Agreement, the Note, and the other Loan Documents;
(iv) certificates of a Responsible Officer of the Borrower certifying the names and true signatures of the officers authorized to sign this Agreement, the Notes, Notices of Borrowing, Notices of Conversion or Continuation, and the other Loan Documents and Hedge Contracts to which the Borrower is a party;
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(v) copies, certified as of the date of this Agreement by a Responsible Officer, the secretary or an assistant secretary or manager of each Restricted Subsidiary of (A) the resolutions of the board of directors or managers (or other applicable governing body) of such Restricted Subsidiary approving the Loan Documents to which it is a party and authorizing the entering into of Hedge Contracts, (B) the articles or certificate (as applicable) of incorporation (or organization) of such Restricted Subsidiary certified by the Secretary of State for the state of organization, (C) the bylaws or other governing documents of such Restricted Subsidiary, and (D) all other documents evidencing other necessary corporate action and governmental approvals, if any, with respect to the Guaranties, the Security Instruments, and the other Loan Documents and Hedge Contracts to which the such Restricted Subsidiary is a party;
(vi) a certificate of a Responsible Officer of each Restricted Subsidiary certifying the names and true signatures of officers of such Restricted Subsidiary authorized to sign the Guaranty, Security Instruments and the other Loan Documents and Hedge Contracts to which such Restricted Subsidiary is a party;
(vii) certificates of good standing for the Borrower, the General Partner, and each Restricted Subsidiary in each state in which each such Person is organized or qualified to do business, which certificate shall be (A) dated a date not sooner than 14 days prior to the date of this Agreement or (B) otherwise effective on the Effective Date;
(viii) a certificate dated as of the date of this Agreement from the Responsible Officer of the Borrower stating that (A) all representations and warranties of the Borrower set forth in this Agreement are true and correct in all material respects (except that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof) as of such date (except in the case of representations and warranties that are made solely as of an earlier date or time, which representations and warranties shall be true and correct in all material respects (except that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof) as of such earlier date or time); (B) no Default has occurred and is continuing; (C) all obligations under the Founder Notes (as defined in the Existing Credit Agreement) have been converted in full to Equity Interests of any Affiliate of the Borrower (other than a Subsidiary thereof), and (D) the conditions in clauses (a), (b), (h) – (n), (p) and (r) of this Section 3.01 have been met;
(ix) appropriate UCC-1 and UCC-3 Financing Statements covering the Collateral for filing with the appropriate authorities and any other documents, agreements or instruments necessary to create an Acceptable Security Interest in such Collateral;
(x) to the extent not already in the possession of the Administrative Agent, certificates evidencing the Equity Interests required in connection with the Pledge Agreements and powers executed in blank for each such certificate;
(xi) insurance certificates naming the Administrative Agent loss payee or additional insured, as applicable, and evidencing insurance that meet the requirements of this Agreement and the Security Instruments, and that are otherwise satisfactory to the Administrative Agent;
(xii) a certificate of the chief financial officer of the Borrower, in form and substance reasonably satisfactory to the Administrative Agent, attesting to the Solvency of the Borrower and its Restricted Subsidiaries, taken as a whole, immediately before and after giving effect to the Transactions; and
(xiii) such other documents, governmental certificates, agreements and lien searches as the Administrative Agent or any Lender may reasonably request.
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(b) Payment of Fees . The Borrower shall have paid the fees required by Section 2.08(c) and all costs and expenses that have been invoiced at least two Business Days’ prior to the Effective Date and are payable pursuant to Section 9.04.
(c) Reserved.
(d) Reserved .
(e) Security Instruments . The Administrative Agent shall have received all appropriate evidence required by the Administrative Agent and the Lenders in their sole discretion necessary to determine that the Administrative Agent (for its benefit and the benefit of the Secured Parties) shall have an Acceptable Security Interest in the Collateral (which shall include at least 90% of the PV-10 value of all of the Borrower’s and its Restricted Subsidiaries’ Proven Reserves and Oil and Gas Properties (as set forth in the most recently delivered Engineering Report), covering Oil and Gas Properties of the Borrower and its Subsidiaries and that all actions or filings necessary to protect, preserve and validly perfect such Liens have been made, taken or obtained, as the case may be, and are in full force and effect.
(f) Title . The Administrative Agent shall be satisfied in its sole discretion with the title to the Oil and Gas Properties of the Borrower and its Restricted Subsidiaries and that such Oil and Gas Properties constitute at least 80% of the present value of the Proven Reserves categorized as “total proved” of the Borrower and its Restricted Subsidiaries as determined by the Administrative Agent in its sole discretion, as evaluated in the most recently delivered Engineering Report.
(g) Environmental . The Administrative Agent shall have received such environmental assessments or other reports as it may reasonably require and shall be satisfied with the condition of the Oil and Gas Properties with respect to the Borrower’s compliance with Environmental Laws.
(h) No Default . No Default shall have occurred and be continuing.
(i) Representations and Warranties . The representations and warranties contained in Article IV hereof and in each other Loan Document shall be true and correct in all material respects (except that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof) as of the Effective Date (except in the case of representations and warranties which are made solely as of an earlier date or time, which representations and warranties shall be true and correct in all material respects (except that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof) as of such earlier date or time); provided that, in any event, such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof.
(j) Material Adverse Change . Since September 30, 2017, there shall not have occurred any Material Adverse Change.
(k) No Proceeding or Litigation; No Injunctive Relief . No action, suit, investigation or other proceeding (including, without limitation, the enactment or promulgation of a statute or rule) by or before any arbitrator or any Governmental Authority shall be threatened or pending and no preliminary or permanent injunction or order by a state or federal court shall have been entered (i) in connection with (A) any of the Oil and Gas Properties or other Properties of the Borrower and its Restricted Subsidiaries or (B) this Agreement or any transaction contemplated hereby, (ii) in connection with the Acquisition or any other portion of the Transactions, or (iii) which, in any case, in the judgment of the Administrative Agent, could reasonably be expected to result in a Material Adverse Change.
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(l) Consents, Licenses, Approvals, etc . The Administrative Agent shall have received true copies (certified to be such by the Borrower or other appropriate party) of all consents, licenses and approvals required in accordance with applicable Legal Requirements, or in accordance with any document, agreement, instrument or arrangement to which the Borrower, or any Restricted Subsidiary is a party, in connection with the execution, delivery, performance, validity and enforceability of this Agreement and the other Loan Documents. In addition, the Borrower and each Restricted Subsidiary shall have all such material consents, licenses and approvals required in connection with the continued operation of the Borrower or any Restricted Subsidiary, and such approvals shall be in full force and effect, and all applicable waiting periods shall have expired without any action being taken or threatened by any competent authority which would restrain, prevent or otherwise impose adverse conditions on this Agreement and the actions contemplated hereby, including the Transactions.
(m) Material Contracts . To the extent not previously delivered to the Administrative Agent, the Borrower shall have delivered to the Administrative Agent copies of all material contracts, agreements, or instruments listed on Schedule 4.19 that Administrative Agent requests.
(n) Hedging Agreements . Schedule 4.20 shall have set forth therein a complete list of all Hedge Contracts in effect on the Effective Date unless otherwise agreed by the Administrative Agent in its reasonable discretion. The Borrower shall have entered into Hedge Contracts to effect the hedge positions for the volumes, years and forecasted production set forth in Schedule 4.20.
(o) USA Patriot Act . The Administrative Agent shall have received all documentation and other information that is required by regulatory authorities under applicable “know your customer” and anti-money-laundering rules and regulations, including, without limitation, the Patriot Act.
(p) Outstanding Advances Paid . All outstanding Advances under the Existing Credit Agreement shall have been paid down in full and the Borrower shall have received sufficient cash capital contributions on account of the Merger Net Equity in order to effect such payments.
(q) Executed Contribution Agreements . The Administrative Agent shall have received, at least five days prior to the Effective Date, in form and substance reasonably satisfactory to the Administrative Agent, true and correct fully executed copies of the Contribution Agreements.
(r) Merger Transaction . The Effective Date shall be on or before February 28, 2018 (or such later date agreed to by the parties to the Contribution Agreements and reasonably acceptable to the Administrative Agent), and the Merger Transaction shall have been consummated on or prior to the Effective Date in accordance with applicable law and on the terms described in the Contribution Agreements without giving effect to any waiver, modification or consent thereunder that is materially adverse to the interests of the Lenders, as reasonably determined by the Administrative Agent.
Section 3.02 Conditions Precedent to All Credit Extensions . The obligation of each Lender to make an Advance on the occasion of each Borrowing and of the Issuing Lenders to issue, increase, or extend any Letter of Credit and of any reallocation of Letter of Credit Exposure provided in Section 2.17(c)(i), shall be subject to the further conditions precedent that on the date of such Borrowing or the date of the issuance, increase, or extension of such Letter of Credit or the date of such reallocation:
(a) the following statements shall be true (and each of the giving of the applicable Notice of Borrowing, Notice of Conversion or Continuation, or Letter of Credit Application and the acceptance by the Borrower of the proceeds of such Borrowing or the issuance, increase, or extension of such Letter of Credit shall constitute a representation and warranty by the Borrower or the reallocation of the Letter of Credit Exposure that on the date of such Borrowing or on the date of such issuance, increase, or extension of such Letter of Credit or the date of such reallocation, as applicable, such statements are true):
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(i) all representations and warranties contained in Article IV of this Agreement and the representations and warranties contained in the Security Instruments, the Guaranties, and each of the other Loan Documents are true and correct in all material respects (except that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof) on and as of the date of such Borrowing or the date of the issuance, increase, or extension of such Letter of Credit, before and after giving effect to such Borrowing or to the issuance, increase, or extension of such Letter of Credit and to the application of the proceeds from such Borrowing, as though made on and as of such date (except in the case of representations and warranties which are made solely as of an earlier date or time, which representations and warranties shall be true and correct in all material respects as of such earlier date or time, except that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof);
(ii) no Default has occurred and is continuing or would result from such Borrowing or from the application of the proceeds therefrom, or would result from the issuance, increase, or extension of such Letter of Credit; and
(iii) such Borrowing or issuance, increase, or extension of such Letter of Credit would not conflict with any Legal Requirement and there exists no pending or threatened litigation that seeks to enjoin such credit extension.
(b) the Administrative Agent shall have received such other approvals, opinions, or documents (including, but not limited to, any Notice of Borrowing, Notice of Conversion or Continuation or Letter of Credit Application) as any Lender through the Administrative Agent may reasonably request.
Each request for a Borrowing and each request for the issuance, amendment, renewal or extension of any Letter of Credit and each reallocation of Letter of Credit Exposure shall be deemed to constitute a representation and warranty by the Borrower on the date thereof as to the matters specified in this Section 3.02.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants as follows:
Section 4.01 Existence; Restricted Subsidiaries . The Borrower is (a) a limited partnership duly organized and validly existing under the laws of Texas and (b) in good standing and qualified to do business as a foreign corporation in each jurisdiction where its ownership or lease of Property or conduct of its business requires such qualification. Each Restricted Subsidiary of the Borrower is (i) duly organized, validly existing, and in good standing (if applicable) under the laws of its jurisdiction of formation and (ii) in good standing and qualified to do business as a foreign corporation or other foreign business entity in each jurisdiction where its ownership or lease of Property or conduct of its business requires such qualification. As of the date of this Agreement, the Borrower has no Subsidiaries other than listed on Schedule 4.01 and the Borrower owns no other Equity Interests in any Person except in such Subsidiaries and otherwise as set forth in Schedule 4.01.
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Section 4.02 Power . The execution, delivery, and performance by the Borrower and by each Restricted Subsidiary of this Agreement, the Notes, and the other Loan Documents to which it is a party, and the consummation of the transactions contemplated hereby and thereby, including the Transactions, (a) are within the Borrower’s and such Restricted Subsidiaries’ governing powers, (b) have been duly authorized by all necessary governing action, (c) do not contravene (i) the Borrower’s or any Restricted Subsidiary’s certificate or articles of incorporation or formation, limited partnership agreement, bylaws, limited liability company agreement, or other similar governance documents or (ii) any law or any contractual restriction binding on or affecting the Borrower or any Restricted Subsidiary, and (d) will not result in or require the creation or imposition of any Lien prohibited by this Agreement. At the time of each Advance and the issuance, extension or increase of a Letter of Credit, such Advance and such Letter of Credit, and the use of the proceeds of such Advance and such Letter of Credit, will be within the Borrower’s governing powers, will have been duly authorized by all necessary partnership action, will not contravene (i) the Borrower’s certificate of limited partnership, limited partnership agreement, or other organizational documents, or (ii) any law or any contractual restriction binding on or affecting the Borrower and will not result in or require the creation or imposition of any Lien prohibited by this Agreement.
Section 4.03 Authorization and Approvals . No consent, order, authorization, or approval or other action by, and no notice to or filing with, any Governmental Authority or any other Person is required for the due execution, delivery, and performance by any Loan Party of this Agreement, the Notes, or the other Loan Documents to which such Loan Party is a party or the consummation of the transactions contemplated thereby, including the Transactions, except for (a) the filing of UCC-1 Financing Statements and the Mortgages in the state and county filing offices and (b) those consents and approvals that have been obtained or made on or prior to the date of this Agreement and that are in full force and effect. At the time of each Borrowing and each issuance, increase or extension of a Letter of Credit, no authorization or approval or other action by, and no notice to or filing with, any Governmental Authority will be required for such Borrowing or such issuance, increase or extension of such Letter of Credit or the use of the proceeds of such Borrowing or such Letter of Credit, except for (i) the filing of any additional UCC-1 Financing Statements and the Mortgages in the state and county filing offices and (ii) those consents and approvals that have been obtained or made on or prior to the date of such Borrowing, which are, as of the date of such Borrowing, in full force and effect.
Section 4.04 Enforceable Obligations . This Agreement, the Notes, and the other Loan Documents to which any Loan Party is a party have been duly executed and delivered by such Loan Party. Each Loan Document is the legal, valid, and binding obligation of the Loan Party party to it, enforceable against such Loan Party in accordance with its terms, except as such enforceability may be limited by any Debtor Relief Law.
Section 4.05 Financial Statements .
(a) The Borrower has delivered to the Administrative Agent and the Lenders copies of the Financial Statements, and the Financial Statements are accurate and complete in all material respects and present fairly in all material respects the consolidated financial condition of Borrower and its Subsidiaries as of their respective dates and for their respective periods in accordance with GAAP. All projections, estimates, and pro forma financial information furnished by the Borrower, whether pursuant to financial statements or in connection with other information delivered to any Lender or the Administrative Agent, were prepared on the basis of assumptions, data, information, tests, or conditions believed to be reasonable at the time such projections, estimates, and pro forma financial information were made in light of current and foreseeable conditions (it being understood that projections as to future events are not to be viewed as facts and that actual results may differ from projected results).
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(b) Since September 30, 2017, no event or circumstance that could cause a Material Adverse Change has occurred.
Section 4.06 True and Complete Disclosure . All factual information (excluding estimates) heretofore or contemporaneously furnished by or on behalf of the Borrower or any of its Restricted Subsidiaries in writing to any Lender or the Administrative Agent for purposes of or in connection with this Agreement, any other Loan Document or any transaction contemplated hereby or thereby is, and all other such factual information hereafter furnished by or on behalf of the Borrower and its Restricted Subsidiaries in writing to the Administrative Agent or any of the Lenders shall be, true and accurate in all material respects on the date as of which such information is dated or certified and does not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements contained therein not misleading at such time.
Section 4.07 Litigation; Compliance with Laws .
(a) There is no pending or, to the knowledge of the Borrower, threatened action or proceeding affecting any Loan Party or any Restricted Subsidiary before any court, Governmental Authority or arbitrator that could reasonably be expected to cause a Material Adverse Change or which purports to affect the legality, validity, binding effect or enforceability of this Agreement, any Note, or any other Loan Document. Additionally, there is no pending or, to the best knowledge of the Borrower, threatened action or proceeding instituted against any Loan Party or any Restricted Subsidiary which seeks to adjudicate any Loan Party or any Restricted Subsidiary as bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any Debtor Relief Law, or seeking the entry of an order for relief or the appointment of a receiver, trustee or other similar official for it or for any substantial part of its Property.
(b) The Borrower and its Restricted Subsidiaries have complied in all material respects with all material statutes, rules, regulations, orders, and restrictions of any Governmental Authority having jurisdiction over the conduct of their respective businesses or the ownership of their respective Property. The offer, sale, and issuance of all outstanding Equity Interests in the Borrower and of the Parent Company have been made in compliance with all applicable Legal Requirements, including without limitation federal and state Legal Requirements relating to the offer and sale of securities.
Section 4.08 Use of Proceeds . The proceeds of the Advances and Letters of Credit will be used by the Loan Parties for the purposes described in Section 5.09. No Loan Party is engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U). No proceeds of any Advance will be used to purchase or carry any margin stock in violation of Regulation T, U or X.
Section 4.09 Investment Company Act . No Loan Party and no Restricted Subsidiary is an “investment company” or a company “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940, as amended.
Section 4.10 Taxes ; Reports and Payments . All Tax Returns required to be filed by or on behalf of any Loan Party or any Restricted Subsidiary, or any member of the Controlled Group (hereafter collectively called the “Tax Group”) have been duly filed on a timely basis or appropriate extensions have been obtained, except where the failure to so file would not be reasonably expected to cause a Material Adverse Change and such Tax Returns are and will be true, complete, and correct in all material respects; and all Taxes shown to be payable on the Tax Returns or on subsequent assessments with respect thereto will have been paid in full on a timely basis, and no other Taxes will be payable by the Tax Group with respect to items or periods covered by such Tax Returns, except in each case to the extent of Taxes that
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are being contested in good faith. The reserves for accrued Taxes reflected in the financial statements delivered to the Lenders under this Agreement are adequate in the aggregate for the payment of all unpaid Taxes, whether or not disputed, for the period ended as of the date thereof and for any period prior thereto, and for which the Tax Group may be liable in its own right, as withholding agent or as a transferee of the assets of, or successor to, any Person.
Section 4.11 Pension Plans . All Plans are in compliance in all material respects with all applicable provisions of ERISA. No Termination Event has occurred with respect to any Plan, and each Plan has complied with and been administered in all material respects in accordance with applicable provisions of ERISA and the Code. No “accumulated funding deficiency” (as defined in Section 302 of ERISA) has occurred and there has been no excise Tax imposed under Section 4971 of the Code. No Reportable Event has occurred with respect to any Multiemployer Plan, and each Multiemployer Plan has complied with and been administered in all material respects with applicable provisions of ERISA and the Code. The present value of all benefits vested under each Plan (based on the assumptions used to fund such Plan) did not, as of the last annual valuation date applicable thereto, exceed the value of the assets of such Plan allocable to such vested benefits. Neither the Borrower nor any member of the Controlled Group has had a complete or partial withdrawal from any Multiemployer Plan for which there is any withdrawal liability. As of the most recent valuation date applicable thereto, neither the Borrower nor any member of the Controlled Group would become subject to any liability under ERISA if the Borrower or any member of the Controlled Group has received notice that any Multiemployer Plan is insolvent or in reorganization. Based upon GAAP existing as of the date of this Agreement and current factual circumstances, the Borrower has no reason to believe that the annual cost during the term of this Agreement to the Borrower or any member of the Controlled Group for post-retirement benefits to be provided to the current and former employees of the Borrower or any member of the Controlled Group under Plans that are welfare benefit plans (as defined in Section 3(1) of ERISA) could, in the aggregate, reasonably be expected to cause a Material Adverse Change.
Section 4.12 Condition of Property; Casualties . Each of the Borrower and its Restricted Subsidiaries has good and defensible title to, or a valid leasehold interest in, or has the right to use pursuant to valid licenses, all of its Oil and Gas Properties as is customary in the oil and gas industry in all material respects, free and clear of all Liens, except for Permitted Liens. The material Properties owned or leased by the Borrower or any of its Restricted Subsidiaries in the continuing operations of the Borrower and each of its Restricted Subsidiaries are in good repair, working order and operating condition (subject to normal wear and tear). Since September 30, 2017, neither the business nor the material Properties of the Borrower and each of its Restricted Subsidiaries, taken as a whole, has been materially and adversely affected as a result of any fire, explosion, earthquake, flood, drought, windstorm, accident, strike or other labor disturbance, embargo, requisition or taking of Property or cancellation of contracts, Permits, or concessions by a Governmental Authority, riot, activities of armed forces, or acts of God or of any public enemy. Since the Effective Date, neither the business nor the material Properties of the Borrower and each of its Restricted Subsidiaries, taken as a whole, has been materially and adversely affected as a result of any fire, explosion, earthquake, flood, drought, windstorm, accident, strike or other labor disturbance, embargo, requisition or taking of Property or cancellation of contracts, Permits, or concessions by a Governmental Authority, riot, activities of armed forces, or acts of God or of any public enemy.
Section 4.13 No Burdensome Restrictions; No Defaults .
(a) Neither the Borrower nor any of its Restricted Subsidiaries is a party to any indenture, loan, or credit agreement or any lease or other agreement or instrument or subject to any charter or corporate restriction or provision of applicable law or governmental regulation that could reasonably be expected to cause a Material Adverse Change. Neither the Borrower nor any of its Restricted
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Subsidiaries is in default in any material respect under or with respect to any contract, agreement, lease, or other instrument to which the Borrower or any Restricted Subsidiary is a party. Neither the Borrower nor any of its Restricted Subsidiaries has received any notice of default under any material contract, agreement, lease, or other instrument to which the Borrower or such Restricted Subsidiary is a party.
(b) No Default has occurred and is continuing.
Section 4.14 Environmental Condition .
(a) Permits, Etc . The Borrower and its Restricted Subsidiaries (i) have obtained all Environmental Permits required under Environmental Law for the ownership and operation of their respective Properties and the conduct of their respective businesses; (ii) have at all times been and are in material compliance with all terms and conditions of such Permits and with all other material requirements of applicable Environmental Laws; (iii) have not received notice of any outstanding material violation or alleged violation of any Environmental Law or Permit; and (iv) are not subject to any actual, pending or to the Borrower’s knowledge, threatened Environmental Claim, that could reasonably be expected to cause a Material Adverse Change.
(b) Certain Liabilities . To the Borrower’s actual knowledge, none of the present or previously owned, leased or operated Property of the Borrower or any Restricted Subsidiary, wherever located, (i) has been placed on or proposed to be placed on the National Priorities List, the Comprehensive Environmental Response Compensation Liability Information System list, or their state or local analogs, or have been otherwise investigated, designated, listed, or identified as a potential site for removal, remediation, cleanup, closure, restoration, reclamation, or other response activity under any Environmental Laws; (ii) is subject to a Lien, arising under or in connection with any Environmental Laws, that attaches to any revenues or to any Property owned, leased or operated by the Borrower or any of its Restricted Subsidiaries, wherever located, that could reasonably be expected to cause a Material Adverse Change; or (iii) has been the site of any Release of Hazardous Substances or Hazardous Wastes from present or past operations that has caused at the site or at any third-party site any condition that has resulted in or could reasonably be expected to result in the need for Response that would cause a Material Adverse Change.
(c) Certain Actions . Without limiting the foregoing, (i) all necessary notices have been properly filed, and no further action is required under current Environmental Law as to each Response or other restoration or remedial project undertaken by the Borrower or its Restricted Subsidiaries on any of their presently or formerly owned, leased or operated Property and (ii) there are no facts, circumstances, conditions or occurrences with respect to any Property owned, leased or operated by the Borrower or any of its Restricted Subsidiaries that could reasonably be expected to form the basis of an Environmental Claim under Environmental Laws that could reasonably be expected to result in a Material Adverse Change.
Section 4.15 Permits, Licenses, Etc . The Borrower and its Restricted Subsidiaries possess all authorizations, Permits, licenses, patents, patent rights or licenses, trademarks, trademark rights, trade names rights and copyrights which are material to the conduct of their business. The Borrower and its Restricted Subsidiaries manage and operate their business in all material respects in accordance with all applicable Legal Requirements and good industry practices.
Section 4.16 Gas Contracts . Neither the Borrower nor any of its Restricted Subsidiaries, as of the date hereof, (a) is obligated in any material respect by virtue of any prepayment made under any contract containing a “take-or-pay” or “prepayment” provision or under any similar agreement to deliver Hydrocarbons produced from or allocated to any of the Borrower’s and its Restricted Subsidiaries’ Oil and
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Gas Properties at some future date without receiving full payment therefor at the time of delivery or (b) except as has been disclosed to the Administrative Agent, has produced gas, in any material amount, subject to balancing rights of third parties or subject to balancing duties under governmental requirements.
Section 4.17 Liens; Titles, Leases, Etc . None of the Property of the Borrower or any of the Restricted Subsidiaries is subject to any Lien other than Permitted Liens. On the date of this Agreement, all governmental actions and all other filings, recordings, registrations, third party consents and other actions which are necessary to create and perfect the Liens provided for in the Security Instruments will have been made, obtained and taken in all relevant jurisdictions. Other than to the extent such could not reasonably be expected to cause a Material Adverse Change, all leases and agreements for the conduct of business of the Borrower and its Restricted Subsidiaries are valid and subsisting, in full force and effect and there exists no default or event of default or circumstance which with the giving of notice or lapse of time or both would give rise to a default by the Borrower or any Restricted Subsidiary, or to the Borrower’s knowledge, by any of the other parties thereto, under any such leases or agreements. Neither the Borrower nor any of its Restricted Subsidiaries is a party to any agreement or arrangement (other than this Agreement and the Security Instruments), or subject to any order, judgment, writ or decree, that either restricts or purports to restrict its ability to grant Liens to secure the Obligations against their respective Properties.
Section 4.18 Solvency and Insurance; EEA Financial Institution . Before and after giving effect to the making of each Credit Extension, each Loan Party and each Restricted Subsidiary is Solvent. Furthermore, each of the Borrower and its Restricted Subsidiaries carry insurance required under Section 5.02 of this Agreement. No Loan Party is an EEA Financial Institution.
Section 4.19 Material Agreements . Schedule 4.19 sets forth a complete and correct list of all material agreements, leases, indentures, purchase agreements, obligations in respect of letters of credit, guarantees, joint venture agreements, and other instruments in effect or to be in effect as of the date hereof (other than the agreements set forth in Schedule 4.20) providing for, evidencing, securing or otherwise relating to any Debt of the Borrower or any of its Restricted Subsidiaries, and all obligations of the Borrower or any of its Restricted Subsidiaries to issuers of surety or appeal bonds issued for account of the Borrower or any such Restricted Subsidiary, and such list correctly sets forth the names of the debtor or lessee and creditor or lessor with respect to the Debt or lease obligations outstanding or to be outstanding and the Property subject to any Lien securing such Debt or lease obligation. Also set forth on Schedule 4.19 hereto is a complete and correct list, as of the date of this Agreement, of all material agreements and other instruments of the Borrower and its Restricted Subsidiaries relating to the purchase, transportation by pipeline, gas processing, marketing, sale and supply of natural gas and other Hydrocarbons and which either (a) has a term longer than 12 months or (b) provides for liabilities of the Borrower and its Restricted Subsidiaries in excess of $10,000,000. To the extent requested, the Borrower has heretofore delivered to the Administrative Agent and the Lenders a complete and correct copy of all such material credit agreements, indentures, purchase agreements, contracts, letters of credit, guarantees, joint venture agreements, or other instruments, including any modifications or supplements thereto, as in effect on the date hereof.
Section 4.20 Hedging Agreements . Schedule 4.20 sets forth, as of the date of this Agreement, a true and complete list of all Hedge Contracts of the Borrower and each Restricted Subsidiary, the material terms thereof (including the type, term, effective date, termination date and notional amounts or volumes), the net mark to market value thereof, all credit support agreements relating thereto (including any margin required or supplied), and the counterparty to each such agreement.
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Section 4.21 Sanctions; Anti-Corruption Laws; Anti-Terrorism/Money Laundering Laws.
(a) The Borrower has taken appropriate measures to ensure compliance by the Borrower, its Subsidiaries and their respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions, and the Borrower, its Subsidiaries and their respective officers and employees and, to the knowledge of the Borrower, its Affiliates, directors and agents, are in compliance with Anti-Corruption Laws and applicable Sanctions. None of (i) the Borrower, any Subsidiary or any of their respective directors, officers or employees, or (ii) to the knowledge of the Borrower, any Affiliate or agent of the Borrower or any Subsidiary that will act in any capacity in connection with or benefit from the credit facility established hereby, (w) is a Sanctioned Person or currently the subject or target of any Sanctions, (x) is an “enemy” or an “ally of the enemy” within the meaning of Section 2 of the Trading with the Enemy Act of the United States (50 U.S.C. App. §§ 1 et seq.), (y) is in violation of any Anti-Terrorism/Money Laundering Law, or (z) is in violation of any Anti-Corruption Law.
(b) No Loan Party nor any Subsidiary nor, to the Borrower’s knowledge, any Affiliate of any Loan Party (i) has its assets located in any Sanctioned Country or any Sanctioned Entity, (ii) derives revenues from investments in, or transactions with, Sanctioned Persons or Sanctioned Entities, (iii) is, or will become, a Sanctioned Person or a Sanctioned Entity, or (iv) engages or will engage in any transaction with any Sanctioned Person or Sanctioned Entity.
(c) No Advance, Letter of Credit, use of proceeds of any Advance or Letter of Credit, or other transaction contemplated by this Agreement will (i) be used, directly or indirectly, to fund any operations in, finance any investments or activities in, or make any payments to, a Sanctioned Person or a Sanctioned Entity or otherwise in any manner that would result in the violation of any applicable Sanctions by any party hereto, or (ii) violate any Anti-Corruption Law or any Anti-Terrorism/Money Laundering Law.
ARTICLE V
AFFIRMATIVE COVENANTS
So long as any amount under any Loan Document shall remain unpaid, any Letter of Credit shall remain outstanding, or any Lender shall have any Commitment hereunder, the Borrower agrees, unless the Majority Lenders shall otherwise consent in writing, to comply with the following covenants.
Section 5.01 Compliance with Laws, Etc . The Borrower shall comply, and shall cause each of its Restricted Subsidiaries to comply, in all material respects with all applicable Legal Requirements. Without limiting the generality and coverage of the foregoing, the Borrower shall comply, and shall cause each of its Restricted Subsidiaries to comply, in all material respects, with all Environmental Laws and all laws, regulations, or directives with respect to equal employment opportunity and employee safety in all jurisdictions in which the Borrower, or any of its Restricted Subsidiaries do business; provided , however, that this Section 5.01 shall not prevent the Borrower, or any of its Restricted Subsidiaries from, in good faith and with reasonable diligence, contesting the validity or application of any such Legal Requirements by appropriate legal proceedings. Without limitation of the foregoing, the Borrower shall, and shall cause each of its Restricted Subsidiaries to, (a) maintain and possess all authorizations, Permits, licenses, trademarks, trade names, rights and copyrights which are necessary to the conduct of its business and (b) obtain, as soon as practicable, all consents or approvals required from any states of the United States (or other Governmental Authorities) necessary to grant the Administrative Agent an Acceptable Security Interest in the Borrower’s and its Restricted Subsidiaries’ Oil and Gas Properties.
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Section 5.02 Maintenance of Insurance .
(a) The Borrower shall, and shall cause each of its Restricted Subsidiaries to, procure and maintain or shall cause to be procured and maintained continuously in effect policies of insurance in form and amounts and issued by companies, associations, or organizations reasonably satisfactory to the Administrative Agent, covering such casualties, risks, perils, liabilities and other hazards reasonably required by the Administrative Agent. In addition, the Borrower shall, and shall cause each of its Restricted Subsidiaries to, comply with all requirements regarding insurance contained in the Security Instruments.
(b) All certified copies of policies or certificates thereof, and endorsements and renewals thereof shall be delivered to and retained by the Administrative Agent. All policies of insurance shall either have attached thereto a Lender’s loss payable endorsement for the benefit of the Administrative Agent, as loss payee in form reasonably satisfactory to the Administrative Agent or shall name the Administrative Agent as an additional insured, as applicable. The Borrower shall furnish the Administrative Agent with a certificate of insurance or a certified copy of all policies of insurance required. All policies or certificates of insurance shall set forth the coverage, the limits of liability, the name of the carrier, the policy number, and the period of coverage. In addition, all policies of insurance required under the terms hereof shall contain an endorsement or agreement by the insurer that any loss shall be payable in accordance with the terms of such policy notwithstanding any act of negligence of the Borrower, or a Restricted Subsidiary or any party holding under the Borrower or a Restricted Subsidiary which might otherwise result in a forfeiture of the insurance and the further agreement of the insurer waiving all rights of setoff, counterclaim or deductions against the Borrower and its Restricted Subsidiaries. All such policies shall contain a provision that notwithstanding any contrary agreements between the Borrower, its Restricted Subsidiaries, and the applicable insurance company, such policies will not be canceled, allowed to lapse without renewal, surrendered or amended (which provision shall include any reduction in the scope or limits of coverage) without at least 30 days’ prior written notice to the Administrative Agent. In the event that, notwithstanding the “lender’s loss payable endorsement” requirement of this Section 5.02, the proceeds of any insurance policy described above are paid to the Borrower or a Restricted Subsidiary, except as permitted under Section 5.02(c) below, the Borrower shall deliver such proceeds to the Administrative Agent immediately upon receipt.
(c) Prior to the occurrence and continuance of an Event of Default, the proceeds of any insurance policy shall be paid directly to the Borrower, or the applicable Restricted Subsidiary of the Borrower, and at the Borrower’s election, may be (i) used to pay down the Obligations then outstanding, (ii) deposited into a deposit account that is subject to an Account Control Agreement to be applied to repair or replace the damaged or destroyed Property covered by such insurance policy, or (iii) if no Default exists and no Borrowing Base Deficiency exists, used to make investments in Oil and Gas Properties permitted under Section 6.06.
(d) After the occurrence and during the continuance of an Event of Default, all proceeds of insurance, including any casualty insurance proceeds, property insurance proceeds, proceeds from actions, and any other proceeds, shall be paid directly to the Administrative Agent and if necessary, assigned to the Administrative Agent, to be applied in accordance with Section 7.06 of this Agreement, whether or not the Obligations are then due and payable.
(e) In the event that any insurance proceeds are paid to the Borrower or any of its Restricted Subsidiaries in violation of clause (c) or clause (d), the Borrower or such Restricted Subsidiary shall hold the proceeds in trust for the Administrative Agent, segregate the proceeds from the other funds of the Borrower, or such Restricted Subsidiary, and promptly pay the proceeds to the Administrative Agent with any necessary endorsement. Upon the request of the Administrative Agent, each of the Borrower and its Restricted Subsidiaries shall execute and deliver to the Administrative Agent any additional assignments and other documents as may be necessary or desirable to enable the Administrative Agent to directly collect the proceeds as set forth herein.
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Section 5.03 Preservation of Corporate Existence, Etc . The Borrower shall (a) preserve and maintain, and shall cause each of its Restricted Subsidiaries to preserve and maintain, its limited partnership, corporate or limited liability company, as applicable, existence (except as otherwise permitted pursuant to Section 6.04), rights, franchises, and privileges in the jurisdiction of its incorporation or organization, as applicable, and (b) qualify and remain qualified, and cause each such Restricted Subsidiary to qualify and remain qualified, as a foreign corporation or such other foreign business entity in each jurisdiction in which qualification is necessary or desirable in view of its business and operations or the ownership of its Properties, in each case, where failure to qualify or preserve and maintain its rights and franchises could reasonably be expected to cause a Material Adverse Change.
Section 5.04 Payment of Taxes, Etc . The Borrower shall pay and discharge, and cause each member of the Tax Group to pay and discharge, before the same shall become delinquent, (a) all Taxes, assessments, and governmental charges or levies imposed upon it or upon its income or profits or Property that are material in amount, prior to the date on which penalties attach thereto and (b) all lawful claims that are material in amount which, if unpaid, might by law become a Lien upon its Property; provided , however, that no Loan Party nor any other member of the Tax Group shall be required to pay or discharge any such Tax, assessment, charge, levy, or claim which is being contested in good faith and by appropriate proceedings, and with respect to which reserves in conformity with GAAP have been provided.
Section 5.05 Visitation Rights . At any reasonable time and from time to time, upon reasonable notice, the Borrower shall, and shall cause its Restricted Subsidiaries to, permit the Administrative Agent and any Lender or any of their respective agents or representatives thereof, to (a) examine and make copies of and abstracts from the records and books of account of, and visit and inspect at their reasonable discretion the Properties of, the Borrower and any such Restricted Subsidiary and (b) discuss the affairs, finances and accounts of the Borrower and any such Restricted Subsidiary with any of their respective officers or directors.
Section 5.06 Reporting Requirements . The Borrower shall furnish to the Administrative Agent and each Lender:
(a) Annual Financials . For each fiscal year of the Borrower and its consolidated Subsidiaries ended on or ending after December 31, 2017, as soon as available but in any event not later than 120 days after the end of such fiscal year, (i) (A) a copy of the annual audited financial report for such year for the Borrower and its consolidated Subsidiaries, including therein the Borrower’s and its consolidated Subsidiaries’ balance sheets as of the end of such fiscal year and the Borrower’s and its consolidated Subsidiaries’ statements of income, cash flows, and retained earnings, in each case certified by independent certified public accountants reasonably acceptable to the Administrative Agent, and including any management letters delivered by such accountants to the Borrower or any Subsidiary in connection with such audit, and (B) a certificate of such accounting firm to the Administrative Agent and the Lenders stating that such audit was conducted by such accounting firm in accordance with generally accepted auditing standards, (ii) a copy of the unaudited annual consolidating financial statements, if any, of each of its Subsidiaries, including therein such Subsidiary’s balance sheet and statements of income, cash flows, and retained earnings for such fiscal year; and (iii) concurrent with such financial reports, a Compliance Certificate executed by a Responsible Officer of the Borrower;
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(b) Quarterly Financials . As soon as available and in any event not later than 45 days after the end of each of the first three fiscal quarters of each fiscal year of the Borrower and its consolidated Subsidiaries, commencing with the fiscal quarter ending March 31, 2018, (i) the unaudited consolidated and consolidating financial statements, including the balance sheet and the statements of income, cash flows, and retained earnings of the Borrower and its consolidated Subsidiaries for the period commencing at the end of the previous year and ending with the end of such fiscal quarter, all in reasonable detail and duly certified with respect to such consolidated statements (subject to year-end audit adjustments) by a Responsible Officer of the Borrower as having been prepared in accordance with GAAP; and (ii) concurrent with such financial reports, a Compliance Certificate executed by a Responsible Officer of the Borrower;
(c) Cash Flow and Capital Expenditures . As soon as available and in any event not later than 45 days after the end of each fiscal year, a budget detailing the projected cash flows and Capital Expenditures of the Borrower and its Restricted Subsidiaries for the immediately subsequent fiscal year;
(d) Oil and Gas Engineering Reports .
(i) As soon as available but in any event on or before each April 1 of each year, an Independent Engineering Report dated effective as of January 1 for such year;
(ii) As soon as available but in any event on or before October 1 of each year, an Internal Engineering Report dated effective as of the immediately preceding July 1;
(iii) With the delivery of each Engineering Report, a certificate from a Responsible Officer certifying that in all material respects: (i) the information contained in the Engineering Report and any other information delivered in connection therewith is true and correct, (ii) the Borrower or a Subsidiary Guarantor owns good and defensible title to the Oil and Gas Properties evaluated in such Engineering Report and such Properties are free of all Liens except for Liens permitted by Section 6.01 , (iii) on a net basis there are no gas imbalances, take or pay or other prepayments in excess of the volume specified in Section 6.13 with respect to its Oil and Gas Properties evaluated in such Engineering Report which would require the Borrower or any Subsidiary Guarantor to deliver Hydrocarbons either generally or produced from such Oil and Gas Properties at some future time without then or thereafter receiving full payment therefor, (iv) none of their proved Oil and Gas Properties have been sold since the date of the last Borrowing Base determination except as set forth on an exhibit to the certificate, which exhibit shall list all of its Oil and Gas Properties sold and in such detail as reasonably required by the Administrative Agent, (v) attached to the certificate is a list of all marketing agreements entered into by a Loan Party or any Subsidiary subsequent to the later of the date hereof or the most recently delivered Engineering Report which the Borrower could reasonably be expected to have been obligated to list on Schedule 4.19 had such agreement been in effect on the date hereof and (vi) attached thereto is a schedule of the Oil and Gas Properties evaluated by such Engineering Report that are subject to an Acceptable Security Interest pursuant to the Mortgages and demonstrating the percentage of the total value of the proved Oil and Gas Properties that the value of such Properties represent and that such percentage is in compliance with Section 5.08 ; and
(iv) Such other information as may be reasonably requested by the Administrative Agent or any Lender with respect to the Oil and Gas Properties included or to be included in the Borrowing Base.
(e) Production Reports . As soon as available and in any event within 45 days after the end of each fiscal quarter, commencing with the fiscal quarter ending March 31, 2018, a report certified by a Responsible Officer of the Borrower in form and substance reasonably satisfactory to the Administrative Agent prepared by the Borrower covering each of the Oil and Gas Properties of the Borrower and its Restricted Subsidiaries and detailing on a quarterly basis (i) the production, revenue, and associated lease
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operating statements for the Oil and Gas Properties of the Borrower and its Restricted Subsidiaries containing Proven Reserves in form and substance reasonably satisfactory to the Administrative Agent, together with a certificate signed by a Responsible Officer of the Borrower as to the truth and accuracy of such analyses in all material respects; (ii) any changes to any producing reservoir, production equipment, or producing well from the report delivered for the preceding fiscal quarter, which changes could cause a Material Adverse Change and (iii) any sales of the Borrower’s or any Restricted Subsidiaries’ Oil and Gas Properties since the delivery of the report for the preceding fiscal quarter;
(f) Defaults . As soon as possible and in any event within three business days after an officer of the Borrower or a Restricted Subsidiary has knowledge of (i) the occurrence of any Default or (ii) the occurrence of any default under any instrument or document evidencing Debt of the Borrower or any Restricted Subsidiary having an aggregate principal amount in excess $5,000,000, in each case which Default or default is continuing on the date of such statement, a statement of a Responsible Officer of the Borrower setting forth the details of such Default or default, as applicable, and the actions which the Borrower or such Restricted Subsidiary has taken and proposes to take with respect thereto;
(g) Quarterly Report on Hedging and Deferred Purchase Obligations . Concurrent with the delivery of the financial statements required under Section 5.06(a) and 5.06(b) above, a statement prepared by Borrower and certified as being true and correct in all material respects by a Responsible Officer of Borrower, setting forth in reasonable detail:
(i) all Hydrocarbon Hedge Agreements to which any production of oil, gas or other Hydrocarbons from the Oil and Gas Properties of the Borrower and its Restricted Subsidiaries is then subject, together with a statement of Borrower’s position with respect to each such Hydrocarbon Hedge Agreement and a calculation of the Current Production and Forecasted Production as of such period end and a certification and detailed calculation of the compliance (or non-compliance) with Section 6.14(c) during such period (other than to the extent otherwise notified to the Administrative Agent); provided , however, if the price of any of the oil, gas or other Hydrocarbons produced from such Oil and Gas Properties is subject to a Hydrocarbon Hedge Agreement, then Borrower shall promptly notify the Administrative Agent and the Lenders if such Hydrocarbon Hedge Agreement is terminated, modified, amended or altered prior to the end of its contractual term, or if there is an amendment, adjustment or modification of the price of any of the oil, gas or other Hydrocarbons produced from such Oil and Gas Properties that is subject to or established by a Hydrocarbon Hedge Agreement;
(ii) all Debt incurred in the form of deferred purchase price of Oil and Gas Property as permitted under Section 6.02(c) or 6.02(d), including the crude oil or natural gas pricing thresholds which would trigger a payment thereunder; provided , however, the Borrower shall promptly notify the Administrative Agent and the Lenders if there is an amendment, adjustment or modification of such pricing thresholds; and
(iii) a detailed calculation of the notional volumes of PDP Reserves covered by Hydrocarbon Hedge Contracts as of each calendar month end occurring in the fiscal quarters covered by such financial statement and a detailed calculation of the compliance (or non-compliance) with Section 6.14(f) during such period.
(h) Termination Events . As soon as possible and in any event (i) within 30 days after the Borrower or any member of the Controlled Group knows or has reason to know that any Termination Event described in clause (a) of the definition of Termination Event with respect to any Plan has occurred, and (ii) within ten days after the Borrower or any member of the Controlled Group knows or has reason to know that any other Termination Event with respect to any Plan has occurred, a statement of a Responsible Officer of the Borrower describing such Termination Event and the action, if any, which the Borrower or such Controlled Group member proposes to take with respect thereto;
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(i) Termination of Plans . Promptly and in any event within five Business Days after receipt thereof by the Borrower or any member of the Controlled Group from the PBGC, copies of each notice received by the Borrower or any such member of the Controlled Group of the PBGC’s intention to terminate any Plan or to have a trustee appointed to administer any Plan;
(j) Other ERISA Notices . Promptly and in any event within five Business Days after receipt thereof by the Borrower or any member of the Controlled Group from a Multiemployer Plan sponsor, a copy of each notice received by the Borrower or any member of the Controlled Group concerning the imposition or amount of withdrawal liability pursuant to Section 4202 of ERISA;
(k) Environmental Notices . Promptly upon the receipt thereof by the Borrower or any of its Restricted Subsidiaries, a copy of any form of request, notice, summons or citation received from the Environmental Protection Agency, or any other Governmental Authority, concerning (i) violations or alleged violations of Environmental Laws, which seeks to impose liability therefor and could cause a Material Adverse Change, (ii) any action or omission on the part of the Borrower or any Restricted Subsidiary in connection with Hazardous Waste or Hazardous Substances that could reasonably result in the imposition of liability therefor that could cause a Material Adverse Change, including without limitation any information request related to, or notice of, potential responsibility under CERCLA, or (iii) concerning the filing of a Lien upon, against or in connection with the Borrower or any Restricted Subsidiary, or any of their leased or owned Property, wherever located;
(l) Other Governmental Notices . Promptly and in any event within five Business Days after receipt thereof by the Borrower or any Restricted Subsidiary, a copy of any notice, summons, citation, or proceeding seeking to modify in any material respect, revoke, or suspend any material contract, license, permit or agreement with any Governmental Authority;
(m) Material Changes . Prompt written notice of any condition or event of which the Borrower has knowledge, which condition or event has resulted or could reasonably be expected to result in a Material Adverse Change, including breach or non-performance of, or any default under, a material agreement of the Borrower or any Restricted Subsidiary;
(n) Disputes, Etc . Prompt written notice of (i) any claims, legal or arbitration proceedings, proceedings before any Governmental Authority, or disputes affecting the Borrower, or any of its Restricted Subsidiaries in any event, of which the Borrower has knowledge that could reasonably be expected to cause a Material Adverse Change, or any material labor controversy of which the Borrower or any of its Restricted Subsidiaries has knowledge resulting in or reasonably considered to be likely to result in a strike against the Borrower or any of its Restricted Subsidiaries and (ii) any claim, judgment, Lien or other encumbrance (other than a Permitted Lien) affecting any Property of the Borrower or any Restricted Subsidiary if the value of the claim, judgment, Lien, or other encumbrance affecting such Property shall exceed $5,000,000;
(o) Other Accounting Reports . Promptly upon receipt thereof, a copy of each other report or letter submitted to the Borrower or any Subsidiary by independent accountants in connection with any annual, interim or special audit made by them of the books of the Borrower and its Subsidiaries, and a copy of any response by the Borrower or any Subsidiary of the Borrower, or the board of directors or managers (or other applicable governing body) of the Borrower or any Subsidiary of the Borrower, to such letter or report;
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(p) Notices and Etc. Under Other Loan Agreements . Promptly after the furnishing thereof, copies of any statement, report or notice furnished to any Person pursuant to the terms of any indenture, loan or credit or other similar agreement relating to Debt of the Borrower or its Restricted Subsidiaries in an aggregate principal amount in excess of $5,000,000, other than this Agreement and not otherwise required to be furnished to the Lenders pursuant to any other provision of this Section 5.06;
(q) Notices of Dispositions and Hedge Events . The Borrower shall promptly, and in any event three Business Days after such event, notify the Administrative Agent of (a) each Disposition of Oil and Gas Properties that had a positive value in the most recently delivered Engineering Report and (b) each Hedge Event.
(r) SEC Filings . The Borrower shall promptly after the same are available, deliver to the Administrative Agent copies of each annual report, proxy or financial statement or other report or communication sent to the stockholders of the Parent Company, and copies of all annual, regular, periodic and special reports and registration statements which the Parent Company may file or be required to file with the SEC under Section 13 or 15(d) of the Exchange Act, or with any national securities exchange, and in any case not otherwise required to be delivered to the Administrative Agent pursuant hereto; provided however, that such filings are deemed to be delivered hereunder on the date the same shall be filed with the SEC and publicly made available.
(s) SEC Inquiries . The Borrower shall promptly, and in any event within five (5) Business Days after receipt thereof by any Loan Party or any Subsidiary thereof, deliver to the Administrative Agent copies of each notice or other correspondence received from the SEC (or comparable agency in any applicable non-U.S. jurisdiction) concerning any investigation or possible investigation by such agency regarding financial or other operational results of any Loan Party or any Subsidiary thereof.
(t) Other Information . Such other information respecting the business or Properties, or the condition or operations, financial or otherwise, of the Parent Company, the Borrower or any of its Restricted Subsidiaries, as any Lender through the Administrative Agent may from time to time reasonably request. The Administrative Agent agrees to provide the Lenders with copies of any material notices and information delivered solely to the Administrative Agent pursuant to the terms of this Agreement.
Section 5.07 Maintenance of Property . The Borrower shall, and shall cause each of its Restricted Subsidiaries to, maintain their owned, leased, or operated Property in good condition and repair (normal wear and tear excepted) and shall abstain, and cause each of its Restricted Subsidiaries to abstain from, knowingly or willfully permitting the commission of waste or other injury, destruction, or loss of natural resources, or the occurrence of pollution, contamination, or any other condition in, on or about the owned, leased or operated Property involving the Environment that could reasonably be expected to result in Response activities and that could reasonably be expected to cause a Material Adverse Change.
Section 5.08 Agreement to Pledge . The Borrower shall, and shall cause each Restricted Subsidiary to, grant to the Administrative Agent an Acceptable Security Interest in any Property of the Borrower or any Restricted Subsidiary now owned or hereafter acquired promptly after receipt of a written request from the Administrative Agent; provided that (a) unless an Event of Default has occurred and is continuing and other than as provided in clause (c) below, in no event shall the Administrative Agent be permitted to request or the Borrower be required to grant an Acceptable Security Interest in any Oil and Gas Properties that exceeds 90% (by value) of the PV-10 of all of the Borrower’s and its Restricted Subsidiaries’ Proven Reserves and Oil and Gas Properties, (b) the Borrower shall cause the Administrative Agent to, at all times and without any requirement of a written request from the Administrative Agent, have an Acceptable Security Interest in at least 90% (by value) of the PV-10 of all
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of the Borrower’s and its Restricted Subsidiaries’ Proven Reserves and Oil and Gas Properties, (c) the Borrower shall cause the Administrative Agent to, at all times and without any requirement of a written request from the Administrative Agent, have an Acceptable Security Interest in all of the Borrower’s and its Restricted Subsidiaries’ Oil and Gas Properties located in Kingfisher County, Oklahoma, (d) the Borrower shall not be required to grant a Lien encumbering more than 66% of the outstanding Voting Securities in any Foreign Subsidiary unless the granting of such Lien would not result in a material adverse Tax consequence to the Borrower or any of its Restricted Subsidiaries, and (e) the Borrower shall not be required to grant a Lien encumbering Equity Interests of Unrestricted Subsidiaries that are scheduled as provided in the Security Agreement. If an Event of Default has occurred and is continuing, the Administrative Agent is permitted to request, and the Borrower shall be required to promptly (but in any event within three Business Days after Administrative Agent delivers the Borrower a form of Mortgage for such Oil and Gas Properties (other than any exhibits or schedules thereto)) grant an Acceptable Security Interest in substantially all of the Borrower’s and its Restricted Subsidiaries’ Oil and Gas Properties (whether or not such Oil and Gas Properties constitute Proven Reserves). Such form of Mortgage shall reaffirm any Acceptable Security Interest granted in any Oil and Gas Property prior thereto.
Section 5.09 Use of Proceeds . The Borrower shall use the proceeds of the Advances and Letters of Credit for working capital and other general corporate purposes of the Borrower, provided that the Borrower will not use any proceeds for the purpose of purchasing or carrying directly or indirectly any margin stock or for any other purpose which would constitute this transaction a “purpose credit” within the meaning of Regulation U.
Section 5.10 Title Evidence . Concurrently with each redetermination of the Borrowing Base pursuant to Sections 2.02(b) , (c) , or (e) , or at such other times as reasonably requested by the Administrative Agent, the Borrower shall take such actions and execute and deliver such documents and instruments as the Administrative Agent shall require to ensure that the Administrative Agent shall, at all times, have received satisfactory title information (including, if requested, supplemental or new title opinions addressed to it), which title information (a) shall collectively cover at least 80% of the present value of the Proven Reserves of the Borrower and its Restricted Subsidiaries as determined by the Administrative Agent, (b) shall be in form and substance acceptable to the Administrative Agent in its sole discretion, and (c) if requested by the Administrative Agent, shall include opinions regarding the before payout and after payout ownership interests held by the Borrower and the Borrower’s Restricted Subsidiaries for all wells located on the Oil and Gas Properties covered thereby as to the ownership of Oil and Gas Properties of the Borrower and its Restricted Subsidiaries.
Section 5.11 Further Assurances; Cure of Title Defects . The Borrower shall, and shall cause each Restricted Subsidiary to, cure promptly any defects in the creation and issuance of the Notes and the execution and delivery of the Security Instruments and this Agreement. The Borrower hereby authorizes the Lenders or the Administrative Agent to file any financing statements without the signature of the Borrower to the extent permitted by applicable law in order to perfect or maintain the perfection of any security interest granted under any of the Loan Documents. The Borrower at its expense will, and will cause each Restricted Subsidiary to, promptly execute and deliver to the Administrative Agent upon its reasonable request all such other documents, agreements and instruments to comply with or accomplish the covenants and agreements of the Borrower, or any Restricted Subsidiary, as the case may be, in the Security Instruments and this Agreement, or to further evidence and more fully describe the collateral intended as security for the Obligations, or to correct any omissions in the Security Instruments, or to state more fully the security obligations set out herein or in any of the Security Instruments, or to perfect, protect or preserve any Liens created pursuant to any of the Security Instruments, or to make any recordings, to file any notices or obtain any consents, all as may be necessary or appropriate in connection therewith or to enable the Administrative Agent to exercise and enforce its rights and remedies with
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respect to any Collateral. Within 60 days after (a) a request by the Administrative Agent or the Lenders to cure any title defects or exceptions that are not Permitted Liens raised by such information or (b) a notice by the Administrative Agent that the Borrower has failed to comply with Section 5.10 above, the Borrower shall (i) cure such title defects or exceptions that are not Permitted Liens or substitute acceptable Oil and Gas Properties with no title defects or exceptions except for Permitted Liens covering Collateral of an equivalent value and (ii) deliver to the Administrative Agent satisfactory title evidence (including supplemental or new title opinions meeting the foregoing requirements) in form and substance acceptable to the Administrative Agent in its reasonable business judgment as to the Borrower’s and its Restricted Subsidiaries’ ownership of such Oil and Gas Properties and the Administrative Agent’s Liens and security interests therein as are required to maintain compliance with Section 5.10. If, within such 60-day period, the Borrower fails to cure any such title defect or exception as required under the foregoing clause (a) or fails to deliver the title evidence required under the foregoing clause (b), such failure shall not be a Default (other than if such failure otherwise constitutes a Default under Section 7.01(k)), but instead the Administrative Agent shall have the right to exercise the following remedy in its sole discretion from time to time, and any failure to so exercise this remedy at any time shall not be a waiver as to future exercise of the remedy by the Administrative Agent. To the extent that the Administrative Agent is not satisfied with title to any portion of any Oil and Gas Property after such 60-day period has elapsed, such unacceptable Oil and Gas Property shall not count towards the 80% requirement under Section 5.10 above, and the Administrative Agent may send a notice to the Borrower and the Lenders that the then effective Borrowing Base shall be reduced by an amount as determined by the Administrative Agent or, if elected by the Required Lenders, by the Required Lenders, to cause the Borrower to be in compliance with the requirement to provide acceptable title information on 80% (by value) of the Borrower’s and its Restricted Subsidiaries’ Oil and Gas Properties. This new Borrowing Base shall become effective immediately after receipt of such notice. If the Borrowing Base is reduced pursuant to this Section 5.11 and such a reduction causes a Borrowing Base Deficiency, then (x) Borrower shall prepay the Advances or make deposits into the Cash Collateral Account to provide cash collateral for the Letters of Credit, in three consecutive monthly installments each equal to one-third of such Borrowing Base Deficiency with the first such installment due 30 days after the date such deficiency notice is received by the Borrower from the Administrative Agent and each following installment due 30 days after the preceding installment, with each prepayment of Advances accompanied by accrued interest on the amount prepaid to the date of such prepayment and amounts, if any, required to be paid pursuant to Section 2.12 as a result of such prepayment being made on such date, and (y) such title defect or exception giving rise to such Borrowing Base reduction shall not constitute an Event of Default hereunder (other than to the extent it constitutes a Default under Section 7.01(k)), unless such title defect or exception is prohibited under Section 6.01. For the avoidance of doubt and for all purposes under this Agreement, if title to any of the Oil and Gas Property of the Borrower or Restricted Subsidiary (or any material part thereof) shall become the subject matter of litigation before any Governmental Authority or arbitrator that could reasonably be expected to result in a Material Adverse Change with respect to the Borrower’s or such Restricted Subsidiary’s title to such Oil and Gas Properties, taken as a whole, then such litigation may be deemed to be a title defect or exception that is not a Permitted Lien regardless of whether the Borrower’s or such Restricted Subsidiary’s record title is then effected.
Section 5.12 Material Agreements . The Borrower shall, and shall cause each Restricted Subsidiary to, comply with all material terms, conditions, or covenants of any material contract or agreement to which the Borrower, or any of its Restricted Subsidiaries is a party or by which they or their Properties may be bound except to the extent where the failure to do so could not reasonably be expected to cause a Material Adverse Change.
Section 5.13 Leases; Development and Maintenance . The Borrower will, and will cause its Restricted Subsidiaries to, except to the extent failure to do any of the matters set forth below would not have a Material Adverse Change: (a) pay and discharge promptly, or cause to be paid and discharged
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promptly, all rentals, delay rentals, royalties, overriding royalties, payments out of production and other indebtedness or obligations accruing under, and perform or cause to be performed each and every act, matter or thing required by each and all of, the oil and gas leases and all other agreements and contracts constituting or affecting the Oil and Gas Properties of the Borrower and its Restricted Subsidiaries (except where the amount thereof is being contested in good faith by appropriate proceedings), (b) do all other things necessary to keep unimpaired its rights thereunder and prevent any forfeiture thereof or default thereunder, and operate or cause to be operated such Properties as a prudent operator would in accordance with industry standard practices and in compliance with all applicable proration and conservation Legal Requirements and any other Legal Requirements of every Governmental Authority, whether state, federal, municipal or other jurisdiction, from time to time constituted to regulate the development and operations of oil and gas properties and the production and sale of oil, gas and other Hydrocarbons therefrom, and (c) maintain (or cause to be maintained) the Leases, wells, units and acreage to which the Oil and Gas Properties of the Borrower and its Restricted Subsidiaries pertain in a prudent manner consistent with industry standard practices.
Section 5.14 Designations with Respect to Subsidiaries .
(a) Any newly acquired or formed Subsidiary shall be deemed a Restricted Subsidiary unless designated by Borrower as an Unrestricted Subsidiary in accordance with the terms of this Section 5.14(a).
(i) The Borrower may not acquire or form any such new Restricted Subsidiary nor may it designate any Unrestricted Subsidiary as a Restricted Subsidiary unless each of the following conditions are satisfied:
(A) immediately before and after giving effect to such acquisition, formation or designation of a Restricted Subsidiary, no Default or Event of Default shall exist and be continuing;
(B) after giving effect to such acquisition, formation or designation of a Restricted Subsidiary, the Borrower would be permitted to incur at least $1 of additional Debt in accordance with the provisions of Section 6.02;
(C) contemporaneously with the acquisition, formation or designation of a Restricted Subsidiary, such Restricted Subsidiary shall execute and deliver to the Administrative Agent a Guaranty, a Pledge Agreement, a Security Agreement, and a Mortgage, and such other Security Instruments as the Administrative Agent or the Majority Lenders may reasonably request and the equity holder of such Subsidiary executing and delivering to the Administrative Agent a Pledge Agreement (or supplement to an existing Pledge Agreement) pledging 100% of the Equity Interest of such Subsidiary (or such lesser percentage pursuant to Section 5.08(d)) along with the certificates pledged thereby, if any, and appropriately executed powers in blank, if applicable;
(D) contemporaneously with the acquisition, formation or designation of a Restricted Subsidiary, the Borrower or such Restricted Subsidiary shall have delivered such certificates, opinions of counsel, title opinions, or other documents as the Administrative Agent may reasonably request relating to such Restricted Subsidiary; and
(E) the Borrower shall otherwise be in compliance with Section 5.08.
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(ii) The Borrower shall deliver to the Administrative Agent and each Bank, within 20 Business Days after any such acquisition, formation or designation, a certificate of a Responsible Officer of Borrower stating the effective date of such designation and stating that the foregoing conditions have been satisfied. Such certificate shall be accompanied by a schedule setting forth in reasonable detail the calculations demonstrating compliance with such conditions, where appropriate.
(iii) Notwithstanding anything herein to the contrary, at no time shall any Subsidiary be an Unrestricted Subsidiary if it is a “restricted subsidiary” for purposes of any indenture, credit agreement or similar agreement that contains the concept of “restricted” and “unrestricted” subsidiaries or otherwise provides a guarantee of, or provides collateral security for, the obligations thereunder.
(b) The Borrower shall not designate any Restricted Subsidiary as an Unrestricted Subsidiary.
(c) In the case of the acquisition, formation or designation of a Restricted Subsidiary, such new Restricted Subsidiary shall be deemed to have made or acquired all Investments owned by it and incurred all Debt and other obligations owing by it and all Liens to which it or any of its properties are subject, on the date of such designation, acquisition, or formation.
Section 5.15 Designation of Senior Debt . The Borrower shall, and shall cause each Restricted Subsidiary to, designate all Obligations as “designated senior indebtedness” under any subordinated note or indenture documents applicable to it, to the extent provided for therein, including but not limited to the Senior Unsecured Notes.
Section 5.16 Anti-Corruption Laws; Sanctions . The Borrower shall, and shall cause each Restricted Subsidiary to, maintain in effect and enforce policies and procedures designed to ensure compliance by each Loan Party and its respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions.
ARTICLE VI
NEGATIVE COVENANTS
So long as any amount under any Loan Document shall remain unpaid, any Letter of Credit shall remain outstanding, or any Lender shall have any Commitment, the Borrower agrees, unless the Majority Lenders otherwise consent in writing, to comply with the following covenants.
Section 6.01 Liens, Etc . The Borrower shall not create, assume, incur, or suffer to exist, or permit any of its Restricted Subsidiaries to create, assume, incur, or suffer to exist, any Lien on or in respect of any of its Property whether now owned or hereafter acquired, or assign any right to receive income, except that the Borrower and its Restricted Subsidiaries may create, incur, assume, or suffer to exist:
(a) Liens granted under a Loan Document and securing the Obligations;
(b) [reserved;]
(c) purchase money Liens or purchase money security interests upon or in any equipment acquired or held by the Borrower or any of its Restricted Subsidiaries in the ordinary course of business prior to or at the time of the Borrower’s or such Restricted Subsidiary’s acquisition of such equipment; provided that, the Debt secured by such Liens (i) was incurred solely for the purpose of financing the acquisition of such equipment, and does not exceed the aggregate purchase price of such equipment, (ii) is secured only by such equipment and not by any other Properties of the Borrower or its Restricted Subsidiaries, and (iii) is permitted under Section 6.02(e);
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(d) Liens securing Capital Leases; provided that the Debt secured by such Liens (i) is secured only by the Property leased under such Capital Leases and not any other Properties of the Borrower or any of its Restricted Subsidiaries and (ii) is permitted under Section 6.02(e);
(e) Liens for Taxes, assessments, or other governmental charges or levies not yet due or that (provided foreclosure, sale, or other similar proceedings shall not have been initiated) are being contested in good faith by appropriate proceedings, and such reserve as may be required by GAAP shall have been made therefor;
(f) Liens in favor of vendors, carriers, warehousemen, repairmen, mechanics, workmen, materialmen, construction, or similar Liens arising by operation of law in the ordinary course of business in respect of obligations that are not yet due or that are being contested in good faith by appropriate proceedings, provided that such reserve as may be required by GAAP shall have been made therefor;
(g) Liens to operators and non-operators under joint operating agreements arising in the ordinary course of the business of the Borrower or the relevant Restricted Subsidiary to secure amounts owing, which amounts are not yet due or are being contested in good faith by appropriate proceedings, if such reserve as may be required by GAAP shall have been made therefor;
(h) royalties, overriding royalties, net profits interests, production payments, reversionary interests, calls on production, preferential purchase rights and other burdens on or deductions from the proceeds of production, that do not secure Debt for borrowed money and that are taken into account in computing the net revenue interests and working interests of the Borrower or any of its Restricted Subsidiaries warranted in the Security Instruments or in this Agreement;
(i) Liens arising in the ordinary course of business out of pledges or deposits under workers’ compensation laws, unemployment insurance, old age pensions or other social security or retirement benefits, or similar legislation or to secure public or statutory obligations of the Borrower;
(j) Liens arising under operating agreements, unitization and pooling agreements and orders, farmout agreements, gas balancing agreements and other agreements, in each case that are customary in the oil, gas and mineral production business and that are entered into in the ordinary course of business that are taken into account in computing the net revenue interests and working interests of the Borrower or any of its Restricted Subsidiaries warranted in the Security Instruments or in this Agreement, to the extent that any such Lien referred to in this clause does not materially impair the use of the Property covered by such Lien for the purposes for which such Property is held by the Borrower or any Restricted Subsidiary or materially impair the value of such Property subject thereto;
(k) easements, rights-of-way, restrictions, and other similar encumbrances, and minor defects in the chain of title that are customarily accepted in the oil and gas financing industry, including in respect of surface operations or for pipelines or power lines, none of which materially interfere with the ordinary conduct of the business of Borrower or any Restricted Subsidiary or materially detract from the value or use of the Property to which they apply;
(l) judgment liens in respect of judgments that do not constitute an Event of Default under Section 7.01(f);
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(m) rights reserved to or vested in any Governmental Authority to control or regulate any Property of the Borrower or any of its Restricted Subsidiaries, or to use such Property; provided that, such rights (a) could not reasonably be expected to materially impair the use of such Property for the purpose for which it is held by the Borrower or any such Restricted Subsidiary and (b) could not reasonably be expected to materially diminish the value of such Property;
(n) [reserved];
(o) Liens encumbering cash, cash equivalents, and certificates of deposits, and security in the form of letters of credit, in any case, arising in the ordinary course of business to secure the Debt permitted under Section 6.02(g) below; and
(p) Liens not otherwise permitted in this Section 6.01 so long as (i) such Liens do not encumber Oil and Gas Properties and (ii) the aggregate amount of obligations secured thereby shall not exceed $5,000,000.
Section 6.02 Debts, Guaranties, and Other Obligations . The Borrower shall not, and shall not permit any of its Restricted Subsidiaries to, create, assume, suffer to exist, or in any manner become or be liable in respect of, any Debt except:
(a) Debt of the Borrower and its Restricted Subsidiaries under the Loan Documents;
(b) Debt listed on Part A of Schedule 4.05 and any renewals, extensions, or replacements thereof; provided that the amount of such Debt may not be increased;
(c) [reserved];
(d) Debt in the form of obligations for the deferred purchase price of Oil and Gas Property acquired in the ordinary course of business and incurred after November 14, 2007, which (i) is not yet past due and payable or is being contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP have been established; (ii) is payable solely out of production revenues generated from the purchased Oil and Gas Properties; (iii) is due if, and only if, prices for crude oil or natural gas, as applicable, exceed certain thresholds agreed to between the seller and the buyer; (iv) cannot be accelerated or demanded for any reason unless and until such Debt becomes due as permitted in clause (iii) above; and (v) does not accrue any interest; provided that, the aggregate amount of Debt incurred by the Borrower and its Subsidiaries as permitted under this paragraph (d) shall not exceed $20,000,000;
(e) Debt secured by the Liens permitted under paragraphs (c) or (d) of Section 6.01 in an aggregate outstanding amount not to exceed $20,000,000 at any time;
(f) Debt under Hedge Contracts that are not prohibited by the terms of Section 6.14; provided that (i) such Debt shall not be secured, other than such Debt owing to Swap Counterparties which are secured under the Loan Documents, (ii) such Debt shall not obligate the Borrower or any of its Subsidiaries to any margin call requirements, and (iii) the deferred premium payments associated with such Hedge Contracts shall be limited to the deferred premium payments for put option contracts which are secured under the Loan Documents; provided that, the sum of (A) aggregate outstanding amount of such deferred premium payments plus (B) the outstanding unsecured Debt permitted under clause (n) below, shall not exceed $15,000,000;
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(g) Debt consisting of sureties or bonds provided to any Governmental Authority or other Person and assuring payment of contingent liabilities of the Borrower or any of its Restricted Subsidiaries in connection with the operation of the Oil and Gas Properties, including with respect to plugging, facility removal and abandonment of its Oil and Gas Properties;
(h) Debt of the Borrower to any Restricted Subsidiary and of any Restricted Subsidiary to the Borrower or any other Restricted Subsidiary; provided that, such Debt is fully subordinated to the Obligations on terms acceptable to the Administrative Agent;
(i) Debt representing deferred compensation to employees, consultants or independent contractors of the Borrower and its Restricted Subsidiaries incurred in the ordinary course of business in an aggregate amount not to exceed $10,000,000;
(j) (i) Senior Unsecured Notes and the guaranties given by Restricted Subsidiaries with respect thereto outstanding on the Effective Date, and (ii) any Refinancing Debt with respect to the Debt referred in the preceding clause (i);
(k) [reserved];
(l) (i) Additional Subordinated Debt that is Specified Additional Subordinated Debt, and the guaranties given by Restricted Subsidiaries with respect thereto; provided that, (A) the Borrowing Base is reduced if and to the extent required by Section 2.02(e), (B) no Borrowing Base Deficiency or Event of Default has occurred and is continuing at the time of such issuance, and (C) the Debt Incurrence Proceeds thereof shall be applied to make the payments, if any, required under Section 2.05(b)(ii), and (ii) any Refinancing Debt with respect to the Debt referred in the preceding clause (i);
(m) Banking Services Obligations secured under the Loan Documents;
(n) Other unsecured Debt which does not require the payment of interest or fees in cash; provided that, the sum of (i) the aggregate outstanding principal amount of such unsecured Debt plus (ii) the aggregate outstanding amount of the deferred premium payments permitted under clause (f) above, shall not exceed $15,000,000.
Section 6.03 Agreements Restricting Liens and Distributions . The Borrower shall not, nor shall it permit any of its Restricted Subsidiaries to, create, incur, assume or permit to exist any contract, agreement or understanding (other than this Agreement and the Security Instruments) that in any way prohibits or restricts the granting, conveying, creation or imposition of any Lien on any of its Property, whether now owned or hereafter acquired, to secure the Obligations or restricts any Restricted Subsidiary from paying dividends to the Borrower, or that requires the consent of or notice to other Persons in connection therewith; provided , that the foregoing shall not apply to (i) restrictions and conditions imposed by Legal Requirements, (ii) customary restrictions or conditions imposed by any agreement relating to other secured Debt permitted by this Agreement if such restrictions or conditions apply only to the Property securing such Debt, and (iii) restrictions on the granting, conveying, creation or imposition of any Lien to secure the Obligations contained in any agreement or instrument governing secured Additional Subordinated Debt so long as such are satisfactory to the Administrative Agent and the Majority Lenders.
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Section 6.04 Merger or Consolidation; Asset Sales; Hedge Terminations .
(a) (i) Without the consent of all the Lenders (other than a Defaulting Lender), the Borrower shall not merge or consolidate with or into any other Person other than (x) with a Restricted Subsidiary with the Borrower being the surviving entity; provided that at the time thereof and immediately after giving effect thereto no Default shall have occurred and the Administrative Agent shall continue to have an Acceptable Security Interest in the Collateral, and (y) pursuant to a Conversion Transaction; provided that, at the time thereof and immediately after giving effect thereto, (1) no Default shall have occurred, (2) the Administrative Agent shall have received written notice and description of such Conversion Transaction at least 90 days prior (or such shorter time period acceptable to the Administrative Agent in its sole discretion) to the consummation of such Conversion Transaction, (3) the Administrative Agent shall have received all documentation and other information that is required by regulatory authorities under applicable “know your customer” and anti-money-laundering rules and regulations, including, without limitation, the Patriot Act, at least 10 Business Days’ prior to the consummation of such Conversion Transaction, (4) the Administrative Agent shall have received an assumption agreement in form and substance reasonably satisfactory to the Administrative Agent confirming the continuing obligations of the Borrower under each Loan Document to which it is a party and such other documents, filings and agreements necessary to maintain an Acceptable Security Interest in the Collateral, (5) the Administrative Agent shall have a certificate, as of the date acceptable to the Administrative Agent, of a Responsible Officer or the secretary or an assistant secretary of the Borrower (after giving effect to the Conversion Transaction) certifying (A) true and complete copy of the resolutions of the board of directors or managers (or other applicable governing body) of the Borrower approving the Loan Documents to which it is a party and authorizing the entering into of any Loan Document in connection with the assignment referred to in the preceding clause (4), (B) true and complete copy of the articles or certificate (as applicable) of incorporation (or formation) of the Borrower certified by the Secretary of State for the state of incorporation (or formation), (C) true and complete copy of the bylaws or other governing documents of the Borrower, (D) the names and true signatures of officers of the Borrower authorized to sign the Loan Documents to which the Borrower is a party, including notices, and (E) true and complete copy of certificate of good standing for the Borrower in the state of its incorporation (or formation), which good standing certificate shall be in effective on the date of such officer’s certificate, (6) as requested by the Administrative Agent, the Administrative Agent shall have received an opinion of counsel in form and substance satisfactory to the Administrative Agent covering the matters set forth in Exhibit K, and (7) the Administrative Agent shall have continue to have an Acceptable Security Interest in the Collateral. (ii) The Borrower shall not permit any of its Restricted Subsidiaries to merge or consolidate with or into any other Person other than the merger of a Restricted Subsidiary into the Borrower pursuant to the immediately preceding sentence or another Restricted Subsidiary; provided that at the time thereof and immediately after giving effect thereto no Default shall have occurred and the Administrative Agent shall continue to have an Acceptable Security Interest in the Collateral.
(b) The Borrower shall not, nor shall it permit any of its Restricted Subsidiaries to make any Disposition or effect any Hedge Event other than:
(i) the sale of Hydrocarbons or Liquid Investments in the ordinary course of business;
(ii) the Disposition of equipment that is (A) obsolete, worn out, depleted or uneconomic and disposed of in the ordinary course of business, (B) no longer necessary for the business of such Person, or (C) contemporaneously replaced by equipment of at least comparable value and use;
(iii) the Disposition of Property to the Borrower or to a Subsidiary Guarantor; provided that at the time thereof and immediately after giving effect thereto no Default shall have occurred and be continuing and the Administrative Agent shall continue to have an Acceptable Security Interest in the Collateral;
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(iv) if no Event of Default then exists or would result therefrom, (A) the Disposition of Property which does not constitute Proven Reserves and does not constitute Collateral or is not otherwise required under this Agreement to be Collateral; and (B) the Disposition of Oil and Gas Properties which do not constitute Proven Reserves and are Disposed of pursuant to the Bayou City JDA under which such applicable third party is obligated to provide the necessary fundings to drill, complete or equip wells pertaining to such Oil and Gas Properties (it being understood and agreed that the Administrative Agent may, pursuant to Section 8.08(b) below, provide lien releases applicable to such Oil and Gas Properties in advance of actual Disposition thereof under the Bayou City JDA);
(v) if no Event of Default then exists or would result therefrom, any Triggering Event (other than a Triggering Event that is part of a Permitted Asset Swap) so long as each of the following conditions are met: (A) if applicable, the Borrowing Base is reduced as required under Section 2.02(e)(ii), (B) at the time of and immediately after giving effect thereto, and after giving effect to any prepayments and deposits of cash collateral required under Section 2.05(b)(iii), no Borrowing Base Deficiency exists, (C) 100% of the consideration received in respect of such Triggering Event shall be cash or cash equivalents, (D) the consideration received in respect of a Disposition shall be equal to or greater than the fair market value of the Oil and Gas Properties or Equity Interests of Restricted Subsidiary being Disposed of (as reasonably determined by the Borrower and, if requested by the Administrative Agent, the Borrower shall deliver a certificate of a Responsible Officer of the Borrower certifying to that effect), and (E) if any such Disposition is of the Equity Interests in a Restricted Subsidiary, such Disposition shall include all the Equity Interests of such Restricted Subsidiary owned by the Borrower and its Subsidiaries; and
(vi) if no Event of Default then exists or would result therefrom, the Disposition of Oil and Gas Properties made by the Borrower or any Restricted Subsidiary (including a Triggering Event) in exchange for other Oil and Gas Properties so long as each of the following conditions are met (such exchange, a “ Permitted Asset Swap ”): (A) such exchange is made with a Person (the “ transferee ”) that is not an Affiliate of any Loan Party or any Subsidiary, (B) such exchange does not include any consideration (cash or otherwise) paid to such transferee other than the Oil and Gas Properties being Disposed of, (C) if the Oil and Gas Properties being Disposed of are Collateral, then the Oil and Gas Properties received shall also be pledged as Collateral pursuant to Mortgages, (D) if a Triggering Event is involved in such exchange, if applicable, the Borrowing Base is reduced as required under Section 2.02(e)(ii), (E) at the time of and immediately after giving effect thereto, and after giving effect to any prepayments and deposits of cash collateral required under Section 2.05(b)(iii), no Borrowing Base Deficiency exists, (F) if a Triggering Event is involved in such exchange, either (y) 100% of the consideration received in respect of such Triggering Event shall be cash or cash equivalents or (z) at the time of and immediately after giving effect thereto, and after giving effect to any prepayments and deposits of cash collateral required under Section 2.05(b)(iii), the aggregate Unused Commitment Amount of all the Lenders is equal to or greater than 10% of the aggregate amount of the then effective Commitments of all the Lenders, (G) if any such Disposition is of the Equity Interests in a Restricted Subsidiary, such Disposition shall include all the Equity Interests of such Restricted Subsidiary owned by the Borrower and its Subsidiaries, and (H) the fair market value of the Disposed Oil and Gas Properties are substantially equivalent to the fair market value of the received Oil and Gas Properties (in any case, as reasonably determined by the board of directors or the equivalent governing body of the Borrower, or its designee, and, if requested by the Administrative Agent, the Borrower shall deliver a certificate of a Responsible Officer of the Borrower certifying to that effect);
(vii) Dispositions permitted under Section 6.05; and
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(viii) the Disposition of Properties not otherwise permitted under this Section 6.04; provided that, the aggregate value of such Properties disposed of under this clause (vii) shall not exceed $5,000,000.
Section 6.05 Restricted Payments . The Borrower shall not, nor shall it permit any of its Restricted Subsidiaries to, make any Restricted Payments, except that:
(a) the Restricted Subsidiaries may make Restricted Payments to the Borrower or to any Subsidiary Guarantor;
(b) if the Borrower has delivered the required financial statements, Compliance Certificate and other items required under Section 5.06(a) or (b) for a fiscal quarter end (the “ Subject Quarter ”), commencing with the fiscal quarter ending June 30, 2018, the Borrower may make cash Restricted Payments in the period from the time such last item is delivered to the date the Borrower is required to deliver financial statements, Compliance Certificate and other items under Section 5.06(a) or (b) for the subsequent fiscal quarter end (such period being the “ Distribution Period ”) so long as: (i) the Compliance Certificate delivered for the Subject Quarter includes a detailed calculation of the Excess Cash Flow for such Subject Quarter, (ii) the aggregate amount of Restricted Payments (including such Restricted Payment) made in such Distribution Period does not exceed the Excess Cash Flow for such Subject Quarter, (iii) both before and after giving effect to the making of such Restricted Payment, no Default has occurred and is continuing, (iv) both before and after giving effect to the making of such Restricted Payment, the pro forma Leverage Ratio for such Subject Quarter end shall be less than 3.00 to 1.00, and (v) both before and after giving effect to the making of such Restricted Payment, aggregate Unused Commitment Amounts is equal to or greater than 20% of the aggregate Commitments then in effect;
(c) the Borrower and its Restricted Subsidiaries may make Restricted Payments in cash to the Parent Company, any direct or indirect parent of the Borrower, or the General Partner the proceeds of which will be used solely to pay (i) operating expenses and other corporate overhead costs (including administrative, legal, accounting, and similar expenses payable to third parties) that are reasonable and customary and incurred in the ordinary course of business and (ii) any reasonable and customary indemnification claims made by members of the board of directors (or equivalent governing body) or officers, employees, directors, managers, consultants, or independent contractors of the Parent Company, any direct or indirect parent of the Borrower, or the General Partner, but in each of the foregoing clause (i) and (ii), only to the extent such expenses are directly attributable to the ownership or operations of the Borrower and its Restricted Subsidiaries;
(d) the Borrower may make Restricted Payments to any direct or indirect parent entity for the sole purpose of allowing such parent entity to (i) make Permitted Tax Distributions so long as no Event of Default arising under Sections 7.01(a) or (e) exists, and (ii) pay the obligations under that certain Tax Receivable Agreement dated as of February 9, 2018, among Parent Company, SRII Opco, LP, a Delaware limited partnership, Riverstone VI Alta Mesa, L.P., a Delaware partnership, and High Mesa Holdings LP; and
(e) the Borrower may make Restricted Payments to any direct or indirect parent entity for the sole purpose of such parent entity applying such Restricted Payment proceeds to make direct or indirect loan or capital contribution to Kingfisher; provided that such Restricted Payments shall be permitted only if (i) such Restricted Payments are made within six (6) months of the closing of the Merger Transaction, (ii) the aggregate amount of such Restricted Payments, when combined with all intercompany loans made (or to be made concurrently with any such Restricted Payment) by the Borrower to Kingfisher pursuant to Section 6.06(e), does not exceed $300,000,000, and (iii) both immediately before and after each such Restricted Payment is made, there are no Advances outstanding.
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Section 6.06 Investments . The Borrower shall not, nor shall it permit any of its Restricted Subsidiaries to, make or permit to exist any loans, advances, or capital contributions to, or make any investment in (including, without limitation, the making of any Acquisition), or purchase or commit to purchase any stock or other securities or evidences of indebtedness of or interests in any Person, except:
(a) Liquid Investments;
(b) trade and customer accounts receivable which are for goods furnished or services rendered in the ordinary course of business and are payable in accordance with customary trade terms;
(c) loans, advances, and investments by the Borrower in and to Restricted Subsidiaries and investments, loans and advances by Restricted Subsidiaries in and to other Restricted Subsidiaries and the Borrower;
(d) creation of any additional Restricted Subsidiaries in compliance with Section 6.16;
(e) intercompany loans from the Borrower to Kingfisher; provided that such loans shall be permitted only if (i) such intercompany loans are made within six (6) months of the closing of the Merger Transaction, (ii) the aggregate amount of such intercompany loans, when combined with all Restricted Payments made (or to be made concurrently with any such intercompany loan) pursuant to Section 6.05(e), does not exceed $300,000,000, and (iii) both immediately before and after each such intercompany loan is made, there are no Advances outstanding;
(f) investments in farm-outs, farm-ins, joint ventures, area of mutual interest agreements, gathering systems, processing systems, pipelines or other similar arrangements, in each case, so long as (i) such Investment is usual and customary in the oil and gas exploration and production business located within the geographic boundaries of the United States of America, (ii) such Investment is directly in Oil and Gas Properties or in an asset (such as pipelines, gathering systems or processing facilities) which services or otherwise directly impacts the Borrower’s and Restricted Subsidiaries Oil and Gas Properties, and (iii) the Borrower would otherwise be in compliance with Section 6.10 after giving effect to such Investment; and
(g) other investments, loans or advances not otherwise permitted by this Section 6.06 in an aggregate amount not to exceed $10,000,000 at any time.
Section 6.07 Affiliate Transactions . The Borrower shall not, nor shall it permit any of its Restricted Subsidiaries to, directly or indirectly, enter into or permit to exist any transaction or series of transactions (including, but not limited to, the purchase, sale, lease or exchange of Property, the making of any investment, the giving of any guaranty, the assumption of any obligation or the rendering of any service) with any of their Affiliates (other than transactions among the Borrower and its Restricted Subsidiaries) unless such transaction or series of transactions is on terms no less favorable to the Borrower or the Restricted Subsidiary, as applicable, than those that could be obtained in a comparable arm’s length transaction with a Person that is not such an Affiliate, except the restrictions in this Section 6.07 shall not apply to:
(a) that certain Management Services Agreement dated as of February 9, 2018, between the Borrower and High Mesa, Inc., substantially in such form provided to the Administrative Agent prior to the Effective Date;
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(b) that certain Management Services Agreement dated as of February 9, 2018, between the Borrower and Kingfisher, substantially in such form provided to the Administrative Agent prior to the Effective Date; and
(c) Restricted Payments permitted under Section 6.05.
Section 6.08 Compliance with ERISA . The Borrower shall not, nor shall it permit any of its Restricted Subsidiaries to, directly or indirectly, (a) engage in, or permit any Restricted Subsidiary to engage in, any transaction in connection with which the Borrower or any Controlled Group member could be subjected to either a civil penalty assessed pursuant to section 502(c), (i) or (l) of ERISA or a Tax imposed by Chapter 43 of Subtitle D of the Code; (b) terminate, or permit any Restricted Subsidiary to terminate, any Plan in a manner, or take any other action with respect to any Plan, which could result in any liability to the Borrower or any Controlled Group member to the PBGC; (c) fail to make, or permit any Restricted Subsidiary to fail to make, full payment when due of all amounts which, under the provisions of any Plan, agreement relating thereto or applicable law, the Borrower or any Controlled Group member is required to pay as contributions thereto; (d) permit to exist, or allow any Restricted Subsidiary to permit to exist, any accumulated funding deficiency within the meaning of Section 302 of ERISA or section 412 of the Code, whether or not waived, with respect to any Plan; (e) permit, or allow any Restricted Subsidiary to permit, the actuarial present value of the benefit liabilities (as “actuarial present value of the benefit liabilities” shall have the meaning specified in section 4041 of ERISA) under any Plan maintained by the Borrower or any Controlled Group member which is regulated under Title IV of ERISA to exceed the current value of the assets (computed on a plan termination basis in accordance with Title IV of ERISA) of such Plan allocable to such benefit liabilities; (f) assume an obligation to contribute to, or permit any Restricted Subsidiary to assume an obligation to contribute to, any Multiemployer Plan; (g) acquire, or permit any Restricted Subsidiary to acquire, an 80% or greater interest in any Person if such Person sponsors, maintains or contributes to, or at any time in the six-year period preceding such acquisition has sponsored, maintained, or contributed to, (1) any Multiemployer Plan, or (2) any other Plan that is subject to Title IV of ERISA, and in either case, the actuarial present value of the benefit liabilities under such Plan exceeds the current value of the assets (computed on a plan termination basis in accordance with Title IV of ERISA) of such Plan allocable to such benefit liabilities, and the withdrawal liability, if assessed, could reasonably be expected to result in a Material Adverse Change; (h) incur, or permit any Restricted Subsidiary to incur, a liability to or on account of a Plan under sections 515, 4062, 4063, 4064, 4201 or 4204 of ERISA; (i) assume an obligation to contribute to, or permit any Restricted Subsidiary to assume an obligation to contribute to, any employee welfare benefit plan, as defined in section 3(1) of ERISA, including, without limitation, any such plan maintained to provide benefits to former employees of such entities, that may not be terminated by such entities in their sole discretion without any material liability; (j) amend or permit any Restricted Subsidiary to amend, a Plan resulting in an increase in current liability such that the Borrower or any Controlled Group member is required to provide security to such Plan under section 401(a)(29) of the Code; or (k) permit to exist any occurrence of any Reportable Event (as defined in Title IV of ERISA), or any other event or condition, which presents a material (in the opinion of the Majority Lenders) risk of such a termination by the PBGC of any Plan that could reasonably be expected to result in a Material Adverse Change.
Section 6.09 Sale-and-Leaseback . The Borrower shall not, nor shall it permit any of its Restricted Subsidiaries to, sell or transfer to a Person any Property, whether now owned or hereafter acquired, if at the time or thereafter the Borrower or a Restricted Subsidiary shall lease as lessee such Property or any part thereof or other Property that the Borrower or a Restricted Subsidiary intends to use for substantially the same purpose as the Property sold or transferred, except for the sale-and-leaseback of furniture, fixtures, and equipment not to exceed $5,000,000.
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Section 6.10 Change of Business . The Borrower shall not, nor shall it permit any of its Restricted Subsidiaries to, make any material change in the character of its business as an independent oil and gas exploration and production company, nor will the Borrower or any Restricted Subsidiary operate or carry on business in any jurisdiction other than the United States, including the Gulf of Mexico.
Section 6.11 Organizational Documents, Name Change; Change in Accounting . The Borrower shall not, nor shall it permit any of its Restricted Subsidiaries to, amend, supplement, modify or restate their articles or certificate of incorporation or formation, limited partnership agreement, bylaws, limited liability company agreements, or other equivalent organizational documents or amend its name or change its jurisdiction of incorporation, organization or formation without prior written notice to, and, if such amendment, supplement, modification or restatement is adverse to the interest of any Lender Party, prior consent of, the Administrative Agent. The Borrower and the Guarantors shall not, and shall not permit any Restricted Subsidiary to, make any significant change in accounting treatment or reporting practices, except as required by GAAP (and then subject to Section 1.03), or change the fiscal year of the Borrower or of any Restricted Subsidiary.
Section 6.12 Use of Proceeds; Letters of Credit .
(a) The Borrower will not permit the proceeds of any Advance or Letters of Credit to be used for any purpose other than those permitted by Section 5.09. The Borrower will not engage in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U). Neither the Borrower nor any Person acting on behalf of the Borrower shall take, nor permit any of the Borrower’s Restricted Subsidiaries to take any action which might cause any of the Loan Documents to violate Regulation T, U or X or any other regulation of the Board of Governors of the Federal Reserve System or to violate Section 7 of the Securities Exchange Act of 1934 or any rule or regulation thereunder, in each case as now in effect or as the same may hereinafter be in effect, including without limitation, the use of the proceeds of any Advance or Letters of Credit to purchase or carry any margin stock in violation of Regulation T, U or X. The Borrower shall not permit more than 25% of the consolidated assets of the Borrower and its Restricted Subsidiaries to consist of “margin stock” (as each such term is defined or used, directly or indirectly, in Regulation U).
(b) The Borrower shall not request any Credit Extension, and the Borrower shall not use, and shall ensure that its Subsidiaries and its or their respective directors, officers, employees and agents shall not use, directly or indirectly, the proceeds of any Credit Extension (i) in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any Person in violation of any Anti-Corruption Laws, (ii) for the purpose of funding, financing or facilitating any activities, business or transaction of or with any Sanctioned Person, or in any Sanctioned Country, or (iii) in any manner that would result in the violation of any Sanctions applicable to any party hereto.
Section 6.13 Gas Imbalances, Take-or-Pay or Other Prepayments . The Borrower shall not, nor shall it permit any of its Restricted Subsidiaries to, allow on a net basis, gas imbalances, take-or-pay or other prepayments with respect to the Oil and Gas Properties of the Borrower or any Restricted Subsidiary that would require the Borrower or any Restricted Subsidiary to deliver their respective Hydrocarbons produced on a monthly basis from such Oil and Gas Properties at some future time without then or thereafter receiving full payment therefor other than that which do not result in the Borrower or any Restricted Subsidiary having net aggregate liability in excess of $10,000,000.
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Section 6.14 Limitation on Hedging .
(a) Speculative Purposes . The Borrower shall not, nor shall it permit any of its Restricted Subsidiaries to purchase, assume, or hold a speculative position in any commodities market or futures market or enter into any Hedge Contract for speculative purposes.
(b) Risk Management; Term . The Borrower shall not, nor shall it permit any of its Restricted Subsidiaries to be party to or otherwise enter into any Hedge Contract that (i) is entered into for reasons other than as a part of its normal business operations as a risk management strategy and/or hedge against changes resulting from market conditions related to the Borrower’s operations or (ii) is longer than five years in duration.
(c) Additional Limitations on Maximum Hedging . The Borrower shall not, nor shall it permit any of its Restricted Subsidiaries to, (x) enter into, execute or otherwise assume any Hydrocarbon Hedge Contract if the aggregate notional volumes of crude oil, natural gas and natural gas liquids (each measured separately) covered by the Borrower and its Restricted Subsidiaries’ Hydrocarbon Hedge Contracts (when aggregated with other all Hydrocarbon Hedge Contracts then in effect and after giving effect to the Hydrocarbon Hedge Contracts to be entered into on such date) would exceed the volume limitations set forth below and for the periods set forth below, and (y) as of each Test Date, allow the aggregate notional volumes of crude oil, natural gas and natural gas liquids (each measured separately) covered by the Borrower and its Restricted Subsidiaries’ Hydrocarbon Hedge Contracts (when aggregated with other all Hydrocarbon Hedge Contracts then in effect and after giving effect to the Hydrocarbon Hedge Contracts, if any, to be entered into on such date) to exceed the volume limitations set forth below and for the periods set forth below:
(i) for each full calendar month during the first twelve calendar months of the forthcoming sixty full calendar months following the date of determination, the greatest of (A) 75% of total Forecasted Production (from reserves of crude oil, natural gas and natural gas liquids (each measured separately)), (B) 85% of production from total projected Proven Reserves (from reserves of crude oil, natural gas and natural gas liquids (each measured separately)) (as detailed in the most recently delivered Engineering Report), and (C) 100% of the highest of the most recent three prior months’ actual production volume of crude oil, natural gas liquids and natural gas (each measured separately) (the “ Actual Production ”);
(ii) for each full calendar month during the calendar months following the first twelve calendar months and prior to the last thirty-six full calendar months of the forthcoming sixty full calendar months following the date of determination, the greater of (A) 75% of total Forecasted Production (from reserves of crude oil, natural gas and natural gas liquids (each measured separately)) and (B) 85% of production from total projected Proven Reserves (from reserves of crude oil, natural gas and natural gas liquids (each measured separately)) (as detailed in the most recently delivered Engineering Report); or
(iii) for each full calendar month during the last thirty-six full calendar months of the forthcoming sixty full calendar months following the date of determination, the greater of (A) 50% of total Forecasted Production (from reserves of crude oil, natural gas and natural gas liquids (each measured separately)) for such month and (B) 75% of production from total projected Proven Reserves (from reserves of crude oil, natural gas and natural gas liquids (each measured separately)) for such month (as detailed in the most recently delivered Engineering Report);
provided that, for purposes of determining compliance with the foregoing notional volume requirements, volumes attributable to basis differential hedges shall not be counted except to the extent that such basis differential volumes exceed the volumes associated with the underlying commodity hedges.
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If, as of any Test Date, the aggregate notional volumes of the Borrower’s and its Restricted Subsidiaries’ Hydrocarbon Hedge Contracts exceeds or would exceed the volume limitations set forth in the preceding subsections (i), (ii), or (iii), then such excess shall not result in a Default but instead the Borrower shall (A) furnish to Administrative Agent, by no later than 5:00 p.m. (Houston, Texas, time) on the fifth Business Day following such Test Date, a detailed calculation of such determination and such excess, in form, and substance reasonably satisfactory to Administrative Agent, and (B) eliminate and cure such excess by no later than thirty days after such Test Date (the “ Cure Period ”) by (1) furnishing to Administrative Agent an updated Internal Engineering Report in form and substance reasonably satisfactory to Administrative Agent, and (2) unless otherwise agreed by the Administrative Agent, terminating, creating off-setting positions or otherwise unwinding existing commodity hedge contracts such that, after giving effect thereto and calculated as of the last day of such Cure Period as if such day was a Test Date, no more than the percentage limitations of the Borrower’s aggregate Forecasted Production, production from total projected Proven Reserves, or Actual Production (as applicable) are subject to the Borrower’s and its Restricted Subsidiaries’ Hydrocarbon Hedge Contracts, in each case, from reserves of crude oil, natural gas and natural gas liquids (each measured separately). The Borrower’s failure to provide the information required in clause (A) above or to eliminate and cure such excess within the applicable Cure Period as provided in clause (B) above shall result in an immediate Event of Default.
(d) Hedge Events . The Borrower shall not, nor shall it permit any of its Restricted Subsidiaries to, effect a Hedge Event in respect of Hydrocarbon Hedge Contracts that were in effect at the time of the most recent Borrowing Base determination where the net marked to market economic effect of such Hedge Event (after taking into account the economic effect of any replacement Hydrocarbon Hedge Contract entered into by the end of the business day immediately succeeding the day on which such Hedge Event occurs (each, a “ Replacement Hedging Contract ”)) on the date thereof is negative, unless either (a) the net economic effect of such Hedge Event (after taking into account each Replacement Hedging Contract) on the Borrowing Base (as determined by the Administrative Agent) on the date thereof, when combined with (i) the corresponding net economic effects of all other Hedge Events consummated (and Replacement Hedging Contracts entered into) during the period since the last Borrowing Base redetermination date and (ii) the Borrowing Base value of the Borrowing Base Properties Disposed during such period, is less than or equal to five percent (5%) of the value of the Borrowing Base then in effect, or (b) if the net economic effect of such Hedge Event (after taking into account each Replacement Hedging Contracts) on the Borrowing Base (as determined by the Administrative Agent) on the date thereof, when combined with (i) the corresponding net economic effects of all other Hedge Events consummated (and Replacement Hedging Contracts entered into) during the period since the last Borrowing Base redetermination date and (ii) the Borrowing Base value of the Borrowing Base Properties Disposed, during such period, is greater than five percent (5%) of the Borrowing Base then in effect, the Borrowing Base shall be automatically reduced in accordance with Section 2.02(e)(ii).
(e) Acquisition Hedging . With respect to anticipated production of Hydrocarbons which are the subject of an Acquisition under which the Borrower or any Restricted Subsidiary is the purchaser, the Borrower and its Restricted Subsidiaries may enter into Hydrocarbon Hedge Contracts covering such anticipated production prior to effecting such Acquisition (regardless of the fact that such production is not yet owned by the Borrower or such Restricted Subsidiary) so long as (A) a binding purchase agreement has been executed by the Borrower or a Restricted Subsidiary and the counterparties to such Acquisition, (B) at the time such Hydrocarbon Hedge Contracts are entered into, the aggregate Unused Commitment Amount is greater than or equal to 10% of the aggregate Commitments then in effect, (C) the Borrower shall, and shall cause its Restricted Subsidiaries to terminate, unwind or otherwise liquidate all such Hydrocarbon Hedge Contracts upon the earliest of (1) the 90th day following the full execution of the purchase agreement related to such Acquisition if the Acquisition has not been fully consummated by such date, (2) within 3 Business Days after the date upon on which such purchase agreement is
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terminated by any party thereto, and (3) the date upon which the Borrower or any Restricted Subsidiary believes, with reasonable certainty, that such Acquisition will not be consummated, and (D) at the time such Hedge Contracts are entered into, but after giving pro forma effect to such Acquisition (i.e. assuming that such Acquisition had gone into effect prior to or as of the date such Hydrocarbon Hedge Contracts are entered into and Engineering Report, for purposes of calculating Current Production, includes any Engineering Report covering the reserves that are the subject of such Acquisition)), such Hedge Contracts would be permitted under subsection (b) above and such Hedge Contracts shall otherwise comply with the terms of this Agreement.
(f) Minimum Hedging Requirements . The Borrower shall not permit, and shall not permit any of its Restricted Subsidiaries to permit, as of the last day of each calendar month (the “ Measurement Date ”), the notional volumes of PDP Reserves covered by Hydrocarbon Hedge Contracts to which the Borrower or any Subsidiary Guarantor is then a party (other than basis differential swaps on volumes already hedged pursuant to other Hedge Contracts) to be less than 50% of the Anticipated Production of PDP Reserves for the twenty-four month period immediately following the Measurement Date; provided that , the hedge positions of such Hydrocarbon Hedge Contracts shall be calculated on an annual basis from such Measurement Date.
(g) Approved Counterparties . The Borrower shall not, and shall not permit any of its Restricted Subsidiaries to, enter into or maintain any Hydrocarbon Hedge Contract with any Person other than Hydrocarbon Hedge Contracts with an Approved Counterparty.
Section 6.15 [Reserved] .
Section 6.16 Additional Subsidiaries . The Borrower shall not, nor shall it permit any of its Restricted Subsidiaries to, create or acquire any additional Subsidiaries without (a) the prior written notice to the Administrative Agent and (b) being in compliance with Section 5.14.
Section 6.17 Current Ratio . The Borrower shall not permit the ratio of, as of the last day of each fiscal quarter of the Borrower, beginning with the fiscal quarter ending June 30, 2018, the Borrower’s and its consolidated Restricted Subsidiaries’ (it being understood that no amounts of the Unrestricted Subsidiaries of the Borrower shall be taken into account in calculating this ratio) (a) consolidated current assets to (b) consolidated current liabilities, to be less than 1.00 to 1.00. For purposes of this calculation (i) “current assets” shall include, as of the date of calculation, the Unused Commitment Amount (but only to the extent the Borrower is able to borrow under this Agreement and be pro forma compliance with its financial covenants herein) but shall exclude any asset representing a valuation account arising from the application of ASC 815 or 410, and (ii) “current liabilities” shall exclude, as of the date of calculation, the current portion of long–term Debt existing under this Agreement, and any liabilities representing a valuation account arising from the application of ASC 815 or 410.
Section 6.18 Leverage Ratio . The Borrower shall not permit, as of each fiscal quarter end, commencing with the fiscal quarter ending June 30, 2018, the Leverage Ratio to be greater than 4.00 to 1.00; provided that, so long as there are no outstanding Advances under this Agreement at a quarter end, the Leverage Ratio as of such fiscal quarter end will be calculated net of available, unrestricted and unencumbered cash and cash equivalents of the Borrower and Restricted Subsidiaries at such time that are held in accounts subject to an Account Control Agreement in favor of the Administrative Agent.
Section 6.19 [Reserved .]
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Section 6.20 Anti-Terrorism . The Borrower shall not permit, and shall not permit any of its Subsidiaries to (a) conduct any business or engage in making or receiving any contribution of funds, goods or services to or for the benefit of any Person described in Section 4.21 above, (b) deal in, or otherwise engage in any transaction relating to, any property or interests in property blocked pursuant to the Executive Order of any other Anti-Terrorism/Money Laundering Law or (c) engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, (x) any of the prohibitions set forth in any Anti-Terrorism/Money Laundering Law or (y) any prohibitions set forth in the rules or regulations issued by OFAC (and, in each case, the Borrower shall, and shall cause each Subsidiary to, promptly deliver or cause to be delivered to the Lenders any certification or other evidence requested from time to time by any Lender in its reasonable discretion, confirming the Loan Parties’ compliance with this Section 6.20).
Section 6.21 Account Payables . The Borrower shall not, nor shall it permit any of its Restricted Subsidiaries to, allow any of its trade payables or other accounts payable to be outstanding for more than 90 days (except (a) in cases where any such trade payable is being disputed in good faith and adequate reserves under GAAP have been established and (b) for such payables, which in the aggregate, do not exceed $3,000,000).
Section 6.22 Additional Subordinated Debt . The Borrower shall not, nor shall it permit any of its Restricted Subsidiaries to make any payments on account of principal (whether by redemption, purchase, retirement, defeasance, set-off or otherwise), interest, premiums and fees in respect of any Senior Unsecured Notes or any other Additional Subordinated Debt prior to the scheduled maturity thereof in any manner, or make any payment in violation of any subordination term applicable thereto, except that, the Borrower may refinance Senior Unsecured Notes with proceeds of permitted Refinancing Debt.
Section 6.23 Additional Liens . The Borrower shall not, nor shall it permit any of its Restricted Subsidiaries to, grant a Lien on any Property to secure any Additional Subordinated Debt that is otherwise permitted to be secured without first (a) giving fifteen days’ prior written notice to the Administrative Agent thereof and (b) granting to the Administrative Agent to secure the Obligations an Acceptable Security Interest in the same Property pursuant to Security Instruments in form and substance satisfactory to the Administrative Agent. In connection therewith, the Borrower shall, or shall cause its Restricted Subsidiaries to, execute and deliver such other additional closing documents, certificates and legal opinions as may reasonably be requested by the Administrative Agent
Section 6.24 Deposit Accounts; Securities Accounts . The Borrower shall not, nor shall it permit any of its Restricted Subsidiaries to, (a) maintain deposit accounts with any Person other than a Lender and which is subject to Account Control Agreements, or (b) maintain securities accounts that are not subject to Account Control Agreements; provided that, the requirements of the foregoing Section 6.24(a) shall not apply to (i) escrow accounts and third party cash pledges or deposits made in the ordinary course of business, in each case, held for the benefit of an unaffiliated third party pursuant to binding contractual agreements, and (ii) petty cash accounts with an amount not to exceed $1,000,000 in the aggregate; provided, however, (A) in the event the Borrower or any Restricted Subsidiary acquires any deposit account or securities account pursuant to an Acquisition, such Loan Party shall have thirty (30) days from the date of such Acquisition (or such later date as the Administrative Agent may agree to in its sole discretion) to deliver to the Administrative Agent an Account Control Agreement therefor, and (B) as to any deposit accounts or securities accounts held on the Effective Date that are not already subject to an Account Control Agreement (but including, for the avoidance, such accounts that are subject to “Control Agreements” as defined in the Existing Credit Agreement), such Loan Party shall have forty-five (45) days from the Effective Date (or such later date as the Administrative Agent may agree to in its sole discretion) to deliver to the Administrative Agent the Account Control Agreements therefor. The
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Borrower, for itself and on behalf of its Restricted Subsidiaries that are Loan Parties, hereby authorizes the Administrative Agent to deliver notices to the depositary banks and securities intermediaries pursuant to any Account Control Agreement under any one or more of the following circumstances: (i) following the occurrence of and during the continuation of an Event of Default, (ii) if the Administrative Agent reasonably believes that a requested transfer by the Borrower or any Restricted Subsidiary, as applicable, is a request to transfer any funds from any account to any other account of the Borrower or any Restricted Subsidiary that is not permitted under this Section 6.24, (iii) as otherwise agreed to in writing by the Borrower or any Restricted Subsidiary, as applicable, and (iv) as otherwise permitted by applicable Legal Requirement.
ARTICLE VII
EVENTS OF DEFAULT; REMEDIES
Section 7.01 Events of Default . The occurrence of any of the following events shall constitute an “Event of Default” under any Loan Document:
(a) Payment . Any Loan Party (i) shall fail to pay when due any principal hereunder or under any other Loan Document (including any requirement to Cash Collateralize and Reimbursement Obligations) or (ii) shall fail to pay, within three Business Days of when due, any interest, fees, reimbursements, indemnifications, or other amounts due and payable hereunder, under the Notes, or under any other Loan Document;
(b) Representation and Warranties . Any representation or warranty made or deemed to be made (i) by the Borrower or any of its Restricted Subsidiaries or any other Guarantor (or any of their respective officers) in this Agreement or in any other Loan Document or (ii) by the Borrower or any of its Restricted Subsidiaries or any other Guarantor (or any of their respective officers) in connection with this Agreement or any other Loan Document shall prove to have been incorrect in any material respect (except that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof) when made or deemed to be made;
(c) Covenant Breaches . The Parent Pledgors, the Borrower or any of its Restricted Subsidiaries or any other Guarantor shall (i) fail to perform or observe any term or covenant set forth in Section 2.05(b), Section 5.03 (with respect to the existence of the Borrower or any Restricted Subsidiary), or Article VI of this Agreement or (ii) fail to perform or observe any other term or covenant set forth in this Agreement or in any other Loan Document that is not covered by clause (i) above or any other provision of this Section 7.01 and such failure shall remain unremedied for a period of thirty days after the occurrence of such failure (such grace period to be applicable only in the event such Default can be remedied by corrective action of the Parent Pledgors, the Borrower or any of its Restricted Subsidiaries);
(d) Cross -Defaults . (i) The Borrower or any of its Restricted Subsidiaries shall fail to pay any principal of or premium or interest on its Debt that is outstanding in a principal amount of at least $15,000,000 individually or when aggregated with all such Debt of the Borrower or any of its Restricted Subsidiaries so in default (but excluding the Debt hereunder) when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt; (ii) any other event shall occur or condition shall exist under any agreement or instrument relating to Debt (including, without limitation, any event of default or termination event under any Hedge Contract) that is outstanding in a principal amount (or termination payment amount or similar amount) of at least $15,000,000 individually or when aggregated with all such Debt of the Borrower or such Restricted Subsidiary so in default, and shall continue after the applicable grace period, if any,
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specified in such agreement or instrument, if the effect of such event or condition is to accelerate, or to permit the acceleration of, the maturity of such Debt; or (iii) any such Debt in a principal amount of at least $15,000,000 individually or when aggregated with all such Debt of the Borrower or such Restricted Subsidiary shall be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment), prior to the stated maturity thereof;
(e) Insolvency . (i) The Borrower or any of its Restricted Subsidiaries or any other Guarantor shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; (ii) any proceeding shall be instituted by or against the Parent Pledgors, the Borrower or any of its Restricted Subsidiaries or any other Guarantor seeking to adjudicate it as bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any Debtor Relief Law, or seeking the entry of an order for relief or the appointment of a receiver, trustee or other similar official for it or for any substantial part of its Property and, in the case of any such proceeding instituted against the Borrower or any such Restricted Subsidiary or such Guarantor either such proceeding shall remain undismissed or unstayed for a period of 60 days or any of the actions sought in such proceeding shall occur; or (iii) the Parent Pledgors, the Borrower or any of its Restricted Subsidiaries or such Guarantor shall take any corporate action to authorize any of the actions set forth above in this paragraph (e);
(f) Judgments . Any judgment or order for the payment of money in excess of $15,000,000 shall be rendered against the Borrower or any of its Restricted Subsidiaries or any of their respective assets and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there shall be any period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect;
(g) Termination Events . Any Termination Event with respect to a Plan shall have occurred, and, 30 days after notice thereof shall have been given to the Borrower by the Administrative Agent, (i) such Termination Event shall not have been corrected and (ii) the Termination Event could reasonably be expected to result in a Material Adverse Change;
(h) Plan Withdrawals . The Borrower or any member of the Controlled Group as employer under a Multiemployer Plan shall have made a complete or partial withdrawal from such Multiemployer Plan and the plan sponsor of such Multiemployer Plan shall have notified such withdrawing employer that such employer has incurred a withdrawal liability in an annual amount that could reasonably be expected to result in a Material Adverse Change;
(i) Change in Control . A Change in Control shall have occurred;
(j) Loan Documents . Any provision of any Loan Document shall for any reason cease to be valid and binding on any Parent Pledgor, the Borrower or any of its Restricted Subsidiaries or any other Guarantor or any such Person shall so state in writing; or
(k) Security Instruments . (i) The Administrative Agent shall fail to have an Acceptable Security Interest in any portion of the Collateral in excess of $15,000,000.00 in the aggregate at any one time or (ii) any Security Instrument shall at any time and for any reason cease to create the Lien on the Property purported to be subject to such agreement in accordance with the terms of such agreement, or cease to be in full force and effect, or shall be contested by Parent Pledgors, the Borrower or any of its Restricted Subsidiaries except as a result of the sale or other Disposition of the applicable Collateral permitted under the Loan Documents.
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(l) Pledge of Borrower’s Equity Interest . The Administrative Agent shall have failed to have received each of the following on or prior to February 19, 2018 (or such later date not later than March 31, 2018 acceptable to the Administrative Agent in its sole discretion): (i) the Parent Pledge Agreement executed by each holder of Equity Interests of the Borrower; (ii) copies, certified by a Responsible Officer or the secretary or an assistant secretary of such equity holder of (A) the resolutions of the board of directors or managers (or other applicable governing body) of such Person approving the Parent Pledge Agreement and authorizing the entering into of the Parent Pledge Agreement, (B) the articles or certificate (as applicable) of incorporation (or organization) of such Person certified by the Secretary of State for the state of organization, (C) the bylaws or other governing documents of such Person, and (D) all other documents evidencing other necessary corporate action and governmental approvals, if any, with respect to the Parent Pledge Agreement; (iii) a certificate of a Responsible Officer of such Person certifying the names and true signatures of officers of such Person authorized to sign the Parent Pledge Agreement; (iv) certificate of good standing for such Person in the state in which such Person is organized which certificate shall be a recent date; (v) a certificate of the chief financial officer of such Person, in form and substance reasonably satisfactory to the Administrative Agent, attesting to the Solvency of such Person immediately before and after giving effect to the Parent Pledge Agreement; and (vi) a favorable opinion of such Person’s counsel dated as of the date of the Parent Pledge Agreement covering the matters discussed in Exhibit K and such other matters as the Administrative Agent, on behalf of the Lenders, may reasonably request.
Section 7.02 Optional Acceleration of Maturity . If any Event of Default (other than an Event of Default pursuant to paragraph (e) of Section 7.01) shall have occurred and be continuing, then, and in any such event,
(a) the Administrative Agent (i) shall at the request, or may with the consent, of the Majority Lenders, by notice to the Borrower, declare the obligation of each Lender and the Issuing Lenders to make extensions of credit hereunder, including making Advances and issuing, increasing, or extending Letters of Credit, to be terminated, whereupon the same shall forthwith terminate, and (ii) shall at the request, or may with the consent, of the Majority Lenders, by notice to the Borrower, declare all principal, interest, fees, reimbursements, indemnifications, and all other amounts payable under this Agreement, the Notes, and the other Loan Documents to be forthwith due and payable, whereupon all such amounts shall become and be forthwith due and payable in full, without notice of intent to demand, demand, presentment for payment, notice of nonpayment, protest, notice of protest, grace, notice of dishonor, notice of intent to accelerate, notice of acceleration, and all other notices, all of which are hereby expressly waived by the Borrower;
(b) the Borrower shall, on demand of the Administrative Agent at the request or with the consent of the Majority Lenders, deposit with the Administrative Agent into the Cash Collateral Account an amount of cash equal to the Letter of Credit Exposure as security for the Obligations; and
(c) the Administrative Agent shall at the request of, or may with the consent of, the Majority Lenders proceed to enforce its rights and remedies under the Security Instruments, the Guaranties, and any other Loan Document for the ratable benefit of itself, the Issuing Lenders and the Lenders by appropriate proceedings.
Section 7.03 Automatic Acceleration of Maturity . If any Event of Default pursuant to paragraph (e) of Section 7.01 shall occur,
(a) (i) the obligation of each Lender and the Issuing Lenders to make extensions of credit hereunder, including making Advances and issuing, increasing, or extending Letters of Credit, shall terminate, and (ii) all principal, interest, fees, reimbursements, indemnifications, and all other amounts
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payable under this Agreement, the Notes, and the other Loan Documents shall become and be forthwith due and payable in full, without notice of intent to demand, demand, presentment for payment, notice of nonpayment, protest, notice of protest, grace, notice of dishonor, notice of intent to accelerate, notice of acceleration, and all other notices, all of which are hereby expressly waived by the Borrower;
(b) the Borrower shall deposit with the Administrative Agent into the Cash Collateral Account an amount of cash equal to the outstanding Letter of Credit Exposure as security for the Obligations; and
(c) the Administrative Agent shall at the request of, or may with the consent of, the Majority Lenders proceed to enforce its rights and remedies under the Security Instruments, the Guaranties, and any other Loan Document for the ratable benefit of itself, the Issuing Lenders and the Lenders by appropriate proceedings.
Section 7.04 Right of Set -off . If an Event of Default shall have occurred and be continuing, each Lender, each Issuing Lender, and each of their respective Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by applicable Legal Requirement, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) at any time held and other obligations (in whatever currency) at any time owing by such Lender, such Issuing Lender, or any such Affiliate to or for the credit or the account of the Borrower or any other Loan Party against any and all of the obligations of the Borrower or such Loan Party now or hereafter existing under this Agreement or any other Loan Document to such Lender, such Issuing Lender or any of their respective Affiliates, irrespective of whether or not such Lender, such Issuing Lender, or any such Affiliate shall have made any demand under this Agreement or any other Loan Document and although such obligations of the Borrower or such Loan Party may be contingent or unmatured or are owed to a branch or office of such Lender, such Issuing Lender or such Affiliate different from the branch, office or Affiliate holding such deposit or obligated on such indebtedness; provided that in the event that any Defaulting Lender shall exercise any such right of setoff, (x) all amounts so set off shall be paid over immediately to the Administrative Agent for further application in accordance with the provisions of Section 7.06 and, pending such payment, shall be segregated by such Defaulting Lender from its other funds and deemed held in trust for the benefit of the Administrative Agent, the Issuing Lenders and the Lenders, and (y) the Defaulting Lender shall provide promptly to the Administrative Agent a statement describing in reasonable detail the Obligations owing to such Defaulting Lender as to which it exercised such right of setoff. The rights of each Lender, each Issuing Lender, and their respective Affiliates under this Section are in addition to other rights and remedies (including other rights of setoff) that such Lender, such Issuing Lender, or their respective Affiliates may have. Each Lender and such Issuing Lender agree to notify the Borrower and the Administrative Agent promptly after any such setoff and application; provided that the failure to give such notice shall not affect the validity of such setoff and application.
Section 7.05 Non-exclusivity of Remedies . No remedy conferred upon the Administrative Agent, the Issuing Lenders, and the Lenders is intended to be exclusive of any other remedy, and each remedy shall be cumulative of all other remedies existing by contract, at law, in equity, by statute or otherwise.
Section 7.06 Application of Proceeds . From and during the continuance of any Event of Default, any monies or Property actually received by the Administrative Agent pursuant to this Agreement or any other Loan Document shall be applied as determined by the Administrative Agent; provided that, if directed by the Majority Lenders, or if the Obligations have been accelerated pursuant to Section 7.02 or Section 7.03, or the Administrative Agent or any Lender has exercised any rights or remedies under this Agreement or any other Loan Document, or any other agreement with any Loan Party or any of its Restricted Subsidiaries that secures any of the Obligations, all payments received on account of the Obligations and all net proceeds from the enforcement of the Obligations shall be applied by the Administrative Agent as follows:
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(a) First , to payment of that portion of the Obligations constituting fees, indemnities, expenses and other amounts, including attorney fees, payable to the Administrative Agent in its capacity as such and the Issuing Lenders in their respective capacities as such, ratably among the Administrative Agent and the Issuing Lenders in proportion to the respective amounts described in this clause First payable to them;
(b) Second , to payment of that portion of the Obligations constituting fees, indemnities and other amounts (other than principal and interest) payable to the Lenders under the Loan Documents, including attorney fees, ratably among the Lenders in proportion to the respective amounts described in this clause Second payable to them;
(c) Third , to payment of that portion of the Obligations constituting accrued and unpaid interest on the Advances and Reimbursement Obligations, ratably among the Lenders in proportion to the respective amounts described in this clause Third payable to them;
(d) Fourth , to payment of that portion of the Obligations constituting unpaid principal of the Advances, Reimbursement Obligations and payment obligations then owing under Hedge Contracts and Banking Services Obligations, ratably among the Lenders, the Issuing Lenders, the Swap Counterparties and the holders of the Banking Service Obligations in proportion to the respective amounts described in this clause Fourth payable to them;
(e) Fifth , to the Administrative Agent for the pro rata account of the Issuing Lenders, to cash collateralize any Letter of Credit Obligations then outstanding; and
(f) Last , the balance, if any, after all of the Obligations have been indefeasibly paid in full, to the Borrower or as otherwise required by applicable Legal Requirement .
Notwithstanding the foregoing, (a) payments and collections received by the Administrative Agent from any Loan Party that is not a Qualified ECP Guarantor (and any proceeds received in respect of such Loan Party’s Collateral) shall not be applied to Excluded Swap Obligations with respect to any Loan Party, provided, however, that the Administrative Agent shall make such adjustments as it determines is appropriate with respect to payments and collections received from the other Loan Parties (or proceeds received in respect of such other Loan Parties’ Collateral) to preserve, as nearly as possible, the allocation to Obligations otherwise set forth above in this Section 7.06 (assuming that, solely for purposes of such adjustments, Obligations includes Excluded Swap Obligations), and (b) Banking Services Obligations and Obligations arising under Hedge Contracts may be excluded from the application described above if the Administrative Agent has not received written notice thereof, together with such supporting documentation as the Administrative Agent may request, from the applicable Secured Party as the case may be. Each Secured Party not a party to this Agreement that has given the notice contemplated by the preceding sentence shall, by such notice, be deemed to have acknowledged and accepted the appointment of the Administrative Agent pursuant to the terms of Article VIII for itself and its Affiliates as if a “Lender” party hereto.
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ARTICLE VIII
THE ADMINISTRATIVE AGENT AND THE ISSUING LENDERS
Section 8.01 Authorization and Action . Each Lender and each Issuing Lender hereby irrevocably (a) appoints Wells Fargo to act on its behalf as the Administrative Agent hereunder and under the other Loan Documents, and (b) authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto. The provisions of this Article VIII are solely for the benefit of the Lender Parties, and neither the Borrower nor any other Loan Party shall have rights as a third party beneficiary of any of such provisions, other than the rights expressly provided to the Borrower under Section 8.07. It is understood and agreed that the use of the term “agent” herein or in any other Loan Document (or any other similar term) with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable Legal Requirement. Instead such term is used as a matter of market custom, and is intended to create or reflect only an administrative relationship between contracting parties. The Administrative Agent shall not have any duties or obligations except those expressly set forth herein. Without limiting the generality of the foregoing, (i) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (ii) the Administrative Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby that the Administrative Agent is required to exercise in writing as directed by the Majority Lenders or Required Lenders, as applicable, provided that the Administrative Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose the Administrative Agent to liability or that is contrary to any Loan Document or applicable Legal Requirement, including for the avoidance of doubt any action that may be in violation of the automatic stay under any Debtor Relief Law or that may effect a forfeiture, modification or termination of property of a Defaulting Lender in violation of any Debtor Relief Law, and (iii) except as expressly set forth herein, the Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to any Loan Party or any Subsidiary that is communicated to or obtained by the bank serving as Administrative Agent or any of its Affiliates in any capacity.
The Administrative Agent shall not be liable for any action taken or not taken by it (i) with the consent or at the request of the Majority Lenders (or such other number or percentage of the Lenders or Secured Parties as shall be necessary, or as the Administrative Agent shall believe in good faith shall be necessary, under the circumstances as provided in Sections 9.01 and Article VII) or (ii) in the absence of its own gross negligence or willful misconduct as determined by a court of competent jurisdiction by final and nonappealable judgment. The Administrative Agent shall be deemed not to have knowledge of any Default unless and until notice describing such Default is given to the Administrative Agent in writing by the Borrower, a Lender or an Issuing Lender. In the event that the Administrative Agent receives such a notice of the occurrence of a Default, the Administrative Agent shall (subject to Section 9.01) take such action with respect to such Default or Event of Default as shall reasonably be directed by the Majority Lenders, provided that, unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action) with respect to such Default as it shall deem advisable in the best interest of the Lender Parties.
The Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any recital, statement, warranty or representation (whether written or oral) made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or
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the occurrence of any Default, (iv) the value, validity, enforceability, effectiveness, sufficiency or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document, (v) the inspection of, or to inspect, the Property (including the books and records) of any Loan Party or any Subsidiary or Affiliate thereof, (vi) the satisfaction of any condition set forth in Article III or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent, or (vii) any litigation or collection proceedings (or to initiate or conduct any such litigation or proceedings) under any Loan Document unless requested by the Majority Lenders in writing and its receives indemnification satisfactory to it from the Lenders.
Section 8.02 Administrative Agent’s Reliance, Etc . Neither the Administrative Agent nor any of its directors, officers, agents, or employees shall be liable for any action taken or omitted to be taken ( INCLUDING THE ADMINISTRATIVE AGENT’S OWN NEGLIGENCE ) by it or them under or in connection with this Agreement or the other Loan Documents, except for its or their own gross negligence or willful misconduct. Without limitation of the generality of the foregoing, the Administrative Agent: (a) may treat the payee of any Note as the holder thereof until the Administrative Agent receives written notice of the assignment or transfer thereof signed by such payee and in form satisfactory to the Administrative Agent; (b) may consult with legal counsel (including counsel for the Borrower), independent public accountants, and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants, or experts; (c) makes no warranty or representation to any Lender and shall not be responsible to any Lender for any statements, warranties, or representations made in or in connection with this Agreement or the other Loan Documents; (d) shall not be responsible to any Lender for the due execution, legality, validity, enforceability, genuineness, sufficiency, or value of this Agreement or any other Loan Document; and (e) shall incur no liability under or in respect of this Agreement or any other Loan Document by acting upon any notice, consent, certificate, or other instrument or writing (which may be by telecopier) believed by it to be genuine and signed or sent by the proper party or parties. The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document, writing or other communication (including any electronic message, Internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon. In determining compliance with any condition hereunder to the making of a Credit Extension or any Conversion or continuance of an Advance that by its terms must be fulfilled to the satisfaction of a Lender or an Issuing Lender, the Administrative Agent may presume that such condition is satisfactory to such Lender or such Issuing Lender unless the Administrative Agent shall have received notice to the contrary from such Lender or such Issuing Lender prior to the making of such Credit Extension or Conversion or continuance of an Advance. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and the Administrative Agent shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.
Section 8.03 The Administrative Agent and Its Affiliates . With respect to its Commitment, the Advances made by it, and the Notes issued to it, the Administrative Agent shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though it were not the Administrative Agent. The term “Lender” or “Lenders” shall, unless otherwise expressly indicated, include the Administrative Agent in its individual capacity. The Administrative Agent and its Affiliates may accept deposits from, lend money to, act as trustee under indentures of, and generally engage in any kind of business with, any Loan Party or any of its Subsidiaries, and any Person who may do business with or own securities of any Loan Party or any such Subsidiary, all as if the Administrative Agent were not an agent hereunder and without any duty to account therefor to the Lenders.
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Section 8.04 Subagents . The Administrative Agent may perform any and all of its duties and exercise its rights and powers hereunder or under any other Loan Document by or through any one or more sub-agents appointed by it. The Administrative Agent and any such sub-agent may perform any and all of its duties and exercise its rights and powers by or through their respective Related Parties. The exculpatory provisions of this Article VIII shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent. The Administrative Agent shall not be responsible for the negligence or misconduct of any sub-agents except to the extent that a court of competent jurisdiction determines in a final and non-appealable judgment that the Administrative Agent acted with gross negligence or willful misconduct in the selection of such sub-agents.
Section 8.05 Lender Credit Decision . Each Lender Party acknowledges and agrees that it has, independently and without reliance upon the Administrative Agent or any other Lender Party or any of their Related Parties and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender Party also acknowledges and agrees that it will, independently and without reliance upon the Administrative Agent or any other Lender Party or any of their Related Parties, and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder. Except for notices, reports, and other documents and information expressly required to be furnished to the Lenders or the Issuing Lenders by the Administrative Agent hereunder and for other information in the Administrative Agent’s possession which has been requested by a Lender and for which such Lender pays the Administrative Agent’s expenses in connection therewith, the Administrative Agent shall not have any duty or responsibility to provide any Lender or any Issuing Lender with any credit or other information concerning the affairs, financial condition, or business of any Loan Party or any of its Subsidiaries or Affiliates that may come into the possession of the Administrative Agent or any of its Affiliates.
Section 8.06 Indemnification . THE LENDERS SEVERALLY AGREE TO INDEMNIFY THE ADMINISTRATIVE AGENT AND EACH ISSUING LENDER AND EACH AFFILIATE THEREOF AND THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, AND AGENTS (TO THE EXTENT NOT REIMBURSED BY THE BORROWER), ACCORDING TO THEIR RESPECTIVE PRO RATA SHARES FROM AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES, OR DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER WHICH MAY BE IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST THE ADMINISTRATIVE AGENT AND SUCH ISSUING LENDER IN ANY WAY RELATING TO OR ARISING OUT OF THIS AGREEMENT OR ANY ACTION TAKEN OR OMITTED BY THE ADMINISTRATIVE AGENT OR SUCH ISSUING LENDER UNDER THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT ( INCLUDING THE ADMINISTRATIVE AGENT’S AND SUCH ISSUING LENDER’S OWN NEGLIGENCE ), AND INCLUDING, WITHOUT LIMITATION, ENVIRONMENTAL CLAIMS AND ANY LIABILITIES ARISING UNDER ENVIRONMENTAL LAW, PROVIDED THAT NO LENDER SHALL BE LIABLE FOR ANY PORTION OF SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES, OR DISBURSEMENTS RESULTING FROM THE ADMINISTRATIVE AGENT’S OR SUCH ISSUING LENDER’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT AS DETERMINED BY A COURT OF COMPETENT JURISDICTION BY FINAL AND NON-APPEALABLE JUDGMENT. WITHOUT LIMITATION OF THE FOREGOING, EACH LENDER AGREES TO REIMBURSE THE ADMINISTRATIVE AGENT AND EACH ISSUING LENDER PROMPTLY UPON DEMAND FOR ITS RATABLE SHARE OF ANY OUT-OF-POCKET EXPENSES (INCLUDING COUNSEL FEES)
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INCURRED BY THE ADMINISTRATIVE AGENT IN CONNECTION WITH THE PREPARATION, EXECUTION, DELIVERY, ADMINISTRATION, MODIFICATION, AMENDMENT, OR ENFORCEMENT (WHETHER THROUGH NEGOTIATIONS, LEGAL PROCEEDINGS, OR OTHERWISE) OF, OR LEGAL ADVICE IN RESPECT OF RIGHTS OR RESPONSIBILITIES UNDER, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, TO THE EXTENT THAT THE ADMINISTRATIVE AGENT OR SUCH ISSUING LENDER IS NOT REIMBURSED FOR SUCH BY THE BORROWER. Notwithstanding the foregoing, the preceding provisions of this Section 8.06 shall apply only to liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements that were incurred by or asserted against the Administrative Agent or any Issuing Lender in their respective capacities as such, or against any Affiliate thereof, or any of such Person’s or Affiliate’s respective directors, officers, employees, or agents, acting for the Administrative Agent or Issuing Lender in connection with such capacity. To the extent that the indemnity obligations provided in this Section 8.06 are for the benefit of the Administrative Agent as the named secured party under the Liens granted under the Security Instruments, each Lender hereby agrees that if such Lender ceases to be a Lender hereunder but obligations owing to such Lender or an Affiliate of such Lender continue to be secured by such Liens, then such Lender shall continue to be bound by the provisions of this Section 8.06 until such time as such obligations have been satisfied or terminated in full and subject to the terms of Section 8.10(b). In such event, in determining the pro rata shares under this Section 8.06, the Lenders shall include the aggregate amount (giving effect to any netting agreements) that would be owing to such Swap Counterparty if such Hedge Contracts were terminated at the time of determination.
Section 8.07 Successor Administrative Agent and Issuing Lenders .
(a) The Administrative Agent and each Issuing Lender may at any time give notice of its resignation to the other Lender Parties and the Borrower. Upon receipt of any such notice of resignation, (i) the Majority Lenders shall have the right, with the prior written consent of the Borrower (which consent is not required if an Event of Default has occurred and is continuing and which consent shall not be unreasonably withheld or delayed), to appoint, as applicable, a successor Administrative Agent (which shall be a Lender or such other Person appointed by the Majority Lenders) or a successor Issuing Lender (which shall be a Lender). If no such successor Administrative Agent or Issuing Lender shall have been so appointed and shall have accepted such appointment within 30 days after the retiring Administrative Agent or Issuing Lender gives notice of its resignation (or such earlier day as shall be agreed by the applicable Majority Lenders) (the “ Resignation Effective Date ”), then the retiring Administrative Agent or Issuing Lender, as applicable, may on behalf of the Lenders and Issuing Lender, appoint a successor Administrative Agent or Issuing Lender meeting the qualifications set forth above. Whether or not a successor has been appointed, such resignation by the Administrative Agent or any Issuing Lender shall become effective in accordance with such notice on the Resignation Effective Date.
(b) If the Person serving as Administrative Agent is a Defaulting Lender pursuant to clause (d) of the definition thereof, the Majority Lenders may, to the extent permitted by applicable Legal Requirement, by notice in writing to the Borrower and such Person remove such Person as Administrative Agent and, in consultation with the Borrower, appoint a successor. If no such successor shall have been so appointed by applicable Majority Lenders and shall have accepted such appointment within 30 days (or such earlier day as shall be agreed by the applicable Majority Lenders) (the “ Removal Effective Date ”), then such removal shall nonetheless become effective in accordance with such notice on the Removal Effective Date.
(c) With effect from the Resignation Effective Date or the Removal Effective Date (as applicable) (i) the retiring or removed Administrative Agent or Issuing Lender, as applicable, shall be discharged from its duties and obligations as the Administrative Agent and Issuing Lender hereunder and under the other Loan Documents (except that (v) in the case of any collateral security held by the
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Administrative Agent on behalf of the Lenders or the Issuing Lenders under any of the Loan Documents, the retiring Administrative Agent shall continue to hold such collateral security until such time as a successor Administrative Agent is appointed and (z) the retiring Issuing Lender shall remain the Issuing Lender with respect to any Letters of Credit outstanding on the effective date of its resignation and the provisions affecting such Issuing Lender with respect to such Letters of Credit shall inure to the benefit of the retiring Issuing Lender until the termination of all such Letters of Credit) and (ii) all payments, communications and determinations provided to be made by, to or through the retiring or removed Administrative Agent or Issuing Lender, as applicable, shall instead be made by or to each applicable class of Lenders, until such time as the Majority Lenders appoint a successor Administrative Agent or Issuing Lender as provided for above in this paragraph. Upon the acceptance of a successor’s appointment as Administrative Agent or Issuing Lender, as applicable, hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring or removed Administrative Agent or Issuing Lender, as applicable, and the retiring or removed Administrative Agent or Issuing Lender, as applicable, shall be discharged from all of its duties and obligations hereunder or under the other Loan Documents. The fees payable by the Borrower to a successor Administrative Agent or Issuing Lender, as applicable, shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the retiring or removed Administrative Agent’s or Issuing Lender’s resignation or removal hereunder and under the other Loan Documents, the provisions of this Article VIII and Section 9.04, Section 9.07, Section 8.06 and Section 2.14(c) shall continue in effect for the benefit of such retiring or removed Administrative Agent and Issuing Lender, as applicable, their respective sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the retiring or removed Administrative Agent or Issuing Lender, as applicable, was acting as Administrative Agent or Issuing Lender, as applicable.
Section 8.08 No Other Duties, etc . Anything herein to the contrary notwithstanding, none of the lead arranger, documentation agent, syndication agent or other titles to Lenders or Affiliates of a Lender which may be listed on the cover page hereof shall have any powers, duties or responsibilities under this Agreement or any of the other Loan Documents, except in its capacity, as applicable, as the Administrative Agent, a Lender or an Issuing Lender hereunder.
Section 8.09 Administrative Agent May File Proofs of Claim . In case of the pendency of any proceeding under any Debtor Relief Law or any other judicial proceeding relative to any Loan Party or any of its Restricted Subsidiaries, the Administrative Agent (irrespective of whether the principal of any Loan shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on the Borrower) shall be entitled and empowered, by intervention in such proceeding or otherwise: (a) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Advances and all other Debt that is owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders and the Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders and the Administrative Agent and their respective agents and counsel and all other amounts due the Lenders and the Administrative Agent under Section 9.04 and Section 9.07) allowed in such judicial proceeding; and (b) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to make such payments to the Administrative Agent and, in the event that the Administrative Agent shall consent to the making of such payments directly to the Lenders, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent under Section 9.04 and Section 9.07. Nothing contained herein shall be deemed to authorize the Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender any plan of reorganization, arrangement, adjustment or composition affecting the Debt or the rights of any Lender or to authorize the Administrative Agent to vote in respect of the claim of any Lender in any such proceeding.
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Section 8.10 Collateral Matters .
(a) Administrative Agent is authorized on behalf of the Secured Parties, without the necessity of any notice to or further consent from the Secured Parties, from time to time, to take any actions with respect to any Collateral or Security Instruments which may be necessary to perfect and maintain Acceptable Security Interests in and Liens upon the Collateral granted pursuant to the Security Instruments. Administrative Agent is further authorized on behalf of the Secured Parties, without the necessity of any notice to or further consent from the Secured Parties, from time to time, to take any action (other than enforcement actions requiring the consent of, or request by, the Majority Lenders as set forth in Section 7.02 or Section 7.03 above) in exigent circumstances as may be reasonably necessary to preserve any rights or privileges of the Secured Parties under the Loan Documents or applicable law. By accepting the benefit of the Liens granted pursuant to the Security Instruments, each Secured Party not party hereto hereby agrees to the terms of this paragraph (a).
(b) Each Secured Party irrevocably authorizes Administrative Agent to release any Lien granted to or held by the Administrative Agent upon any Collateral and release any Guarantor from its Guaranty: (i) upon termination of the Commitments, termination or expiration of all Letters of Credit (other than Letters of Credit as to which other arrangements satisfactory to the Administrative Agent and the applicable Issuing Lender have been made), termination of all Hedge Contracts with Swap Counterparties that are secured by the Liens on the Collateral (other than Hedge Contracts with any Swap Counterparty with respect to which other arrangements satisfactory to the Swap Counterparty and the Borrower have been made; provided that, unless a Swap Counterparty notifies the Administrative Agent in writing at least 2 Business Days prior to the expected termination of the Commitments that such arrangements have not been made, then solely for purposes of this clause (b), it shall be deemed that such satisfactory arrangements have been made), and payment in full of all Obligations (other than Obligations arising under Hedge Contracts with any Swap Counterparty with respect to which other arrangements satisfactory to the Swap Counterparty and the Borrower have been made; provided that, unless a Swap Counterparty notifies the Administrative Agent in writing at least 2 Business Days prior to the expected termination of the Commitments that such arrangements have not been made, then solely for purposes of this clause (b), it shall be deemed that such satisfactory arrangements have been made); (ii) as to release of Collateral, constituting Property sold or to be sold or otherwise disposed of as part of or in connection with any Disposition permitted under this Agreement or the other Loan Documents; (iii) as to release of Collateral, constituting Property in which the Borrower or any Restricted Subsidiary owned no interest at the time the Lien was granted or at any time thereafter (other than as a result of a transaction, event or circumstance that is prohibited hereunder); (iv) as to release of Collateral, constituting Property leased to the Borrower or any Restricted Subsidiary under a lease which has expired or has been terminated in a transaction permitted under this Agreement or is about to expire and which has not been, and is not intended by the Borrower or such Restricted Subsidiary to be, renewed or extended; (v) as to a release of a Subsidiary from its respective Guaranty, upon such Subsidiary ceasing to be a Restricted Subsidiary of the Borrower pursuant to a transaction permitted hereunder; or (vi) if approved, authorized or ratified in writing by the applicable Majority Lenders, Required Lenders or all the Lenders, as the case may be, as required by Section 9.01. Upon the request of the Administrative Agent at any time, the Secured Parties will confirm in writing the Administrative Agent’s authority to release particular types or items of Collateral pursuant to this Section 8.10. By accepting the benefit of the Liens granted pursuant to the Security Instruments, each Secured Party not party hereto hereby agrees to the terms of this paragraph (b).
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(c) Notwithstanding anything contained in any of the Loan Documents to the contrary, the Borrower, the Administrative Agent, and each Secured Party hereby agree that no Secured Party shall have any right individually to realize upon any of the Collateral or to enforce the Guaranty, it being understood and agreed that all powers, rights and remedies hereunder and under the Security Instruments may be exercised solely by Administrative Agent on behalf of the Secured Parties in accordance with the terms hereof. By accepting the benefit of the Liens granted pursuant to the Security Instruments, each Secured Party not party hereto hereby agrees to the terms of this paragraph (c).
Section 8.11 Credit Bidding .
(a) The Administrative Agent, on behalf of itself and the Secured Parties, shall have the right, at the direction of the Majority Lenders, to credit bid and purchase for the benefit of the Administrative Agent and the Secured Parties all or any portion of Collateral at any sale thereof conducted by the Administrative Agent under the provisions of the UCC, including pursuant to Sections 9-610 or 9-620 of the UCC, at any sale thereof conducted under the provisions of the United States Bankruptcy Code, including Section 363 thereof, or a sale under a plan of reorganization, or at any other sale or foreclosure conducted by the Administrative Agent (whether by judicial action or otherwise) in accordance with Legal Requirements.
(b) Each Secured Party hereby agrees that, except as otherwise provided in any Loan Documents or with the written consent of the Administrative Agent and the Majority Lenders, it will not take any enforcement action, accelerate obligations under any Loan Documents, or exercise any right that it might otherwise have under Legal Requirements to credit bid at foreclosure sales, UCC sales or other similar Dispositions of Collateral; provided that, for the avoidance of doubt, this subsection (b) shall not limit the rights of (i) any Swap Counterparty to terminate any Hedge Contract or net out any resulting termination values, or (ii) any Banking Service Provider to terminate any Banking Services or set off against any deposit accounts. By accepting the benefit of the Liens granted pursuant to the Security Instruments, each Secured Party not party hereto hereby agrees to the terms of this Section 8.11.
ARTICLE IX
MISCELLANEOUS
Section 9.01 Amendments, Etc . No amendment of, consent to depart from, or waiver of, any provision of this Agreement, the Notes, or any other Loan Document (other than the Fee Letters), shall in any event be effective unless the same shall be in writing and signed by the Majority Lenders and the Borrower, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided that:
(a) no amendment, waiver or consent shall, without the consent of each Lender directly and adversely affected thereby, (i) reduce the amount of, or rate of interest on, the Advances (other than (x) the Default Rate of interest on the Advances which may be reduced or waived by the Majority Lenders, and (y) changes to the definitions of “Eurodollar Base Rate” to accommodate a new benchmark replacement rate which may be made pursuant to agreement or agreements in writing entered into by the Borrower and the Majority Lenders or by the Borrower and the Administrative Agent with the consent of the Majority Lenders), (ii) reduce the amount of any fees or other amounts payable hereunder or under any other Loan Document (other than those specifically addressed above in this Section 9.01), (iii) amend, waive or consent to depart from any of the conditions specified in Section 3.01 (other than such conditions which are expressly noted to be subject to Majority Lenders’ approval), (iv) increase the Maximum Credit Amount, the Elected Commitment Amount or other obligations of any Lender, (v) postpone or extend any date fixed for any payment of any fees or other amounts payable hereunder
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(other than those otherwise specifically addressed in this Section 9.01), including an extension of the Maturity Date or the Commitment Termination Date, (vi) amend Section 2.07(a)(ii) in any manner to permit an Expiration Date to be beyond the then scheduled Maturity Date, or (vii) amend, waive or consent to depart from Section 2.11 or Section 7.06;
(b) no amendment, waiver or consent shall, unless the same shall be in writing and signed by each Lender, (i) except as permitted under Section 8.10(b), release all or substantially all of the Guarantors from their obligations under any Guaranty or, except as specifically provided in the Loan Documents and as a result of transactions permitted by the terms of this Agreement, release all or substantially all of the Collateral; (ii) increase the Borrowing Base, (iii) change Section 2.04(d) of this Agreement in a manner that would alter the pro rata nature thereof, or (iv) amend the definitions of “Majority Lenders”, “Required Lenders” or “Credit Exposure”, this Section 9.01 or any other provision in any Loan Document specifying the number or percentage of Lenders required to waive, amend or modify any rights thereunder (other than as provided in clause (c) below);
(c) no amendment, waiver or consent shall, without the consent of the Required Lenders, (i) decrease or maintain the Borrowing Base or (ii) amend, waive or consent to depart from any other provision in this Agreement which expressly requires the consent of, or action or waiver by, the Required Lenders, including, without limitation, Section 2.02 (except for such provisions in Section 2.02 which expressly require consent of all the Lenders);
(d) no amendment, waiver, or consent shall, unless in writing and signed by the Administrative Agent in addition to the Lenders required above to take such action, affect the rights or duties of the Administrative Agent under this Agreement or any other Loan Document; and
(e) no amendment, waiver or consent shall, unless in writing and signed by the applicable Issuing Lender in addition to the Lenders required above to take such action, affect the rights or duties of such Issuing Lender under this Agreement or any other Loan Document.
No Lender or any Affiliate of a Lender shall have any voting rights under any Loan Document as a result of the existence of obligations owed to it under Hedge Contracts or Banking Services Obligations.
Section 9.02 Notices, Etc . All notices and other communications (other than Notices of Borrowing and Notices of Conversion or Continuation, which are governed by Article II of this Agreement) shall be in writing and hand delivered with written receipt, telecopied, sent by facsimile, sent by electronic mail as permitted under paragraph (b) below (with, in the case of electronic mail, a hard copy sent as otherwise permitted in this Section 9.02), sent by a nationally recognized overnight courier, or sent by certified mail, return receipt requested as follows: if to a Loan Party, as specified on Schedule I , if to the Administrative Agent or an Issuing Lender, at its credit contact specified under its name on Schedule I (or as to any Issuing Lender appointed after the Effective Date, to its credit contact specified in its Administrative Questionnaire as a Lender), and if to any Lender at its credit contact specified in its Administrative Questionnaire. Each party may change its notice address by written notification to the other parties. All such notices and communications shall be effective when delivered, except that (i) notices and communications to the Administrative Agent, any Lender or any Issuing Lender pursuant to Article II shall not be effective until received and, in the case of facsimile delivered under Article II, such receipt is confirmed by the Administrative Agent, such Lender or such Issuing Lender, as applicable, verbally or in writing and (ii) notices delivered through electronic communications to the extent provided in paragraph (b) below, shall be effective as provided in said paragraph (b).
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(a) Electronic Communications . Notices and other communications to the Lenders and the Issuing Lenders hereunder may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved by the Administrative Agent, provided that the foregoing shall not apply to notices to any Lender or any Issuing Lender pursuant to Article II if such Lender or such Issuing Lender, as applicable, has notified the Administrative Agent that is incapable of receiving notices under such Article by electronic communication. The Administrative Agent or the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it, provided that approval of such procedures may be limited to particular notices or communications. Unless the Administrative Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement), and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor; provided that, for both clauses (i) and (ii) above, if such notice, email or other communication is not sent during the normal business hours of the recipient, such notice, email or other communication shall be deemed to have been sent at the opening of business on the next business day for the recipient.
(b) Platform .
(i) Each Loan Party agrees that the Administrative Agent may, but shall not be obligated to, make the Communications (as defined below) available to the Issuing Lender and the other Lenders by posting the Communications on Debt Domain, Intralinks, Syndtrak or a substantially similar electronic transmission system (the “ Platform ”).
(ii) The Platform is provided “as is” and “as available.” The Agent Parties (as defined below) do not warrant the adequacy of the Platform and expressly disclaim liability for errors or omissions in the Communications. No warranty of any kind, express, implied or statutory, including, without limitation, any warranty of merchantability, fitness for a particular purpose, non-infringement of third-party rights or freedom from viruses or other code defects, is made by any Agent Party in connection with the Communications or the Platform. In no event shall the Administrative Agent or any of its Related Parties (collectively, the “ Agent Parties ”) have any liability to the Borrower or the other Loan Parties, any Lender or any other Person or entity for damages of any kind, including, without limitation, direct or indirect, special, incidental or consequential damages, losses or expenses (whether in tort, contract or otherwise) arising out of the Borrower’s, any Loan Party’s or the Administrative Agent’s transmission of communications through the Platform. “ Communications ” means, collectively, any notice, demand, communication, information, document or other material provided by or on behalf of any Loan Party pursuant to any Loan Document or the transactions contemplated therein which is distributed to the Administrative Agent, any Lender or any Issuing Lender by means of electronic communications pursuant to this Section, including through the Platform.
Section 9.03 No Waiver; Remedies . No failure on the part of any Lender, the Administrative Agent, or any Issuing Lender to exercise, and no delay in exercising, any right hereunder or under any Note shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The making of a Loan or issuance of a Letter of Credit shall not be construed as a waiver of any Default, regardless of whether the Administrative Agent, any Lender or any Issuing Lender may have had notice or knowledge of such Default at the time. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.
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Section 9.04 Costs and Expenses . The Borrower agrees to pay on demand (a) all reasonable out-of-pocket costs and expenses of the Administrative Agent in connection with the preparation, execution, waiver, delivery, administration, modification, and amendment of this Agreement, the Notes, the Guaranties, and the other Loan Documents including, without limitation, the reasonable fees and reasonable out-of-pocket expenses of counsel for the Administrative Agent with respect to advising the Administrative Agent as to its rights and responsibilities under this Agreement, and (b) all out-of-pocket costs and expenses, if any, of the Administrative Agent, each Issuing Lender, and each Lender (including, without limitation, counsel fees and expenses of the Administrative Agent, each Issuing Lender, and each Lender) incurred in connection with the enforcement of its rights or incurred during the existence of a Default in connection with the protection if its rights (in any event, whether through negotiations, legal proceedings, or otherwise) (A) in connection with this Agreement, the Notes, the Guaranties and the other Loan Documents, including its rights under this Section, following an Event of Default or (B) in connection with the Advances made or Letters of Credit issued hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Advances or Letters of Credit.
Section 9.05 Binding Effect . This Agreement shall become effective as provided in Section 3.01 and thereafter shall be binding upon and inure to the benefit of the Borrower, the Administrative Agent, each Issuing Lender, and each Lender and their respective successors and assigns, except that the Borrower shall not have the right to assign its rights or delegate its duties under this Agreement or any interest in this Agreement without the prior written consent of each Lender.
Section 9.06 Successors and Assigns .
(a) Successors and Assigns Generally . The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that neither the Borrower nor any other Loan Party may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of the Administrative Agent and each Lender, and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an assignee in accordance with the provisions of paragraph (b) of this Section, (ii) by way of participation in accordance with the provisions of paragraph (d) of this Section, or (iii) by way of pledge or assignment of a security interest subject to the restrictions of paragraph (e) of this Section (and any other attempted assignment or transfer by any party hereto shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in paragraph (d) of this Section and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.
(b) Assignment by Lenders . Any Lender may at any time assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Advances at the time owing to it); provided that any such assignment shall be subject to the following conditions:
(i) Minimum Amounts . The aggregate amount of the Commitment (which for this purpose includes Advances outstanding thereunder) or, if the applicable Commitment is not then in effect, the principal outstanding balance of the Advances of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent or, if “ Trade Date ” is specified in the Assignment and Acceptance, as of the Trade Date) shall not be less than $5,000,000, unless (A) such assignment is to a Lender, and Affiliate of a Lender, or an Approved Fund or (B) each of the Administrative Agent and, so long as no as no Event of Default has occurred and is continuing, the Borrower otherwise consents (each such consent not to be unreasonably withheld or delayed).
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(ii) Proportionate Amounts . Each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement with respect to the Advance or the Commitment assigned.
(iii) Required Consents . No consent shall be required for any assignment except to the extent required by paragraph (b)(i) of this Section and, in addition:
(A) the consent of the Borrower (such consent not to be unreasonably withheld or delayed) shall be required unless (x) an Event of Default has occurred and is continuing at the time of such assignment or (y) such assignment is to a Lender, an Affiliate of a Lender or an Approved Fund; provided that the Borrower shall be deemed to have consented to any such assignment unless it shall object thereto by written notice to the Administrative Agent within 5 Business Days after having received notice thereof;
(B) the consent of the Administrative Agent shall be required for assignments to a Person that is not a Lender; and
(C) the consent of each Issuing Lender shall be required for any such assignment to a Person that is not a Lender.
(iv) Assignment and Acceptance . The parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance, together with a processing and recordation fee of $5,000; provided that the Administrative Agent may, in its sole discretion, elect to waive such processing and recordation fee in the case of any assignment. The assignee, if it is not a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire.
(v) Limitations on Assignment to Certain Persons . No such assignment shall be made to (A) the Borrower or any of the Borrower’s Affiliates or Subsidiaries or (B) any Defaulting Lender or any of its Subsidiaries, or any Person who, upon becoming a Lender hereunder, would constitute any of the foregoing Persons described in this clause (B).
(vi) No Assignment to Natural Persons . No such assignment shall be made to a natural Person.
(vii) Certain Additional Payments . In connection with any assignment of rights and obligations of any Defaulting Lender hereunder, no such assignment shall be effective unless and until, in addition to the other conditions thereto set forth herein, the parties to the assignment shall make such additional payments to the Administrative Agent in an aggregate amount sufficient, upon distribution thereof as appropriate (which may be outright payment, purchases by the assignee of participations or sub-participations, or other compensating actions, including funding, with the consent of the Borrower and the Administrative Agent, the applicable pro rata share of Advances previously requested but not funded by the Defaulting Lender, to each of which the applicable assignee and assignor hereby irrevocably consent), to (x) pay and satisfy in full all payment liabilities then owed by such Defaulting Lender to the Administrative Agent, the Issuing Lender and each other Lender hereunder (and interest accrued and unpaid thereon), and (y) acquire (and fund as appropriate) its full pro rata share of all Advances and participations in Letters of Credit in accordance with its Pro Rata Share. Notwithstanding the foregoing, in the event that any assignment of rights and obligations of any Defaulting Lender hereunder shall become effective under applicable Legal Requirement without compliance with the provisions of this paragraph, then the assignee of such interest shall be deemed to be a Defaulting Lender for all purposes of this Agreement until such compliance occurs.
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Subject to acceptance and recording thereof by the Administrative Agent pursuant to paragraph (c) of this Section, from and after the effective date specified in each Assignment and Acceptance, the assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto) but shall continue to be entitled to the benefits of Sections 2.12, 2.13, 2.14, and 9.07 with respect to facts and circumstances occurring prior to the effective date of such assignment; provided , that except to the extent otherwise expressly agreed by the affected parties, no assignment by a Defaulting Lender will constitute a waiver or release of any claim of any party hereunder arising from that Lender’s having been a Defaulting Lender. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this paragraph shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (d) of this Section.
(c) Register . The Administrative Agent, acting solely for this purpose as a non-fiduciary agent of the Borrower, shall maintain at its address referred to in Section 9.02 a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amounts (and stated interest) of the Advances owing to, each Lender pursuant to the terms hereof from time to time (the “ Register ”). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Borrower, the Administrative Agent and the Lenders shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice. The Borrower hereby agrees that the Administrative Agent acting as its agent solely for the purpose set forth above in this clause (c), shall not subject the Administrative Agent to any fiduciary or other implied duties, all of which are hereby waived by the Borrower.
(d) Participations . Any Lender may at any time, without the consent of, or notice to, the Borrower or the Administrative Agent, sell participations to any Person (other than a natural Person or the Borrower or any of the Borrower’s Affiliates or Subsidiaries) (each, a “ Participant ”) in all or a portion of such Lender’s rights and/or obligations under this Agreement (including all or a portion of its Commitment and/or the Advances owing to it); provided that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, and (iii) the Borrower, the Administrative Agent, the Issuing Lender and Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement. For the avoidance of doubt, each Lender shall be responsible for the indemnity under Section 9.07(a) with respect to any payments made by such Lender to its Participant(s).
Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in clauses (a), (b), (c) or (d) of Section 9.01 or this Section 9.06 (that adversely affects such Participant). The Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.12, 2.13 and 2.14 (subject to the requirements and limitations therein, including the requirements under Section 2.14(e) (it being understood that the documentation required under Section 2.14(e) shall be delivered to the participating Lender)) to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section; provided that such
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Participant (A) agrees to be subject to the provisions of Section 2.16 as if it were an assignee under paragraph (b) of this Section; and (B) shall not be entitled to receive any greater payment under Sections 2.12 , 2.13 or 2.14, with respect to any participation, than its participating Lender would have been entitled to receive, except to the extent such entitlement to receive a greater payment results from a Change in Law that occurs after the Participant acquired the applicable participation or the sale of the participation to such Participant is made with the Borrower’s prior written consent. Each Lender that sells a participation agrees, at the Borrower’s request and expense, to use reasonable efforts to cooperate with the Borrower to effectuate the provisions of Section 2.16 with respect to any Participant. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 7.04 as though it were a Lender; provided that such Participant agrees to be subject to Section 2.11 as though it were a Lender. Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the Borrower, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participant’s interest in the Advances or other obligations under the Loan Documents (the “ Participant Register ”); provided that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant’s interest in any commitments, loans, letters of credit or its other obligations under any Loan Document) to any Person except to the extent that such disclosure is necessary to establish that such commitment, loan, letter of credit or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, the Administrative Agent (in its capacity as Administrative Agent) shall have no responsibility for maintaining a Participant Register. The Borrower hereby agrees that each Lender acting as its agent solely for the purpose set forth above in this clause (d), shall not subject such Lender to any fiduciary or other implied duties, all of which are hereby waived by the Borrower.
(e) Certain Pledges . Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank or any central bank having jurisdiction over such Lender; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.
(f) Cashless Settlement . Notwithstanding anything to the contrary contained in this Agreement, any Lender may exchange, continue or rollover all or a portion of its Advances in connection with any refinancing, extension, loan modification or similar transaction permitted by the terms of this Agreement, pursuant to a cashless settlement mechanism approved by the Borrower, the Administrative Agent and such Lender.
Section 9.07 Indemnification; Waiver .
(a) INDEMNIFICATION . THE BORROWER AGREES TO, AND DOES HEREBY, INDEMNIFY AND HOLD HARMLESS EACH SECURED PARTY AND EACH OF THEIR RESPECTIVE RELATED PARTIES (EACH, AN “ INDEMNIFIED PARTY ”) FROM AND AGAINST ANY AND ALL LOSSES, CLAIMS, DAMAGES, PENALTIES, LIABILITIES AND EXPENSES OF ANY KIND OR NATURE (INCLUDING FEES, CHARGES, AND DISBURSEMENTS OF COUNSEL AND ANY CONSULTANT FOR ANY INDEMNIFIED PARTY), TO WHICH SUCH INDEMNIFIED PARTY MAY BECOME SUBJECT OR THAT MAY BE INCURRED BY OR ASSERTED OR AWARDED AGAINST SUCH INDEMNIFIED PARTY BY ANY PERSON (INCLUDING THE PARENT COMPANY, THE BORROWER, ANY SUBSIDIARY OR ANY AFFILIATE THEREOF), IN EACH CASE ARISING OUT OF OR IN
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CONNECTION WITH OR BY REASON OF (INCLUDING, WITHOUT LIMITATION, IN CONNECTION WITH ANY INVESTIGATION, LITIGATION, OR PROCEEDING OR PREPARATION OF A DEFENSE IN CONNECTION THEREWITH) (I) THE EXECUTION OR DELIVERY OF ANY LOAN DOCUMENT, ANY HEDGE CONTRACT WITH ANY SWAP COUNTERPARTY, ANY AGREEMENT OR INSTRUMENT RELATING TO BANKING SERVICES WITH A BANKING SERVICE PROVIDER, OR ANY AGREEMENT OR INSTRUMENT CONTEMPLATED THEREBY, THE PERFORMANCE BY THE PARTIES HERETO OR THERETO OF THEIR RESPECTIVE OBLIGATIONS HEREUNDER OR THEREUNDER OR THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, (II) ANY ADVANCE OR LETTER OF CREDIT OR THE USE OR PROPOSED USE OF THE PROCEEDS THEREFROM (INCLUDING ANY REFUSAL BY ANY ISSUING LENDER TO HONOR A DEMAND FOR PAYMENT UNDER A LETTER OF CREDIT IF THE DOCUMENTS PRESENTED IN CONNECTION WITH SUCH DEMAND DO NOT STRICTLY COMPLY WITH THE TERMS OF SUCH LETTER OF CREDIT), (III) ANY ACTUAL OR ALLEGED PRESENCE OR RELEASE OR THREATENED RELEASE OF HAZARDOUS MATERIALS ON, AT, UNDER OR FROM ANY PROPERTY OWNED, LEASED OR OPERATED BY THE BORROWER OR ANY SUBSIDIARY OR AFFILIATE THEREOF, OR ANY ENVIRONMENTAL CLAIM RELATED IN ANY WAY TO THE BORROWER OR ANY SUBSIDIARY OR AFFILIATE THEREOF AT ANY TIME, (IV) ANY ACTUAL OR PROSPECTIVE CLAIM, LITIGATION, INVESTIGATION OR PROCEEDING RELATING TO ANY OF THE FOREGOING, WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY, WHETHER BROUGHT BY A THIRD PARTY OR BY THE BORROWER OR ANY SUBSIDIARY OR AFFILIATE THEREOF, AND REGARDLESS OF WHETHER ANY INDEMNIFIED PARTY IS A PARTY THERETO, OR (V) ANY CLAIM (INCLUDING, WITHOUT LIMITATION, ANY ENVIRONMENTAL CLAIMS), INVESTIGATION, LITIGATION OR OTHER PROCEEDING (WHETHER OR NOT ANY SECURED PARTY IS A PARTY THERETO) AND THE PROSECUTION AND DEFENSE THEREOF, ARISING OUT OF OR IN ANY WAY CONNECTED WITH THE ADVANCES, ANY LOAN DOCUMENT, ANY HEDGE CONTRACT WITH ANY SWAP COUNTERPARTIES, ANY AGREEMENT OR INSTRUMENT RELATING TO ANY BANKING SERVICES WITH A BANKING SERVICE PROVIDER OR ANY DOCUMENTS CONTEMPLATED BY OR REFERRED TO HEREIN OR THEREIN OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY ( AND IN ALL CASES, WHETHER OR NOT CAUSED BY OR ARISING, IN WHOLE OR IN PART, OUT OF THE COMPARATIVE, CONTRIBUTORY OR SOLE NEGLIGENCE OF SUCH INDEMNIFIED PARTY ); PROVIDED THAT SUCH INDEMNITY SHALL NOT, AS TO ANY INDEMNIFIED PARTY, BE AVAILABLE TO THE EXTENT THAT SUCH LOSSES, CLAIMS, DAMAGES, LIABILITIES OR RELATED EXPENSES ARE DETERMINED BY A COURT OF COMPETENT JURISDICTION BY FINAL AND NON-APPEALABLE JUDGMENT TO HAVE RESULTED FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNIFIED PARTY. THIS INDEMNITY SHALL NOT APPLY WITH RESPECT TO TAXES OTHER THAN ANY TAXES THAT REPRESENT LOSSES, CLAIMS, DAMAGES, ETC. ARISING FROM ANY NON-TAX CLAIM. In the case of an investigation, litigation or proceeding to which the indemnity in this paragraph applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by the Borrower, any Subsidiary or Affiliate thereof, any equity holder or creditor thereof, or an Indemnified Party. The Borrower hereby also agrees that no Indemnified Party will have any liability (whether direct or indirect, in contract or tort, or otherwise) to the Borrower, any Subsidiary or Affiliate thereof, or any equity holder or creditor thereof arising out of, related to or in connection with any aspect of the transactions contemplated hereby, except to the extent such liability is determined in a final, nonappealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party’s own gross negligence or willful misconduct. The Borrower shall not, nor shall it permit any of its Subsidiaries to, without the prior written consent of each Indemnified Party affected
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thereby (which consent will not be unreasonably withheld), settle any threatened or pending claim or action that would give rise to the right of any Indemnified Party to claim indemnification hereunder unless such settlement (a) includes a full and unconditional release of all liabilities arising out of such claim or action against such Indemnified Party, (b) does not include any statement as to or an admission of fault, culpability or failure to act by or on behalf of any Indemnified Party and (c) does not require any actions to be taken or refrained from being taken by any Indemnified Party other than the execution of the related settlement agreement, if any. To the extent that the Borrower fails to pay any amount required to be paid by it to the Administrative Agent or such Issuing Lender under this Section, each Lender severally agrees to pay to the Administrative Agent or such Issuing Lender, as the case may be, such Lender’s Pro Rata Share (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent or such Issuing Lender in its capacity as such. All amounts due under this Section shall be payable promptly after written demand therefor.
(b) Waiver of Damages . No Indemnified Party will be liable to the Borrower, any Subsidiary or Affiliate thereof, any equity holder or creditor thereof or any other Person for any indirect, consequential or punitive damages that may be alleged as a result of this Agreement, any other Loan Documents, or any element of the transactions contemplated hereby or thereby, including the Transactions. To the fullest extent permitted by applicable law, the Borrower shall not assert, and hereby waives, any claim against any Indemnified Party, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby, the transactions contemplated hereby or thereby, any Advance or Letter of Credit or the use of the proceeds thereof. No Indemnified Party referred to in subsection (a) above shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby.
(c) Survival . Without prejudice to the survival of any other agreement of the Loan Parties and the Lenders hereunder, the agreements and obligations of the Loan Parties and the Lenders contained in this Section 9.07 shall survive the termination of this Agreement, the termination of all Commitments, and the payment in full of the Advances and all other amounts payable under this Agreement.
Section 9.08 Confidentiality . Each Lender Party agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its Affiliates and to its and its Related Parties (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent required or requested by, or required to be disclosed to, any regulatory or similar authority purporting to have jurisdiction over such Person or its Related Parties (including any self-regulatory authority, such as the National Association of Insurance Commissioners), (c) as to the extent required by Legal Requirements or regulations or in any legal, judicial, administrative or other compulsory proceeding, (d) to any other party hereto, (e) in connection with the exercise of any remedies under this Agreement, under any other Loan Document or under any agreement related to any Obligation, or any action or proceeding relating to this Agreement, any other Loan Document or any agreement related to any Obligation, or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights and obligations under this Agreement, (ii) any actual or prospective party (or its Related Parties) to any swap, derivative or other transaction under which payments are to be made by reference to any Loan Party and its obligations, this
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Agreement or payments hereunder, (iii) to an investor or prospective investor in an Approved Fund that also agrees that Information shall be used solely for the purpose of evaluating an investment in such Approved Fund, (iv) to a trustee, collateral manager, servicer, backup servicer, noteholder or secured party in an Approved Fund in connection with the administration, servicing and reporting on the assets serving as collateral for an Approved Fund, or (v) to a nationally recognized rating agency that requires access to information regarding the Borrower and its Subsidiaries, the Advances and the Loan Documents in connection with ratings issued with respect to an Approved Fund, (g) on a confidential basis to the CUSIP Service Bureau or any similar agency in connection with the issuance and monitoring of CUSIP numbers with respect to the credit facility, (h) with the consent of the Borrower, (i) to Gold Sheets and other similar bank trade publications, such information to consist of deal terms and other information customarily found in such publications, (j) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section by the disclosing party or (ii) becomes available to any Secured Party or affiliate thereof from a third party that is not, to such Person’s actual knowledge, subject to confidentiality obligations to the Borrower, (k) to governmental regulatory authorities in connection with any regulatory examination of any Lender Party or, if such Lender Party deems necessary for the mitigation of claims by those authorities against such Lender Party or any of its subsidiaries or affiliates, in accordance with such Lender Party’s regulatory compliance policy, (l) to the extent that such information is independently developed by such Lender Party, or (m) for purposes of establishing a “due diligence” defense. For purposes of this Section, “ Information ” means all information received from any Loan Party or any Subsidiary thereof relating to any Loan Party or any Subsidiary thereof or any of their respective businesses, other than any such information that is available to the Administrative Agent, any Lender or any Issuing Lender on a non-confidential basis prior to disclosure by any Loan Party or any Subsidiary thereof; provided that, in the case of information received from a Loan Party or any Subsidiary thereof after the date hereof, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN, nothing in this Agreement shall (a) restrict any Lender Party from providing information to any bank or other regulatory or governmental authorities, including the Federal Reserve Board and its supervisory staff; (b) require or permit any Lender Party to disclose to any Loan Party that any information will be or was provided to the Federal Reserve Board or any of its supervisory staff; or (c) require or permit any Lender Party to inform any Loan Party of a current or upcoming Federal Reserve Board examination or any nonpublic Federal Reserve Board supervisory initiative or action.
Section 9.09 Execution in Counterparts . This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page of this Agreement by facsimile or in electronic (i.e., “pdf” or “tif”) format shall be effective as delivery of a manually executed counterpart of this Agreement. The words “execution,” “signed,” “signature,” and words of like import in any Assignment and Acceptance shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable Legal Requirement, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act.
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Section 9.10 Survival of Representations, Etc .
(a) All representations and warranties set forth in Article IV and all representations and warranties contained in any certificate, or any of the Loan Documents (including, but not limited to, any such representation or warranty made in or in connection with any amendment thereto) shall constitute representations and warranties made under this Agreement. All representations and warranties made under this Agreement shall be made or deemed to be made at and as of the Effective Date (except those that are expressly made as of a specific date), shall survive the Effective Date and shall not be waived by the execution and delivery of this Agreement, any investigation made by or on behalf of the Lenders or any borrowing hereunder.
(b) Notwithstanding any termination of this Agreement, the indemnities to which the Administrative Agent and the Lenders are entitled under the provisions of Article VIII or Article IX and any other provision of this Agreement and the other Loan Documents shall continue in full force and effect and shall protect the Administrative Agent and the Lenders against events arising after such termination as well as before. Without limiting the foregoing, all obligations of the Loan Parties provided for in Sections 2.12, 2.13, 2.14(c), 9.04, and 9.07 and all of the obligations of the Lenders in Section 8.06 shall survive any termination of this Agreement and repayment in full of the Obligations. No termination of this Agreement shall affect the rights and obligations of the parties hereto arising prior to such termination or in respect of any provision of this Agreement which survives such termination
Section 9.11 Severability . In case one or more provisions of this Agreement or the other Loan Documents shall be invalid, illegal or unenforceable in any respect under any applicable law, the validity, legality, and enforceability of the remaining provisions contained herein or therein shall not be affected or impaired thereby; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.
Section 9.12 Governing Law; Submission to Jurisdiction; Waiver of Venue .
(a) Governing Law . This Agreement and the other Loan Documents and any claim, controversy, dispute or cause of action (whether in contract or tort or otherwise) based upon, arising out of or relating to this Agreement or any other Loan Document (except, as to any other Loan Document, as expressly set forth therein) and the transactions contemplated hereby and thereby shall be governed by, and construed in accordance with, the law of the State of New York (including Section 5-1401 and Section 5-1402 of the General Obligations Law of the State of New York), without reference to any other conflicts or choice of law principles thereof. Each Letter of Credit shall be governed by either (i) the Uniform Customs and Practice for Documentary Credits (2007 Revision), International Chamber of Commerce Publication No. 600, or (ii) the International Standby Practices (ISP98), International Chamber of Commerce Publication No. 590, in either case, including any subsequent revisions thereof approved by a Congress of the International Chamber of Commerce and adhered to by the applicable Issuing Lender.
(b) Submission to Jurisdiction . The Borrower irrevocably and unconditionally agrees that it will not commence any action, litigation or proceeding of any kind or description, whether in law or equity, whether in contract or in tort or otherwise, against any Secured Party or any Related Party of any Secured Party in any way relating to this Agreement or any other Loan Document or the transactions relating hereto or thereto, in any forum other than the courts of the State of New York sitting in New York County, and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, and each of the parties hereto irrevocably and unconditionally submits to the jurisdiction of such courts and agrees that all claims in respect of any such action, litigation or proceeding may be heard and determined in such New York State court or, to the fullest extent permitted by applicable Legal Requirement, in such federal court. Each of the parties hereto agrees that a final judgment in any such action, litigation or proceeding
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shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Legal Requirement. Nothing in this Agreement or in any other Loan Document shall affect any right that any Secured Party may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against the Borrower or any other Loan Party or its Properties in the courts of any jurisdiction. Each party hereto irrevocably consents to service of process in the manner provided for notices in Section 9.02. Nothing in this Agreement will affect the right of any party hereto to serve process in any other manner permitted by applicable Legal Requirement.
(c) Waiver of Venue . The Borrower irrevocably and unconditionally waives, to the fullest extent permitted by applicable Legal Requirement, any objection that it may now or hereafter have to the laying of venue of any action or proceeding arising out of or relating to this Agreement or any other Loan Document in any court referred to in Section 9.12(b) above. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by applicable Legal Requirement, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.
Section 9.13 WAIVER OF JURY TRIAL . THE BORROWER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LEGAL REQUIREMENT, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
Section 9.14 Usury Not Intended . It is the intent of each Loan Party and each Lender Party in the execution and performance of this Agreement and the other Loan Documents to contract in strict compliance with applicable usury laws, including conflicts of law concepts, governing the Advances of each Lender including such applicable Legal Requirements of the State of New York, if any, and the United States of America from time to time in effect, and any other jurisdiction whose laws may be mandatorily applicable to such Lender notwithstanding the other provisions of this Agreement. In furtherance thereof, the Lender Parties and the Loan Parties stipulate and agree that none of the terms and provisions contained in this Agreement or the other Loan Documents shall ever be construed to create a contract to pay, as consideration for the use, forbearance or detention of money, interest at a rate in excess of the Maximum Rate and that for purposes of this Agreement “interest” shall include the aggregate of all charges which constitute interest under such laws that are contracted for, charged or received under this Agreement; and in the event that, notwithstanding the foregoing, under any circumstances the aggregate amounts taken, reserved, charged, received or paid on the Advances, include amounts which by applicable Legal Requirement are deemed interest which would exceed the Maximum Rate, then such excess shall be deemed to be a mistake and each Lender receiving same shall credit the same on the principal of its Advances (or if such Advances shall have been paid in full, refund said excess to the Borrower). In the event that the maturity of the Advances are accelerated by reason of any election of the holder thereof resulting from any Event of Default under this Agreement or otherwise, or in the event of any required or permitted prepayment, then such consideration that constitutes interest may never include more than the Maximum Rate, and excess interest, if any, provided for in this Agreement or otherwise
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shall be canceled automatically as of the date of such acceleration or prepayment and, if theretofore paid, shall be credited on the applicable Advances (or, if the applicable Advances shall have been paid in full, refunded to the Borrower of such interest). In determining whether or not the interest paid or payable under any specific contingencies exceeds the Maximum Rate, the Loan Parties and the Lenders shall to the maximum extent permitted under applicable Legal Requirement amortize, prorate, allocate and spread in equal parts during the period of the full stated term of the Obligations all amounts considered to be interest under applicable Legal Requirement at any time contracted for, charged, received or reserved in connection with the Obligations. The provisions of this Section shall control over all other provisions of this Agreement or the other Loan Documents which may be in apparent conflict herewith.
Section 9.15 Payments Set Aside . To the extent that any payment by or on behalf of the Borrower is made to any Lender Party, or any Lender Party exercises its right of setoff, and such payment or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by any Lender Party in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any Debtor Relief Law or otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such setoff had not occurred, and (b) each Lender Party severally agrees to pay to the Administrative Agent upon demand its applicable share (without duplication) of any amount so recovered from or repaid by the Administrative Agent, plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the Federal Funds Rate in effect from time to time, in the applicable currency of such recovery or payment. The obligations of the Lenders and the Issuing Lenders under clause (b) of the preceding sentence shall survive the payment in full of the Obligations and the termination of this Agreement.
Section 9.16 Performance of Duties . Each of the Loan Party’s obligations under this Agreement and each of the other Loan Documents shall be performed by such Loan Party at its sole cost and expense.
Section 9.17 All Powers Coupled with Interest . All powers of attorney and other authorizations granted to the Lenders, the Administrative Agent and any Persons designated by the Administrative Agent or any Lender pursuant to any provisions of this Agreement or any of the other Loan Documents shall be deemed coupled with an interest and shall be irrevocable so long as any of the Obligations remain unpaid or unsatisfied, any of the Commitments remain in effect or the credit facility evidenced hereby has not been terminated.
Section 9.18 No Third Party Beneficiaries . This Agreement, the other Loan Documents, and the agreement of the Lenders to make Advances and the Issuing Lenders to issue, amend, renew or extend Letters of Credit hereunder are solely for the benefit of the Borrower, and no other Person (including, without limitation, any Subsidiary of the Borrower, any obligor, contractor, subcontractor, supplier or materialman) shall have any rights, claims, remedies or privileges hereunder or under any other Loan Document against the Administrative Agent, any other agent, any Issuing Lender or any Lender for any reason whatsoever. There are no third party beneficiaries other than Indemnified Parties under the applicable indemnity provisions.
Section 9.19 Keepwell . Each Qualified ECP Guarantor hereby jointly and severally absolutely, unconditionally and irrevocably undertakes to provide such funds or other support as may be needed from time to time by each other Loan Party to honor all of its obligations under this Agreement in respect of Swap Obligations (provided, however, that each Qualified ECP Guarantor shall only be liable under this Section 9.19 for the maximum amount of such liability that can be hereby incurred without rendering its obligations under this Section 9.19, or otherwise under this Agreement, voidable under
115
applicable Legal Requirement relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount). The obligations of each Qualified ECP Guarantor under this Section shall remain in full force and effect until the termination of all Commitments and payment in full of all Obligations (other than contingent indemnification obligations) and the expiration or termination of all Letters of Credit (other than Letters of Credit as to which other arrangements satisfactory to the Administrative Agent and the Issuing Lender have been made). Each Qualified ECP Guarantor intends that this Section 9.19 constitute, and this Section 9.19 shall be deemed to constitute, a “keepwell, support, or other agreement” for the benefit of each other Loan Party for all purposes of Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.
Section 9.20 Independent Effect of Covenants . Borrower expressly acknowledges and agrees that each covenant contained in Articles V or VI hereof shall be given independent effect. Accordingly, no Loan Party shall engage in any transaction or other act otherwise permitted under any covenant contained in Articles V or VI, before or after giving effect to such transaction or act, or the Borrower shall or would be in breach of any other covenant contained in Articles V or VI.
Section 9.21 Injunctive Relief . Each Loan Party hereto recognizes that, in the event such Loan Party fails to perform, observe or discharge any of its obligations or liabilities under this Agreement, any remedy of law may prove to be inadequate relief to the Lenders. Therefore, each Loan Party hereto agrees that the Lenders, at the Lenders’ option, shall be entitled to temporary and permanent injunctive relief in any such case without the necessity of proving actual damages.
Section 9.22 No Advisory or Fiduciary Responsibility .
(a) In connection with all aspects of each transaction contemplated hereby, each Loan Party acknowledges and agrees, and acknowledges its Affiliates’ understanding, that (i) the facilities provided for hereunder and any related arranging or other services in connection therewith (including in connection with any amendment, waiver or other modification hereof or of any other Loan Document) are an arm’s-length commercial transaction between the Borrower and its Affiliates, on the one hand, and the Administrative Agent, the Issuing Lenders and the Lenders, on the other hand, and each Loan Party is capable of evaluating and understanding and understands and accepts the terms, risks and conditions of the transactions contemplated hereby and by the other Loan Documents (including any amendment, waiver or other modification hereof or thereof), (ii) in connection with the process leading to such transaction, each of the Administrative Agent, the Issuing Lenders and the Lenders is and has been acting solely as a principal and is not the financial advisor, agent or fiduciary, for the Borrower or any of its Affiliates, stockholders, creditors or employees or any other Person, (iii) none of the Administrative Agent, the Issuing Lenders or the Lenders has assumed or will assume an advisory, agency or fiduciary responsibility in favor of any Loan Party with respect to any of the transactions contemplated hereby or the process leading thereto, including with respect to any amendment, waiver or other modification hereof or of any other Loan Document (irrespective of whether any Lender Party has advised or is currently advising the Borrower or any of its Affiliates on other matters) and none of the Administrative Agent, the Issuing Lender or the Lenders has any obligation to the Borrower or any of its Affiliates with respect to the financing transactions contemplated hereby except those obligations expressly set forth herein and in the other Loan Documents, (iv) the Issuing Lenders, the Administrative Agent, the Lenders and their respective Affiliates may be engaged in a broad range of transactions that involve interests that differ from, and may conflict with, those of the Borrower and its Affiliates, and none of the Administrative Agent, the Issuing Lenders or the Lenders has any obligation to disclose any of such interests by virtue of any advisory, agency or fiduciary relationship and (v) the Administrative Agent, the Issuing Lenders and the Lenders have not provided and will not provide any legal, accounting, regulatory or Tax advice with respect to any of the transactions contemplated hereby (including any amendment, waiver or other modification hereof or of any other Loan Document) and the Loan Parties have consulted their own legal, accounting, regulatory and Tax advisors to the extent they have deemed appropriate.
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(b) Each Loan Party acknowledges and agrees that each Lender, the Issuing Lenders, the Administrative Agent and any Affiliate thereof may lend money to, invest in, and generally engage in any kind of business with, any of the Borrower, any Affiliate thereof or any other person or entity that may do business with or own securities of any of the foregoing, all as if such Lender, Issuing Lender, the Administrative Agent or Affiliate thereof were not a Lender, Issuing Lender, Administrative Agent or an Affiliate thereof (or an agent or any other Person with any similar role under the credit facilities evidenced hereby) and without any duty to account therefor to any other Lender, the Issuing Lender, the Administrative Agent, the Borrower or any Affiliate of the foregoing. Each Lender, each Issuing Lender, the Administrative Agent and any Affiliate thereof may accept fees and other consideration from the Borrower or any Affiliate thereof for services in connection with this Agreement, the credit facilities evidenced hereby or otherwise without having to account for the same to any other Lender, the Issuing Lender, the Administrative Agent, the Borrower or any Affiliate of the foregoing.
Section 9.23 Inconsistencies with Other Documents . In the event there is a conflict or inconsistency between this Agreement and any other Loan Document, the terms of this Agreement shall control; provided that any provision of the Security Instruments which imposes additional burdens on the Borrower or any of its Subsidiaries or further restricts the rights of the Borrower or any of its Subsidiaries or gives the Administrative Agent, the Issuing Lenders or Lenders additional rights shall not be deemed to be in conflict or inconsistent with this Agreement and shall be given full force and effect.
Section 9.24 Acknowledgement and Consent to Bail-In of EEA Financial Institutions . Notwithstanding anything to the contrary in any Loan Document or in any other agreement, arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any EEA Financial Institution arising under any Loan Document, to the extent such liability is unsecured, may be subject to the Write-Down and Conversion Powers of an EEA Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:
(a) the application of any Write-Down and Conversion Powers by an EEA Resolution Authority to any such liabilities arising hereunder which may be payable to it by any party hereto that is an EEA Financial Institution; and
(b) the effects of any Bail-in Action on any such liability, including, if applicable:
(i) a reduction in full or in part or cancellation of any such liability;
(ii) a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such EEA Financial Institution, its parent undertaking, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such liability under this Agreement or any other Loan Document; or
(iii) the variation of the terms of such liability in connection with the exercise of the Write-Down and Conversion Powers of any EEA Resolution Authority.
Section 9.25 USA Patriot Act . Each Lender that is subject to the Act (as hereinafter defined) and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies the Borrower that pursuant to the requirements of the Patriot Act, it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow such Lender or the Administrative Agent, as applicable, to identify the Borrower in accordance with the Patriot Act.
117
Section 9.26 Flood Insurance Regulations . Wells Fargo has adopted internal policies and procedures that address requirements placed on federally regulated lenders under the Flood Insurance Regulations (defined below). If applicable, Wells Fargo, as administrative agent, will post on the applicable electronic platform (or otherwise distribute to each Lender) documents that it receives in connection with the Flood Insurance Regulations; however, Wells Fargo reminds each Lender and Participant that, pursuant to the Flood Insurance Regulations, each federally regulated lender (whether acting as a Lender or Participant) is responsible for assuring its own compliance with the Flood Insurance Regulations. Notwithstanding the foregoing or any other provision in this Agreement to the contrary, in no event is any Building (as defined in the applicable Flood Insurance Regulation) or Manufactured (Mobile) Home (as defined in the applicable Flood Insurance Regulation) included in the definition of “Collateral” and no Building or Manufactured (Mobile) Home is intended to be encumbered by any Mortgage. As used herein, “ Flood Insurance Regulations ” shall mean (a) the National Flood Insurance Act of 1968 as now or hereafter in effect or any successor statute thereto, (b) the Flood Disaster Protection Act of 1973 as now or hereafter in effect or any successor statue thereto, (c) the National Flood Insurance Reform Act of 1994 (amending 42 USC 4001, et seq.), as the same may be amended or recodified from time to time, and (d) the Flood Insurance Reform Act of 2004 and any regulations promulgated thereunder.
Section 9.27 NON-RELIANCE . IN EXECUTING THIS AGREEMENT, THE BORROWER HEREBY WARRANTS AND REPRESENTS IT IS NOT RELYING ON ANY STATEMENT OR REPRESENTATION OTHER THAN THOSE IN THIS AGREEMENT AND IS RELYING UPON ITS OWN JUDGMENT AND ADVICE OF ITS ATTORNEYS.
Section 9.28 PRIOR OR ORAL AGREEMENTS . THIS WRITTEN AGREEMENT AND THE LOAN DOCUMENTS, AS DEFINED IN THIS AGREEMENT, REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND SUPERSEDE ALL PRIOR UNDERSTANDINGS AND AGREEMENTS, WHETHER WRITTEN OR ORAL, RELATING TO THE TRANSACTIONS PROVIDED FOR HEREIN AND THEREIN. ADDITIONALLY, THIS AGREEMENT AND THE LOAN DOCUMENTS MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.
IN EXECUTING THIS AGREEMENT, THE BORROWER HEREBY WARRANTS AND REPRESENTS IT IS NOT RELYING ON ANY STATEMENT OR REPRESENTATION OTHER THAN THOSE IN THIS AGREEMENT AND IS RELYING UPON ITS OWN JUDGMENT AND ADVICE OF ITS ATTORNEYS.
[Remainder of this page intentionally left blank. Signature page follows.]
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EXECUTED as of the date first above written.
| BORROWER : | ||
| ALTA MESA HOLDINGS, LP | ||
| By: |
Alta Mesa Holdings GP, LLC, its general partner |
|
| By: |
/s/ Harlan H. Chappelle |
|
| Harlan H. Chappelle | ||
| President | ||
Signature Page to Eighth Amended and Restated Credit Agreement
(Alta Mesa Holdings, LP)
| WELLS FARGO BANK, NATIONAL ASSOCIATION | ||
| as Administrative Agent, as Issuing Lender and Lender | ||
| By: |
/s/ Shiloh Davila |
|
| Shiloh Davila | ||
| Director | ||
Signature Page to Eighth Amended and Restated Credit Agreement
(Alta Mesa Holdings, LP)
| TORONTO DOMINION (NEW YORK) LLC | ||
| By: |
/s/ Savo Bozic |
|
| Name: | Savo Bozic | |
| Title: | Authorized Signatory |
Signature Page to Eighth Amended and Restated Credit Agreement
(Alta Mesa Holdings, LP)
| ING CAPITAL LLC | ||
| By: |
/s/ Josh Strong |
|
| Name: | Josh Strong | |
| Title: | Director | |
| By: |
/s/ Charles Hall |
|
| Name: | Charles Hall | |
| Title: | Managing Director | |
Signature Page to Eighth Amended and Restated Credit Agreement
(Alta Mesa Holdings, LP)
| CITIBANK, N.A. | ||
| By: |
/s/ William B. McNeely |
|
| Name: | William B. McNeely | |
| Title: | Senior Vice President |
Signature Page to Eighth Amended and Restated Credit Agreement
(Alta Mesa Holdings, LP)
| CAPITAL ONE, NATIONAL ASSOCIATION | ||
| By: |
/s/ Matthew Brice |
|
| Name: | Matthew Brice | |
| Title: | Vice President |
Signature Page to Eighth Amended and Restated Credit Agreement
(Alta Mesa Holdings, LP)
| BOKF, NA dba Bank of Texas | ||
| By: |
/s/ Martin W. Wilson |
|
| Name: | Martin W. Wilson | |
| Title: | Senior Vice President |
Signature Page to Eighth Amended and Restated Credit Agreement
(Alta Mesa Holdings, LP)
| NATIXIS | ||
| By: |
/s/ Carlos Quinteros |
|
| Name: | Carlos Quinteros | |
| Title: | Managing Director | |
| By: |
/s/ Brice Le Foyer |
|
| Name: | Brice Le Foyer | |
| Title: | Director |
Signature Page to Eighth Amended and Restated Credit Agreement
(Alta Mesa Holdings, LP)
| MORGAN STANLEY BANK, N.A. | ||
| By: |
/s/ Michael King |
|
| Name: | Michael King | |
| Title: | Authorized Signatory |
Signature Page to Eighth Amended and Restated Credit Agreement
(Alta Mesa Holdings, LP)
| MORGAN STANLEY SENIOR FUNDING, INC. | ||
| By: |
/s/ Michael King |
|
| Name: | Michael King | |
| Title: | Vice President |
Signature Page to Eighth Amended and Restated Credit Agreement
(Alta Mesa Holdings, LP)
Exhibit 10.2
E XECUTION C OPY
CREDIT AGREEMENT
KINGFISHER MIDSTREAM, LLC,
as Borrower,
ABN AMRO CAPITAL USA LLC,
as Administrative Agent and LC Issuer,
and CERTAIN FINANCIAL INSTITUTIONS,
as Lenders,
$200,000,000
August 8, 2017
ABN AMRO CAPITAL USA LLC
as
Sole Bookrunner and Sole Lead Arranger
EAST WEST BANK
as
Syndication Agent
WELLS FARGO BANK, NA
as
Documentation Agent
| C REDIT A GREEMENT |
TABLE OF CONTENTS
| Page | ||||||
|
ARTICLE I - DEFINITIONS AND REFERENCES |
1 | |||||
|
Section 1.1 |
Defined Terms | 1 | ||||
|
Section 1.2 |
Exhibits and Schedules; Additional Definitions | 31 | ||||
|
Section 1.3 |
Terms Generally; References and Titles | 31 | ||||
|
Section 1.4 |
Calculations and Determinations | 32 | ||||
|
Section 1.5 |
Rounding | 32 | ||||
|
Section 1.6 |
Times of Day | 32 | ||||
|
Section 1.7 |
Joint Preparation; Construction of Indemnities and Releases | 32 | ||||
|
ARTICLE II - THE LOANS AND LETTERS OF CREDIT |
32 | |||||
|
Section 2.1 |
Commitments to Lend; Notes | 32 | ||||
|
Section 2.2 |
Requests for New Loans | 33 | ||||
|
Section 2.3 |
Continuations and Conversions of Existing Loans | 34 | ||||
|
Section 2.4 |
Use of Proceeds | 35 | ||||
|
Section 2.5 |
Interest Rates and Fees; Payment Dates; Retroactive Adjustments of Applicable Interest Rates | 35 | ||||
|
Section 2.6 |
Optional Prepayments; Commitment Reductions | 36 | ||||
|
Section 2.7 |
Mandatory Prepayments | 37 | ||||
|
Section 2.8 |
Letters of Credit | 38 | ||||
|
Section 2.9 |
Requesting Letters of Credit | 39 | ||||
|
Section 2.10 |
Reimbursement and Participations | 40 | ||||
|
Section 2.11 |
Letter of Credit Fees | 43 | ||||
|
Section 2.12 |
No Duty to Inquire | 43 | ||||
|
Section 2.13 |
Sharing of Payments by Lenders | 45 | ||||
|
Section 2.14 |
Obligations of Lenders Several | 45 | ||||
|
Section 2.15 |
Cash Collateral | 46 | ||||
|
Section 2.16 |
Defaulting Lenders | 47 | ||||
|
Section 2.17 |
Increase in Aggregate Commitment | 49 | ||||
|
ARTICLE III - PAYMENTS TO LENDERS |
50 | |||||
|
Section 3.1 |
General Procedures | 50 | ||||
|
Section 3.2 |
Increased Costs | 51 | ||||
|
Section 3.3 |
Illegality | 52 | ||||
|
Section 3.4 |
Funding Losses | 52 | ||||
|
Section 3.5 |
Taxes | 53 | ||||
|
Section 3.6 |
Alternative Rate of Interest | 57 | ||||
|
Section 3.7 |
Mitigation Obligations; Replacement of Lenders | 57 | ||||
|
Section 3.8 |
Payments by Borrower; Presumptions by Administrative Agent | 58 | ||||
|
ARTICLE IV - CONDITIONS PRECEDENT TO LENDING |
59 | |||||
|
Section 4.1 |
Closing Date Conditions | 59 | ||||
|
Section 4.2 |
Additional Conditions Precedent | 62 | ||||
|
ARTICLE V - REPRESENTATIONS AND WARRANTIES |
63 | |||||
|
Section 5.1 |
No Default | 63 | ||||
| C REDIT A GREEMENT |
|
Section 5.2 |
Organization and Good Standing | 63 | ||||
|
Section 5.3 |
Authorization | 63 | ||||
|
Section 5.4 |
No Conflicts or Consents | 64 | ||||
|
Section 5.5 |
Enforceable Obligations | 64 | ||||
|
Section 5.6 |
Financial Statements; Material Adverse Effect; Equity Contributions | 64 | ||||
|
Section 5.7 |
Other Obligations and Restrictions | 64 | ||||
|
Section 5.8 |
Full Disclosure | 65 | ||||
|
Section 5.9 |
Litigation | 65 | ||||
|
Section 5.10 |
ERISA Plans and Liabilities | 65 | ||||
|
Section 5.11 |
Environmental Matters | 66 | ||||
|
Section 5.12 |
Names and Places of Business | 67 | ||||
|
Section 5.13 |
Subsidiaries | 67 | ||||
|
Section 5.14 |
Government Regulation | 67 | ||||
|
Section 5.15 |
Solvency | 67 | ||||
|
Section 5.16 |
Taxes | 67 | ||||
|
Section 5.17 |
Title to Properties; Intellectual Property | 68 | ||||
|
Section 5.18 |
Regulation U | 70 | ||||
|
Section 5.19 |
Operation and Condition of Properties; Compliance with Law | 70 | ||||
|
Section 5.20 |
Insurance | 70 | ||||
|
Section 5.21 |
No Restriction on Liens or Distributions | 70 | ||||
|
Section 5.22 |
Anti-Corruption Laws and Sanctions | 71 | ||||
|
Section 5.23 |
State Regulation | 71 | ||||
|
Section 5.24 |
FERC | 71 | ||||
|
Section 5.25 |
Title to Hydrocarbons | 71 | ||||
|
Section 5.26 |
EEA Financial Institutions | 71 | ||||
|
ARTICLE VI - AFFIRMATIVE COVENANTS |
71 | |||||
|
Section 6.1 |
Payment and Performance | 71 | ||||
|
Section 6.2 |
Books, Financial Statements and Reports | 71 | ||||
|
Section 6.3 |
Other Information and Inspections | 73 | ||||
|
Section 6.4 |
Notice of Material Events and Change of Address | 74 | ||||
|
Section 6.5 |
Maintenance and Operation of Properties | 75 | ||||
|
Section 6.6 |
Maintenance of Existence and Qualifications | 76 | ||||
|
Section 6.7 |
Payment of Trade Liabilities, Taxes, etc. | 76 | ||||
|
Section 6.8 |
Insurance | 77 | ||||
|
Section 6.9 |
Performance on Borrower’s Behalf | 78 | ||||
|
Section 6.10 |
Interest | 78 | ||||
|
Section 6.11 |
Compliance with Agreements and Law; Permits | 78 | ||||
|
Section 6.12 |
Environmental Matters; Environmental Reviews | 78 | ||||
|
Section 6.13 |
Evidence of Compliance | 79 | ||||
|
Section 6.14 |
Bank Accounts; Offset | 79 | ||||
|
Section 6.15 |
Non-Consolidation | 80 | ||||
|
Section 6.16 |
Guaranties of Borrower’s Subsidiaries | 80 | ||||
|
Section 6.17 |
Agreement to Deliver Security Documents | 80 | ||||
|
Section 6.18 |
Revenues | 81 | ||||
|
Section 6.19 |
Perfection and Protection of Security Interests and Liens | 81 | ||||
|
Section 6.20 |
Unrestricted Subsidiaries | 82 | ||||
|
Section 6.21 |
Commodity Exchange Act Keepwell Provisions | 82 | ||||
| ii | C REDIT A GREEMENT |
|
Section 6.22 |
Post Closing | 82 | ||||
|
ARTICLE VII - NEGATIVE COVENANTS |
83 | |||||
|
Section 7.1 |
Indebtedness | 83 | ||||
|
Section 7.2 |
Limitation on Liens | 83 | ||||
|
Section 7.3 |
Hedging Contracts | 84 | ||||
|
Section 7.4 |
Limitation on Mergers, Issuances of Securities | 84 | ||||
|
Section 7.5 |
Limitation on Dispositions | 84 | ||||
|
Section 7.6 |
Limitation on Dividends, Distributions and Redemptions | 85 | ||||
|
Section 7.7 |
Limitation on Investments | 86 | ||||
|
Section 7.8 |
Limitation on Credit Extensions | 87 | ||||
|
Section 7.9 |
Transactions with Affiliates | 88 | ||||
|
Section 7.10 |
Prohibited Contracts | 88 | ||||
|
Section 7.11 |
Conduct of Business | 88 | ||||
|
Section 7.12 |
Amendments to Organizational Documents | 89 | ||||
|
Section 7.13 |
Fiscal Year | 89 | ||||
|
Section 7.14 |
Financial Covenants | 89 | ||||
|
Section 7.15 |
Sale and Leaseback Transactions | 91 | ||||
|
Section 7.16 |
Use of Proceeds | 91 | ||||
|
Section 7.17 |
Permitted Acquisitions | 91 | ||||
|
Section 7.18 |
Subsidiaries | 91 | ||||
|
Section 7.19 |
Designation and Conversion of Restricted and Unrestricted Subsidiaries | 92 | ||||
|
ARTICLE VIII - EVENTS OF DEFAULT AND REMEDIES |
93 | |||||
|
Section 8.1 |
Events of Default | 93 | ||||
|
Section 8.2 |
Remedies | 95 | ||||
|
Section 8.3 |
Application of Proceeds After Acceleration | 95 | ||||
|
ARTICLE IX - ADMINISTRATIVE AGENT |
97 | |||||
|
Section 9.1 |
Appointment and Authority | 97 | ||||
|
Section 9.2 |
Exculpatory Provisions | 97 | ||||
|
Section 9.3 |
Reliance by Administrative Agent | 98 | ||||
|
Section 9.4 |
Non-Reliance on Administrative Agent and Other Lenders | 99 | ||||
|
Section 9.5 |
Rights as a Lender | 99 | ||||
|
Section 9.6 |
Investments | 99 | ||||
|
Section 9.7 |
Resignation of Administrative Agent | 100 | ||||
|
Section 9.8 |
Delegation of Duties | 100 | ||||
|
Section 9.9 |
No Other Duties, etc. | 101 | ||||
|
Section 9.10 |
Administrative Agent May File Proofs of Claim | 101 | ||||
|
Section 9.11 |
Guaranty Matters | 101 | ||||
|
Section 9.12 |
Collateral Matters | 102 | ||||
|
Section 9.13 |
Agreement to Assignment of ISDA Master Agreement | 103 | ||||
|
Section 9.14 |
Notice of Default | 103 | ||||
|
Section 9.15 |
Lender Hedging Obligations and Cash Management Obligations | 104 | ||||
|
Section 9.16 |
Credit Bidding | 104 | ||||
|
ARTICLE X – MISCELLANEOUS |
105 | |||||
|
Section 10.1 |
Waivers and Amendments; Acknowledgments | 105 | ||||
| iii | C REDIT A GREEMENT |
|
Section 10.2 |
Survival of Agreements; Cumulative Nature | 107 | ||||
|
Section 10.3 |
Notices; Effectiveness; Electronic Communication | 108 | ||||
|
Section 10.4 |
Expenses; Indemnity; Damage Waiver | 110 | ||||
|
Section 10.5 |
Successors and Assigns; Joint and Several Liability | 112 | ||||
|
Section 10.6 |
Confidentiality | 115 | ||||
|
Section 10.7 |
Governing Law; Submission to Process | 116 | ||||
|
Section 10.8 |
Limitation on Interest | 117 | ||||
|
Section 10.9 |
Severability | 118 | ||||
|
Section 10.10 |
Counterparts; Integration; Effectiveness | 118 | ||||
|
Section 10.11 |
Waiver of Jury Trial, Punitive Damages, etc. | 118 | ||||
|
Section 10.12 |
No Advisory or Fiduciary Responsibility | 118 | ||||
|
Section 10.13 |
USA PATRIOT Act Notice | 119 | ||||
|
Section 10.14 |
Right of Setoff | 119 | ||||
|
Section 10.15 |
Payments Set Aside | 120 | ||||
|
Section 10.16 |
Acknowledgment and Consent to Bail-In of EEA Financial Institutions | 120 |
|
Schedules and Exhibits: |
||||
|
Schedule 1 |
- | Lenders Schedule | ||
|
Schedule 2 |
- | Disclosure Schedule | ||
|
Schedule 3 |
- | Security Schedule | ||
|
Exhibit A |
- | Promissory Note | ||
|
Exhibit B |
- | Borrowing Notice | ||
|
Exhibit C |
- | Continuation/Conversion Notice | ||
|
Exhibit D |
- | Compliance Certificate | ||
|
Exhibit E |
- | Assignment and Assumption | ||
|
Exhibit F-1 to Exhibit F-4 |
- | Tax Forms | ||
| iv | C REDIT A GREEMENT |
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is made as of August 8, 2017, by and among Kingfisher Midstream, LLC, a Delaware limited liability company (“ Borrower ”), ABN AMRO Capital USA LLC, as Administrative Agent and as initial LC Issuer, and the Lenders referred to below.
W I T N E S S E T H:
In consideration of the mutual covenants and agreements contained herein, in consideration of the Loans that may hereafter be made by Lenders and the Letters of Credit that may be issued by LC Issuer at the request of Borrower, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I - DEFINITIONS AND REFERENCES
Section 1.1 Defined Terms . As used in this Agreement, each of the following terms has the meaning given to such term in this Section 1.1 or in the sections and subsections referred to below:
“ Adjusted Base Rate ” means, on any day, the per annum rate of interest equal to the highest (redetermined daily) of (a) the per annum rate of interest established by JPMorgan Chase Bank, N.A. (or any successor, “JPM”) from time to time at its principal office in New York City as its prime rate or base rate for U.S. dollar loans (such rate is a reference rate established by JPM from time to time and does not necessarily represent the lowest or best rate actually charged by JPM or the Lender to any customer), (b) the Adjusted Eurodollar Rate for a one month Interest Period commencing on such day (or if such day is not a Business Day, the immediately preceding Business Day) plus 1%, or (c) the Federal Funds Rate, plus one half of one percent (0.5%) per annum. Any change in the Adjusted Base Rate due to a change in any of such rates referred to above shall be effective as of 12:01 a.m. (New York City time) on the day such change becomes effective.
“ Adjusted Eurodollar Rate ” means, for any Eurodollar Loan for any day during any Interest Period therefor, the rate per annum equal to the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) determined by Administrative Agent to be equal to the quotient obtained by dividing (a) the Eurodollar Rate for such Eurodollar Loan for such Interest Period by (b) 1 minus the Reserve Requirement for such Eurodollar Loan for such Interest Period. The Adjusted Eurodollar Rate for any Eurodollar Loan shall change whenever the Reserve Requirement changes.
“ Administrative Agent ” means ABN AMRO Capital USA LLC, as Administrative Agent hereunder, and its successors in such capacity.
“ Administrative Questionnaire ” means an Administrative Questionnaire in a form supplied by Administrative Agent.
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“ Affiliate ” means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.
“ Aggregate Commitment ” means the Commitments of all the Lenders as the same may be increased, reduced or terminated pursuant to the terms hereof.
“ Agreement ” means this Credit Agreement.
“ Annualized Consolidated EBITDA ” means (a) with respect to the Fiscal Quarter ending September 30, 2017, Consolidated EBITDA for such Fiscal Quarter multiplied by 4; (b) with respect to the Fiscal Quarter ending December 31, 2017, Consolidated EBITDA for the period of July 1, 2017 through December 31, 2017 multiplied by 2; and (c) with respect to the Fiscal Quarter ending March 31, 2018, Consolidated EBITDA for the period of July 1, 2017 through March 31, 2018 multiplied by 4/3rds.
“ Anti-Corruption Laws ” means all laws, rules, and regulations of any jurisdiction applicable to Borrower or any of its Subsidiaries from time to time concerning or relating to bribery or corruption.
“ Applicable Lending Office ” means a Lender’s Domestic Lending Office (in the case of Base Rate Loans) and such Lender’s Eurodollar Lending Office (in the case of Eurodollar Loans).
“ Applicable Margin ” means the applicable rate per annum set forth in the grid below determined by reference to the Consolidated Leverage Ratio as set forth in the most recent Compliance Certificate received by Administrative Agent pursuant to Section 6.2(b) :
Applicable Margin
|
Pricing Level |
Consolidated
Leverage Ratio |
Eurodollar Loans
Letter of Credit Fee Rate |
Base Rate
Loans |
Commitment
Fee Rate |
||||||||||
| 1 | > 4.5:1 | 3.25 | % | 2.25 | % | 0.50 | % | |||||||
| 2 | > 4.0:1 but <4.5:1 | 3.00 | % | 2.00 | % | 0.50 | % | |||||||
| 3 | > 3.5:1 but <4.0:1 | 2.75 | % | 1.75 | % | 0.50 | % | |||||||
| 4 | > 3.0:1 but <3.5:1 | 2.50 | % | 1.50 | % | 0.375 | % | |||||||
| 5 | > 2.5:1 but <3.0:1 | 2.25 | % | 1.25 | % | 0.375 | % | |||||||
| 6 | <2.5:1 | 2.00 | % | 1.00 | % | 0.375 | % | |||||||
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Any increase or decrease in the Applicable Margin resulting from a change in the Consolidated Leverage Ratio shall become effective as of the first Business Day immediately following the date on which a Compliance Certificate is delivered pursuant to Section 6.2(b) ; provided, however, that if a Compliance Certificate is not delivered when due in accordance with such Section, then Pricing Level 1 shall apply as of the first Business Day after the date on which such Compliance Certificate was required to have been delivered and in each case shall remain in effect until the date on which such Compliance Certificate is delivered; provided, further that from the Closing Date through the First Reporting Date, Pricing Level 2 shall apply. Notwithstanding anything to the contrary contained in this definition, the determination of the Applicable Margin for any period shall be subject to the provisions of Section 2.5(f) .
“ Applicable Percentage ” means with respect to any Lender at any time, the percentage (carried out to the ninth decimal place) of the Aggregate Commitment represented by such Lender’s Commitment at such time, subject to adjustment as provided in Section 2.16 or Section 2.17 . If the commitment of each Lender to make Loans and the obligation of LC Issuer to issue or extend Letters of Credit have been terminated pursuant to Section 8.1 or if the Commitments have expired, then the Applicable Percentage of each Lender shall be determined based on the Applicable Percentage of such Lender most recently in effect, giving effect to any subsequent assignments. The initial Applicable Percentage of each Lender is set forth opposite the name of such Lender on the Lenders Schedule or in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as applicable.
“ Approved Counterparty ” means a counterparty to a Hedging Contract that at the time of entering into such Hedging Contract either (a) is a Lender Counterparty or (b) is a Person whose senior unsecured long-term debt obligations are rated A or higher by S&P and A3 or higher by Moody’s (or whose obligations under the applicable Hedging Contract are guaranteed by an Affiliate of such Person meeting such rating standards).
“ Approved Fund ” means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender, or (c) an entity or an Affiliate of an entity that administers or manages a Lender.
“ Arranger ” means ABN AMRO Capital USA LLC, in its capacity as sole lead arranger.
“ ASC ” means the Financial Accounting Standards Board Accounting Standards Codification, as in effect from time to time.
“ Assignment and Assumption ” means an assignment and assumption entered into by a Lender and an Eligible Assignee (with the consent of any party whose consent is required by Section 10.5), and accepted by Administrative Agent, in substantially the form of Exhibit E or any other form approved by Administrative Agent.
“ Availability ” means:
(a) from the Closing Date until, but excluding, the First Reporting Date, an aggregate amount equal to $84,643,920; and
| 3 | C REDIT A GREEMENT |
(b) On the First Reporting Date and on any date of determination thereafter until the Maturity Date, an aggregate amount equal to the lesser of (i) the Aggregate Commitment and (ii) the product of (A) Consolidated Adjusted EBITDA for the most recently ended Rolling Period for which the financial statements and Compliance Certificate were delivered pursuant to Section 6.2(a) or (b) times (B) 4.50 on any date of determination prior to the Target EBITDA Date and 4.75 on any date of determination on or after the Target EBITDA Date.
“ Bail-In Action ” means the exercise of any Write-Down and Conversion Powers by the applicable EEA Resolution Authority in respect of any liability of an EEA Financial Institution.
“ Bail-In Legislation ” means, with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule.
“ Bankruptcy Code ” means the United States Bankruptcy Code, Title 11 U.S.C., as amended.
“ Base Rate Loan ” means a Loan that bears interest with reference to the Adjusted Base Rate.
“ Borrower ” has the meaning given to such term in the preamble to this Agreement.
“ Borrowing ” means a borrowing of new Loans of a single Type (and, in the case of Eurodollar Loans, with the same Interest Period) pursuant to Section 2.2 or a Continuation or Conversion of existing Loans into a single Type (and, in the case of Eurodollar Loans, with the same Interest Period) pursuant to Section 2.3 .
“ Borrowing Notice ” means a written or telephonic request, or a written confirmation, made by Borrower that meets the requirements of Section 2.2 .
“ Business Day ” means a day, other than a Saturday or Sunday, on which commercial banks are open for business with the public in New York City and Dallas, Texas. Any Business Day in any way relating to Eurodollar Loans (such as the day on which an Interest Period begins or ends) must also be a day on which dealings in Dollar deposits are carried out in the London interbank market.
“ Capital Lease ” means a lease with respect to which the lessee is required concurrently to recognize the acquisition of an asset and the incurrence of a liability in accordance with GAAP.
“ Capital Lease Obligation ” means, with respect to any Person and a Capital Lease, the amount of the obligation of such Person as the lessee under such Capital Lease that should, in accordance with GAAP, appear as a liability on the balance sheet of such Person.
“ Cash Collateralize ” means to pledge and deposit with or deliver to Administrative Agent, for the benefit of Administrative Agent or LC Issuer (as applicable) and the Lenders, as collateral for LC Obligations or obligations of Lenders to fund participations in respect of either thereof (as the context may require), cash or deposit account balances or, if LC Issuer
| 4 | C REDIT A GREEMENT |
benefitting from such collateral shall agree in its discretion, other credit support, in each case pursuant to documentation in form and substance satisfactory to (a) Administrative Agent and (b) LC Issuer. “ Cash Collateral ” shall have a meaning correlative to the foregoing and shall include the proceeds of such cash collateral and other credit support.
“ Cash Equivalents ” means Investments in:
(a) marketable obligations, maturing within twelve (12) months after acquisition thereof, issued or unconditionally guaranteed by the United States or an instrumentality or agency thereof and entitled to the full faith and credit of the United States;
(b) demand deposits, and time deposits (including certificates of deposit) maturing within twelve (12) months from the date of deposit thereof, with any office of any Lender or with a domestic office of any national or state bank or trust company that is organized under the Laws of the United States or any state therein, which has capital, surplus and undivided profits of at least $500,000,000, and whose long term certificates of deposit are rated at least Aa3 by Moody’s or AA- by S&P;
(c) open market commercial paper, maturing within 270 days after acquisition thereof, rated in the highest grade by Moody’s or S&P; and
(d) shares in any SEC registered 2a-7 money market fund that has net assets of at least $500,000,000 and the highest rating available from either S&P or Moody’s.
“ Cash Management Lender ” means any Lender or any Affiliate of any Lender that provides a Cash Management Service to any Restricted Person, in its capacity as a provider of such service. If a Person ceases to be a Lender or an Affiliate of a Lender, such Person shall nonetheless remain a Cash Management Lender, but only with respect to transactions entered into thereunder during or prior to the time such Person was a Lender or an Affiliate of a Lender.
“ Cash Management Obligation ” means any obligation of any Restricted Person arising from time to time in respect of Cash Management Services heretofore, presently or hereafter entered into with a Cash Management Lender; provided that if any Person that was a Cash Management Lender ceases to be a Lender or an Affiliate of a Lender, the Cash Management Obligations shall only include such obligations to the extent arising from Cash Management Services provided to such Restricted Person during or prior to the time such Person was a Lender or an Affiliate of a Lender and shall not include any obligations arising from any Cash Management Services provided to such Restricted Person after such Person ceases to be a Lender or an Affiliate of a Lender.
“ Cash Management Services ” means any banking services that are provided to any Restricted Person by a Cash Management Lender (other than pursuant to this Agreement), including: (a) credit cards, (b) credit card processing services, (c) debit cards, (d) purchase cards, (e) stored value cards, (f) automated clearing house or wire transfer services, or (g) treasury management, including controlled disbursement, consolidated account, lockbox, overdraft, return items, sweep and interstate depository network services.
| 5 | C REDIT A GREEMENT |
“ Change in Law ” means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation, implementation, or application thereof by any Governmental Authority, or (c) the making or issuance of any request, rule, guideline or directive (whether or not having the force of law) by any Governmental Authority; provided that notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (y) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted or issued.
“ Change of Control ” means the occurrence of any of the following: (a) the Identified Investors shall for any reason not have, collectively, record and beneficial ownership, directly or indirectly, of greater than 75% of each class of the Equity of Borrower or (b) Borrower shall not be controlled by Identified Investors. As used in this definition “ Identified Investors ” means each of High Mesa, Inc., ARM Energy Holdings, LLC, HPS Investment Partners, LLC, and any limited liability companies managed by or whose managing member or investment manager is or is directly or indirectly Controlled by, or any limited partnerships whose general partner is or directly or indirectly controlled by, or any other Person managed or directly or indirectly Controlled by, High Mesa, Inc., ARM Energy Holdings, LLC or HPS Investment Partners, LLC.
“ Closing Date ” means the date on which all of the conditions precedent set forth in Section 4.1 shall have been satisfied (or waived in accordance with Section 10.10 ).
“ Collateral ” means substantially all of the property of Borrower and its Restricted Subsidiaries as described in the Security Documents, together with any other property and collateral described in the Security Documents, including, among other things, the Mortgaged Properties and any other property which may now or hereafter secure the Secured Obligations or any part thereof.
“ Commitment ” means, for each Lender, the obligation of such Lender to make Loans to, and participate in Letters of Credit issued upon the application of, Borrower in an aggregate amount not exceeding the amount set forth on the Lenders Schedule or as set forth in any Assignment and Assumption relating to any assignment that has become effective pursuant to Section 10.5 , as the same may be increased, reduced or terminated pursuant to the terms hereof.
“ Commitment Fee Rate ” means, on any date, the rate per annum set forth as such in the definition of Applicable Margin.
“ Commitment Period ” means the period from and including the Closing Date until the Maturity Date (or, if earlier, the day on which the obligations of Lenders to make Loans hereunder and the obligations of LC Issuer to issue Letters of Credit hereunder have been terminated or the Notes first become due and payable in full).
| 6 | C REDIT A GREEMENT |
“ Commodity Exchange Act ” means the Commodity Exchange Act (7 U.S.C. § 1 et seq.), as amended from time to time, and any successor statute, or any rule, regulation or order of the U.S. Commodity Futures Trading Commission issued with respect to such Act or statute (or the application or official interpretation of any thereof).
“ Compliance Certificate ” means a certificate in the form of Exhibit D.
“ Connection Income Taxes ” means Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.
“ Consolidated ” refers to the consolidation of any Person, in accordance with GAAP, with its properly consolidated subsidiaries. References herein to a Person’s Consolidated financial statements, financial position, financial condition, liabilities, etc. refer to the consolidated financial statements, financial position, financial condition, liabilities, etc. of such Person and its properly consolidated subsidiaries.
“ Consolidated Adjusted EBITDA ” means, for any Rolling Period, the sum, without duplication, of (a) Consolidated EBITDA for such Rolling Period or, with respect to any Rolling Period ending prior to March 31, 2018, Annualized Consolidated EBITDA plus (b) the amount approved by Administrative Agent as applicable Material Project EBITDA Adjustments for such Rolling Period.
“ Consolidated EBITDA ” means, for any period (without duplication), the sum of (a) Consolidated Net Income during such period (excluding extraordinary gains and losses), plus (b) the following that were deducted in determining such Consolidated Net Income (i) Consolidated Interest Expense, (ii) all income tax expense, (iii) all depreciation and amortization (including amortization of good will and debt issue costs), (iv) all extraordinary losses, (v) all non-recurring expenses which do not represent a cash item in such period or any future period (including any provision for the reduction in the carrying value of assets recorded in accordance with GAAP and including those resulting from the requirements of ASC Topic 815, ASC Topic 410, or ASC Topic 360), (vi) for any period including the Closing Date, fees and expenses incurred in connection with this Agreement and the other Loan Documents that were deducted in determining such Consolidated Net Income not to exceed $2,500,000 and (vii) for any period after the Closing Date, fees and expenses incurred in connection with the negotiation and consummation of any Permitted Acquisition, minus (in each case, to the extent added to Consolidated Net Income), (c) all non-cash items of income, all extraordinary gains, all gains on sales of assets, and all income tax credits that were included in determining such Consolidated Net Income. For the purposes of calculating Consolidated EBITDA for any Rolling Period, if at any time during such Rolling Period Borrower or any Restricted Subsidiary shall have made any Material Disposition or Material Acquisition or if Borrower shall make any designation pursuant to Section 7.19 , the Consolidated EBITDA for such Rolling Period shall be calculated after giving pro forma effect thereto as if such Material Disposition or Material Acquisition or such designation pursuant to Section 7.19 had occurred on the first day of such Rolling Period (such calculations to be reasonably acceptable to the Administrative Agent).
| 7 | C REDIT A GREEMENT |
“ Consolidated Funded Indebtedness ” means the categories of Liabilities of Borrower and its properly Consolidated Restricted Subsidiaries described in the definition of “Indebtedness” in this Section 1.1 (without duplication), excluding Liabilities in respect of (i) letters of credit which have not been drawn upon and (ii) transactions under Hedging Contracts which have not been subject to an early termination.
“ Consolidated Interest Expense ” means, for any period, all interest paid or accrued during such period on Indebtedness (including premium payments, capitalized interest, amortization of original issue discount, and the interest component of any deferred payment obligations and Capital Lease Obligations) that was deducted in determining Consolidated Net Income during such period.
“ Consolidated Leverage Ratio ” means, as of any date of determination, the ratio calculated pursuant to Section 7.14(a) .
“ Consolidated Net Income ” means, for any period, Borrower’s and its properly Consolidated Restricted Subsidiaries’ gross revenues for such period, minus Borrower’s and such Restricted Subsidiaries’ expenses and other proper charges against income (including taxes on income, to the extent imposed), determined on a Consolidated basis, after eliminating earnings or losses attributable to outstanding minority interests and excluding the net earnings of any Person (other than a Restricted Person) in which Borrower or any of its Restricted Subsidiaries has an ownership interest, except that any Restricted Person’s equity in the net income of any such Person for such period shall be included in Consolidated Net Income up to the aggregate amount of cash actually distributed by such Person during such period to such Restricted Person as a dividend or other distribution.
“ Continuation ” shall refer to the continuation pursuant to Section 2.3 of a Eurodollar Loan as a Eurodollar Loan from one Interest Period to the next Interest Period. “ Continued ” has a meaning correlative thereto.
“ Continuation/Conversion Notice ” means a written or telephonic request, or a written confirmation, made by Borrower that meets the requirements of Section 2.3 .
“ Control ” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. “ Controlling ” and “ Controlled ” have meanings correlative thereto.
“ Conversion ” shall refer to a conversion pursuant to Section 2.3 of one Type of Loan into another Type of Loan. “ Converted ” has a meaning correlative thereto.
“ Debtor Relief Laws ” means the Bankruptcy Code, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.
“ Deeds ” has the meaning given in Section 5.17(h) .
| 8 | C REDIT A GREEMENT |
“ Default ” means any Event of Default and any default, event or condition that would, with the giving of any requisite notices or the passage of any requisite periods of time, or both constitute an Event of Default.
“ Default Rate ” means, at the time in question (a) with respect to any Base Rate Loan, the rate per annum equal to the sum of (i) 2.0% plus (ii) the Applicable Margin then in effect for such Loan plus (iii) the Adjusted Base Rate then in effect and (b) with respect to any Eurodollar Loan, the rate per annum equal to the sum of (i) 2.0% plus (ii) the Applicable Margin then in effect for such Loan plus (iii) the Adjusted Eurodollar Rate then in effect for such Loan, provided in each case that no Default Rate charged by any Person shall ever exceed the Highest Lawful Rate.
“ Defaulting Lender ” means, subject to Section 2.16(b) , any Lender that (a) has failed to (i) fund all or any portion of its Loans within two (2) Business Days of the date such Loans were required to be funded hereunder unless such Lender notifies Administrative Agent and Borrower in writing that such failure is the result of such Lender’s determination that one or more conditions precedent to funding (each of which conditions precedent, together with any applicable default, shall be specifically identified in such writing) has not been satisfied, or (ii) pay to Administrative Agent, any LC Issuer, or any other Lender any other amount required to be paid by it hereunder (including in respect of its participation in Letters of Credit within two (2) Business Days of the date when due), (b) has notified Borrower, Administrative Agent or any LC Issuer in writing that it does not intend to comply with its funding obligations hereunder, or has made a public statement to that effect (unless such writing or public statement relates to such Lender’s obligation to fund a Loan hereunder and states that such position is based on such Lender’s determination that a condition precedent to funding (which condition precedent, together with any applicable default, shall be specifically identified in such writing or public statement) cannot be satisfied), (c) has failed, within three (3) Business Days after written request by Administrative Agent or Borrower, to confirm in writing to Administrative Agent and Borrower that it will comply with its prospective funding obligations hereunder (provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon receipt of such written confirmation by Administrative Agent and Borrower), or (d) has, or has a direct or indirect parent company that has, (i) become the subject of a proceeding under any Debtor Relief Law, (ii) had appointed for it a receiver, custodian, conservator, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or assets, including the Federal Deposit Insurance Corporation or any other state or federal regulatory authority acting in such a capacity, or (iii) become the subject of a Bail-in Action; provided that a Lender shall not be a Defaulting Lender solely by virtue of the ownership or acquisition of any equity interest in that Lender or any direct or indirect parent company thereof by a Governmental Authority so long as such equity interest does not result in or provide such Lender with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Lender (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made with such Lender. Any determination by Administrative Agent that a Lender is a Defaulting Lender under any one or more of clauses (a) through (d) above shall be conclusive and binding absent manifest error, and such Lender shall be deemed to be a Defaulting Lender (subject to Section 2.16(b) ) upon delivery of written notice of such determination to Borrower, each LC Issuer, and each Lender.
| 9 | C REDIT A GREEMENT |
“ Disclosure Schedule ” means Schedule 2 hereto.
“ Disposition ” or “ Dispose ” means the sale, assignment, conveyance, transfer, license, lease or other disposition (including any sale and leaseback transaction) of any property by any Person (or the granting of any option or other right to do any of the foregoing), including any sale, assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith and any assignment, termination or close out of any Hedging Contract.
“ Disqualified Capital Stock ” means any Equity in a Person that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable) or upon the happening of any event, matures or is mandatorily redeemable for any consideration other than other Equity in such Person (which would not constitute Disqualified Capital Stock), pursuant to a sinking fund obligation or otherwise, or is convertible or exchangeable for Indebtedness or redeemable for any consideration other than other Equity in such Person (which would not constitute Disqualified Capital Stock) at the option of the holder thereof, in whole or in part (but if in part only with respect to such amount that meets the criteria set forth in this definition), on or prior to the date that is one year after the earlier of the Maturity Date and payment in full of the Loans.
“ Distribution ” means (a) any dividend, distribution or other payment made by a Restricted Person on or in respect of any Equity in such Restricted Person or any other Restricted Person or to the direct or indirect holder of any such Equity, other than reasonable and customary salary payments to employees of a Restricted Person, or (b) any payment made by a Restricted Person to purchase, redeem, acquire, retire, cancel, or terminate any Equity in such Restricted Person or any other Restricted Person.
“ Dollar ” and “ $ ” mean lawful money of the United States.
“ Domestic Lending Office ” means, with respect to any Lender, the office of such Lender specified as its “Domestic Lending Office” below its name on the Lenders Schedule, or such other office as such Lender may from time to time specify to Borrower and Administrative Agent; with respect to LC Issuer, the office, branch, or agency through which it issues Letters of Credit; and, with respect to Administrative Agent, the office, branch, or agency through which it administers this Agreement.
“ EEA Financial Institution ” means (a) any credit institution or investment firm established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition, or (c) any financial institution established in an EEA Member Country which is a subsidiary of an institution described in clauses (a) or (b) of this definition and is subject to consolidated supervision with its parent.
“ EEA Member Country ” means any of the member states of the European Union, Iceland, Liechtenstein, and Norway.
| 10 | C REDIT A GREEMENT |
“ EEA Resolution Authority ” means any public administrative authority or any person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.
“ Eligible Assignee ” means any Person that meets the requirements to be an assignee under Section 10.5(b)(iii) , (v) and (vi) (subject to such consents, if any, as may be required under Section 10.5(b)(iii) ).
“ Eligible Contract Participant ” means, with respect to any Swap, a Person that is an “eligible contract participant”, as defined in the Commodity Exchange Act, with respect to such Swap.
“ Environmental Laws ” means any and all Laws to the extent relating to the environment or to emissions, discharges, releases or threatened releases of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes into the environment including ambient air, surface water, ground water, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes or to the remediation of any part of the environment in connection with any of the foregoing.
“ Equity ” in any Person means any share of capital stock issued by such Person, any general or limited partnership interest, profits interest, capital interest, membership interest, or other equity interest in such Person, any option, warrant or any other right to acquire any share of capital stock or any partnership, profits, capital, membership or other equity interest in such Person, and any other voting security issued by such Person.
“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor statutes or statute, together with all rules and regulations promulgated with respect thereto.
“ ERISA Affiliate ” means each Restricted Person and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control that, together with such Restricted Person, are (or were at any time in the past six years) treated as a single employer under Section 414 of the Internal Revenue Code.
“ ERISA Plan ” means any “employee pension benefit plan” as defined in Section 3(2) of ERISA (other than a Multiemployer Plan) that is subject to Title IV of ERISA or Section 412 of the Internal Revenue Code and maintained, contributed to or required to be contributed to by any ERISA Affiliate and with respect to which any Restricted Person has a fixed or contingent liability.
“ ERISA Plan Funding Rules ” means the rules in the Internal Revenue Code and ERISA (and related regulations and other guidance) regarding minimum funding standards and minimum required contributions to ERISA Plans as set forth in Sections 412, 430 and 436 of the Internal Revenue Code and Sections 302 and 303 of ERISA (and as set forth in Section 412 of the Internal Revenue Code and Section 302 of ERISA for periods prior to the effective date of the Pension Protection Act of 2006).
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“ EU Bail-In Legislation Schedule ” means the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor person), as in effect from time to time.
“ Eurodollar Lending Office ” means, with respect to any Lender, the office of such Lender specified as its “Eurodollar Lending Office” below its name on the Lenders Schedule (or, if no such office is specified, its Domestic Lending Office), or such other office of such Lender as such Lender may from time to time specify to Borrower and Administrative Agent.
“ Eurodollar Loan ” means a Loan that bears interest with reference to the Adjusted Eurodollar Rate.
“ Eurodollar Rate ” means:
(a) for any Interest Period with respect to a Eurodollar Loan, the rate per annum equal to (i) the ICE Benchmark Administration LIBOR Rate (“ ICE LIBOR ”), as published by Reuters (or such other commercially available source providing quotations of ICE LIBOR as may be designated by Administrative Agent from time to time) at approximately 11:00 a.m., London time, two (2) Business Days prior to the commencement of such Interest Period, for Dollar deposits (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period or (ii) if such rate is not available at such time for any reason, the rate per annum determined by Administrative Agent to be the rate at which deposits in Dollars for delivery on the first day of such Interest Period in same day funds in the approximate amount of the Eurodollar Loan being made, continued or converted and with a term equivalent to such Interest Period would be offered by Administrative Agent’s London branch to major banks in the London interbank eurodollar market at their request at approximately 11:00 a.m. (London time) two (2) Business Days prior to the commencement of such Interest Period; and
(b) for any interest calculation with respect to a Base Rate Loan on any date, the rate per annum equal to (i) ICE LIBOR, at approximately 11:00 a.m., London time determined two (2) Business Days prior to such date for Dollar deposits being delivered in the London interbank market for a term of one (1) month commencing that day or (ii) if such published rate is not available at such time for any reason, the rate per annum determined by Administrative Agent to be the rate at which deposits in Dollars for delivery on the date of determination in same day funds in the approximate amount of the Base Rate Loan being made or maintained and with a term equal to one (1) month would be offered by Administrative Agent’s London branch to major banks in the London interbank Eurodollar market at their request at the date and time of determination;
provided that, if at any time any such rate determined in accordance with the foregoing provisions of this definition is less than zero, such rate shall be deemed to be zero for purposes of this Agreement.
“ Event of Default ” has the meaning given to such term in Section 8.1 .
“ Excess Cash ” means any cash or Cash Equivalents of the Restricted Persons (other than Cash Collateral) in excess of the Excess Cash Threshold in the aggregate at any time, net of and reduced by (without duplication) (i) any cash or Cash Equivalents set aside to pay in the ordinary course of business in an amount up to the amount then due and owing to third parties and for
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which Restricted Persons have issued checks or initiated wires or ACH transfers in order to pay (or will, within fifteen (15) Business Days, issue checks or initiate wires or ACH transfers), (ii) any cash or Cash Equivalents constituting purchase price deposits held in escrow by or on behalf of any third party pursuant to a binding and enforceable purchase and sale agreement with such third party containing customary provisions regarding the payment and refunding of such deposits, (iii) any cash or Cash Equivalents to be used by any Restricted Person within thirty (30) days to pay the purchase price for property to be acquired by such Restricted Person pursuant to a binding and enforceable purchase and sale agreement with a third party containing customary provisions regarding the payment of such purchase price; provided that cash and Cash Equivalents excluded pursuant to this clause (iii) shall not be excluded for more than thirty (30) consecutive days at any time and (iv) without duplication of amounts described in clause (i), cash or Cash Equivalents in an amount up to the aggregate amount of outstanding checks or initiated wires or ACH transfers issued by Restricted Persons which have not yet been subtracted from the balance of the relevant accounts of such Restricted Persons.
“ Excess Cash Threshold ” means $15,000,000.
“ Excluded Swap Obligation ” means, with respect to any Guarantor, any Swap Obligation if, and to the extent that, all or a portion of the guaranty by such Guarantor of, or the grant by such Guarantor of a security interest or lien to secure, or the provision by such Guarantor of other support of, such Swap Obligation is or becomes illegal under the Commodity Exchange Act by virtue of such party’s failure for any reason to constitute an Eligible Contract Participant at the time such guaranty, grant of security interest or lien or provision of support of, such Swap Obligation becomes effective. If a Swap Obligation arises under a master agreement governing more than one Swap, such exclusion shall apply only to the portion of such Swap Obligation that is attributable to Swaps for which such guaranty, grant of security interest or lien to secure or provision of other support is or becomes illegal.
“ Excluded Taxes ” means any of the following Taxes imposed on or with respect to a Recipient or required to be withheld or deducted from a payment to a Recipient, (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case, (i) imposed as a result of such Recipient being organized under the laws of, or having its principal office or, in the case of any Lender, its Applicable Lending Office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) in the case of a Lender, United States federal withholding Taxes imposed on amounts payable to or for the account of such Lender with respect to an applicable interest in a Loan or Commitment pursuant to a law in effect on the date on which (i) such Lender acquires such interest in the Loan or Commitment (other than pursuant to an assignment request by Borrower under Section 3.7(b) ) or (ii) such Lender changes its lending office, except in each case to the extent that, pursuant to Section 3.5 , amounts with respect to such Taxes were payable either to such Lender’s assignor immediately before such Lender became a party hereto or to such Lender immediately before it changed its lending office, (c) Taxes attributable to such Recipient’s failure to comply with Section 3.5(g) and (d) any United States federal withholding Taxes imposed under FATCA.
“ Facility Usage ” means, at the time in question, the aggregate principal amount of outstanding Loans and existing LC Obligations at such time.
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“ FATCA ” means Sections 1471 through 1474 of the Internal Revenue Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof, any agreement entered into pursuant to Section 1471(b)(1) of the Internal Revenue Code, any intergovernmental agreement entered into in connection with the implementation of such Sections of the Internal Revenue Code and any fiscal or regulatory legislation, rules or practices adopted pursuant to such intergovernmental agreement.
“ Federal Funds Rate ” means, for any day, the rate per annum (rounded upwards, if necessary, to the nearest 1/100th of one percent) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day, provided that (a) if the day for which such rate is to be determined is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if such rate is not so published for any day, the Federal Funds Rate for such day shall be the average rate quoted to Administrative Agent on such day on such transactions as determined by Administrative Agent.
“ Fee Letter ” means the letter agreement, dated June 9, 2017 among Borrower, Administrative Agent and Arranger.
“ First Reporting Date ” means the date on which Borrower delivers its financial statements and Compliance Certificate required pursuant to Section 6.2(b) with respect to the Fiscal Quarter ending September 30, 2017, together with a certificate of a Responsible Officer which calculates Availability under clause (b) of the definition thereof.
“ Fiscal Quarter ” means a 3 month period ending on March 31, June 30, September 30 or December 31 of any year.
“ Fiscal Year ” means a twelve (12) month period ending on December 31 of any year.
“ Foreign Lender ” means a Lender that is not a U.S. Person.
“ Fronting Exposure ” means, at any time there is a Defaulting Lender, with respect to LC Issuer, such Defaulting Lender’s Applicable Percentage of the outstanding LC Obligations other than LC Obligations as to which such Defaulting Lender’s participation obligation has been reallocated to other Lenders or Cash Collateralized in accordance with the terms hereof.
“ Fund ” means any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business.
“ GAAP ” means those generally accepted accounting principles and practices that are recognized as such by the Financial Accounting Standards Board (or any generally recognized successor) and that, in the case of Borrower and its Consolidated Restricted Subsidiaries, are applied for all periods after the date hereof in a manner consistent with the manner in which such principles and practices were applied to the Initial Financial Statements. If any change in any
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accounting principle or practice is required by the Financial Accounting Standards Board (or any such successor) in order for such principle or practice to continue as a generally accepted accounting principle or practice, all reports and financial statements required hereunder with respect to any Restricted Person or with respect to any Borrower and its Consolidated Subsidiaries may be prepared in accordance with such change, but all calculations and determinations to be made hereunder may be made in accordance with such change only after notice of such change is given to each Lender, and Required Lenders, Administrative Agent and Borrower agree to negotiate in good faith in respect of the modification of any covenants hereunder that are affected by such change in order to cause them to measure substantially the same financial performance as the covenants in effect immediately prior to such change.
“ Gathering System ” means the Midstream Properties of the Restricted Persons comprised of any pipeline or gathering system owned or leased from time to time by any Restricted Person that is used in the business of such Restricted Person.
“ Governmental Authority ” means the government of the United States or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).
“ Governmental Requirement ” means any law, statute, code, ordinance, order, determination, rule, regulation, judgment, decree, injunction, franchise, permit, certificate, license, rules of common law, authorization, restriction, policy, guideline or other directive or requirement, whether now, or hereinafter in effect of any Governmental Authority.
“ Guarantor ” means any Person who has guaranteed some or all of the Secured Obligations pursuant to a guaranty listed on the Security Schedule or any other Restricted Subsidiary of Borrower that now or hereafter executes and delivers a guaranty to Administrative Agent pursuant to Section 6.16 .
“ Hazardous Materials ” means any substances regulated under any Environmental Law, whether as pollutants, contaminants, or chemicals, or as industrial, toxic or hazardous substances or wastes, or otherwise.
“ Hedging Contract ” means (a) any agreement providing for swaps, floors, puts, caps, collars, caps, forward sales or forward purchases involving interest rates, commodities or commodity prices, equities, currencies or bonds, or indexes based on any of the foregoing, (b) an option or obligation to enter into any of the foregoing agreements, (c) any option, futures or forward contract traded on an exchange, and (d) any other derivative agreement similar to any of the foregoing. If multiple transactions are entered into under a master agreement, each such transaction that constitutes a Hedging Contract will be a separate Hedging Contract for the purposes of this Agreement.
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“ Highest Lawful Rate ” means, with respect to each Lender Party to whom Obligations are owed, the maximum nonusurious rate of interest that such Lender Party is permitted under applicable Law to contract for, take, charge, or receive with respect to such Obligations. All determinations herein of the Highest Lawful Rate, or of any interest rate determined by reference to the Highest Lawful Rate, shall be made separately for each Lender Party as appropriate to assure that the Loan Documents are not construed to obligate any Person to pay interest to any Lender Party at a rate in excess of the Highest Lawful Rate applicable to such Lender Party.
“ HPS Notes ” means the promissory notes issued pursuant to the terms of the Note Purchase Agreements, including the Tranche A Notes (as defined in the Note Purchase Agreements), Tranche B Notes (as defined in the Note Purchase Agreements), the Tranche C Notes (as defined in the Note Purchase Agreements) and the Tranche D Notes.
“ Hydrocarbons ” means crude oil, natural gas, casinghead gas, condensate or natural gas liquids, and all other liquid or gaseous hydrocarbons, together with all products separated, processed or refined therefrom.
“ Indebtedness ” of any Person means Liabilities in any of the following categories (without duplication):
(a) Liabilities for borrowed money;
(b) Liabilities constituting an obligation to pay the deferred purchase price of property or services;
(c) Liabilities evidenced by a bond, debenture, note or similar instrument;
(d) Liabilities arising under Hedging Contracts (on a net basis to the extent netting is provided for in the applicable Hedging Contract and calculated as if an early termination of Hedging Contracts occurred on the date Indebtedness of such Person is being determined), excluding any portion thereof that would be accounted for as an interest expense under GAAP;
(e) Liabilities constituting principal under Capital Lease Obligations;
(f) Liabilities arising under conditional sales or other title retention agreements relating to property purchased by such Person;
(g) Liabilities with respect to Disqualified Capital Stock;
(h) Liabilities (for example, repurchase agreements and sale/leaseback agreements) consisting of an obligation to purchase or redeem securities or other property of such Person, if such Liabilities arise out of or in connection with the sale or issuance of the same or similar securities or property;
(i) Liabilities with respect to letters of credit or applications or reimbursement agreements therefor;
(j) Liabilities with respect to banker’s acceptances;
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(k) Liabilities with respect to other obligations to deliver goods or services in consideration of advance payments therefor;
(l) Liabilities constituting Synthetic Lease Obligations;
(m) Liabilities with respect to payments received in consideration of Hydrocarbons or other goods or services yet to be produced, acquired or performed at the time of receipt of such payment (including obligations under forward sale agreements or “take-or-pay” contracts to deliver Hydrocarbons in return for payments already received and including the undischarged portion of any production payment created by such Person or its Affiliate or for the creation of which such Person or its Affiliate directly or indirectly received payment);
(n) Liabilities owing under direct or indirect guaranties of Indebtedness of any other Person or otherwise constituting obligations to purchase or acquire or to otherwise protect or insure a creditor against loss in respect of Indebtedness of any other Person (such as obligations under working capital maintenance agreements, agreements to keep-well, or agreements to purchase Indebtedness, assets, goods, securities or services), but excluding endorsements in the ordinary course of business of negotiable instruments in the course of collection;
(o) Indebtedness (as defined in the other clauses of this definition) of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) a Lien on any property of such Person, whether or not such Indebtedness is assumed by such Person; and
(p) Indebtedness (as defined in the other clauses of this definition) of a partnership for which such Person is liable either by agreement, by operation of Law or by a Governmental Requirement, but only to the extent of such liability;
provided, however, that Indebtedness does not include (i) obligations with respect to surety or performance bonds and similar instruments entered into in the ordinary course of business or with respect to appeal bonds, (ii) accounts payable and other accrued expenses, liabilities or other obligations to pay the deferred purchase price of property or services, incurred from time to time in the ordinary course of business, which are not greater than ninety (90) days past the date of billing or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP, or (iii) endorsements of negotiable instruments for collection or deposit. The Indebtedness of any Person shall include all Liabilities of such Person of the types described in clauses (a) through (p) above to the extent such Person remains legally liable in respect thereof notwithstanding that any such obligation is not included as a liability of such Person under GAAP. Unless otherwise expressly provided herein, references to the amount of any Indebtedness refer to the outstanding principal amount thereof.
“ Indemnified Taxes ” means (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of Borrower or any Guarantor under any Loan Document and (b) to the extent not otherwise described in clause (a), Other Taxes.
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“ Initial Financial Statements ” means (a) Borrower’s audited Consolidated annual financial statements as of December 31, 2016, and (b) Borrower’s unaudited quarterly Consolidated financial statements as of March 31, 2017.
“ Insolvent ” means with respect to any Person, that (a) such Person is insolvent (as such term is defined in the Bankruptcy Code, and with all terms used in this definition that are defined in the Bankruptcy Code having the meanings ascribed to those terms in the text and interpretive case law applicable to the Bankruptcy Code), (b) the sum of such Person’s debts, including absolute liabilities and guaranties and other contingent liabilities, exceeds the value of such Person’s assets, at a fair valuation, (c) such Person’s capital is unreasonably small for the business in which such Person is engaged and intends to be engaged, or (d) such Person has incurred (whether under the Loan Documents or otherwise), or intends to incur debts that will be beyond its ability to pay as such debts mature. In determining whether a Person is “Insolvent” all rights of contribution of each Restricted Person against other Restricted Persons under the guaranty of the Obligations, at law, in equity or otherwise shall be taken into account.
“ Interest Payment Date ” means (a) with respect to each Base Rate Loan, the last Business Day of each March, June, September and December, and (b) with respect to each Eurodollar Loan, the last day of the Interest Period that is applicable thereto and, if such Interest Period exceeds 3 months, the respective dates that fall every 3 months after the beginning of such Interest Period shall also be Interest Payment Dates; provided that the last day of each calendar month shall also be an Interest Payment Date for each such Loan so long as any Event of Default exists under Section 8.1(a) or (b) .
“ Interest Period ” means, with respect to each Eurodollar Loan, the period specified in the Borrowing Notice or Continuation/Conversion Notice applicable to such Eurodollar Loan, beginning on and including the date specified in such Borrowing Notice or Continuation/ Conversion Notice (which must be a Business Day), and ending 1, 2, 3, or 6 months thereafter, as Borrower may elect in such notice; provided that: (a) any Interest Period that would otherwise end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day; (b) any Interest Period that begins on the last Business Day in a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day in a calendar month; and (c) notwithstanding the foregoing, any Interest Period that would otherwise end after the last day of the Commitment Period shall end on the last day of the Commitment Period (or, if the last day of the Commitment Period is not a Business Day, on the first preceding Business Day).
“ Internal Revenue Code ” means the United States Internal Revenue Code of 1986, as amended from time to time and any successor statute or statutes, together with all rules and regulations promulgated with respect thereto.
“ Investment ” means any investment, made directly or indirectly, in any Person, whether by purchase or acquisition of Equity, Indebtedness or other obligations or securities or by extension of credit, loan, advance, capital contribution or otherwise and whether made in cash, by the transfer of property, or by any other means or the purchase or other acquisition (in one
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transaction or a series of related transactions) of all or a material portion of the assets of another Person, to the extent constituting a division or line of business of such Person, and excluding, for the avoidance of doubt, purchases of inventory or equipment in the ordinary course of business, or the guarantee of or other surety obligation with respect to, Indebtedness of any other Person.
“ IRS ” means the Internal Revenue Service.
“ ISP ” means the International Standby Practices ISP98, International Chamber of Commerce Publication No. 590, as from time to time amended, modified, or replaced.
“ Law ” means any statute, law, regulation, ordinance, rule, treaty, judgment, order, decree, permit, concession, franchise, license, agreement or other Governmental Requirement of the United States or any state or political subdivision thereof or of any foreign country or any department, province or other political subdivision thereof. Any reference to a Law includes any amendment or modification to such Law, and all regulations, rulings, and other Laws promulgated under such Law.
“ LC Application ” means any application for a Letter of Credit hereafter made by Borrower to LC Issuer.
“ LC Conditions ” has the meaning given to such term in Section 2.8 .
“ LC Issuer ” means each of ABN AMRO Capital USA LLC, as the initial LC Issuer, and one or more other Lenders acceptable to Borrower and the Administrative Agent, which Lender or Lenders shall act in the capacity as the issuer of Letters of Credit hereunder.
“ LC Obligations ” means, at the time in question, the sum of all Matured LC Obligations plus the maximum amounts that LC Issuer might then or thereafter be called upon to advance under all Letters of Credit then outstanding.
“ LC Sublimit ” means $20,000,000.
“ Lender Counterparty ” means (a) any Lender or any Affiliate of any Lender that entered into a Hedging Contract with any Restricted Person before or while such Person was a Lender or an Affiliate of a Lender, or (b) any assignee of any Person described in clause (a) above so long as such assignee is a Lender or an Affiliate of a Lender. If a Person ceases to be a Lender or an Affiliate of a Lender but remains a party to one or more Hedging Contracts with a Restricted Person that were entered into prior to such cessation, such Person shall remain a Lender Counterparty, but only with respect to Hedging Contracts and transactions thereunder that were entered into prior to the time such Person ceased to be a Lender or an Affiliate of a Lender.
“ Lender Hedging Obligation ” means any obligation of any Restricted Person arising from time to time under any Hedging Contract heretofore, presently or hereafter entered into with a Lender Counterparty; provided that (a) if any Person that was a Lender Counterparty ceases to be a Lender or an Affiliate of a Lender, the obligations owing to such Person under any Hedging Contracts shall continue to be Lender Hedging Obligations only to the extent arising from transactions entered into during or prior to the time such Person was a Lender or an Affiliate of a Lender and the Lender Hedging Obligations shall not include any obligations arising from any
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transaction entered into after such Person ceases to be a Lender or an Affiliate of a Lender, (b) if any obligation that is a Lender Hedging Obligation is assigned or transferred to any Person that is not a Lender Counterparty, such obligation shall thereupon cease to be a Lender Hedging Obligation, and (c) the Lender Hedging Obligations owed by any Restricted Person shall not include any Excluded Swap Obligation with respect to such Restricted Person.
“ Lender Parties ” means Administrative Agent, LC Issuer, and all Lenders.
“ Lenders ” means each signatory hereto (other than Borrower and any Restricted Person that is a party hereto), including ABN AMRO Capital USA LLC in its capacity as a Lender hereunder rather than as Administrative Agent or LC Issuer, and the successors of each such party as a Lender hereunder pursuant to Section 10.5 .
“ Lenders Schedule ” means Schedule 1 hereto.
“ Letter of Credit ” means any standby letter of credit issued by LC Issuer hereunder at the application of Borrower.
“ Letter of Credit Fee Rate ” means, on any date, the rate per annum set forth as such in the definition of “Applicable Margin”.
“ Letter of Credit Termination Date ” means the date that is five (5) days prior to the Maturity Date or, if such day is not a Business Day, the next preceding Business Day.
“ Liabilities ” means, as to any Person, all indebtedness, liabilities and obligations of such Person, whether matured or unmatured, liquidated or unliquidated, primary or secondary, direct or indirect, absolute, fixed or contingent, and whether or not required to be considered pursuant to GAAP.
“ Lien ” means, with respect to any property or assets, any right or interest therein of a creditor to secure Liabilities owed to it or any other arrangement with such creditor that (x) provides for the payment of such Liabilities out of such property or assets or (y) that allows such creditor to have such Liabilities satisfied out of such property or assets, in each case, prior to the general creditors of any owner thereof, including 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, tax lien, mechanic’s or materialman’s lien, or any other charge or encumbrance for security purposes, whether arising by Law or agreement or otherwise, but excluding any right of offset that arises without agreement in the ordinary course of business. “ Lien ” also means any filed financing statement, any registration of a pledge (such as with an issuer of uncertificated securities), or any other arrangement or action that would serve to perfect a Lien described in the preceding sentence, regardless of whether such financing statement is filed, such registration is made, or such arrangement or action is undertaken before or after such Lien exists.
“ Loan Documents ” means this Agreement, the Notes, the Security Documents, the Pledge Agreement, the Letters of Credit, the LC Applications, the Fee Letter, any agreement creating or perfecting rights in Cash Collateral pursuant to the provisions of Section 2.15 , and all other agreements, certificates, documents, instruments and writings at any time delivered in connection herewith or therewith (exclusive of term sheets and commitment letters).
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“ Loans ” has the meaning given to such term in Section 2.1 .
“ Material Acquisition ” means any acquisition of property or series of related acquisitions of property (including by way of merger or consolidation) that involves the payment of consideration by any Restricted Person in excess of $20,000,000.
“ Material Adverse Effect ” means (a) a material and adverse change in, or material adverse effect on, (i) the Restricted Persons’ businesses, assets, properties, liabilities (actual or contingent), operations, condition (financial or otherwise), or prospects, considered as a whole, or (ii) Borrower’s ability to timely pay the Obligations or any Restricted Person’s ability to perform its obligations under any Loan Document to which it is a party, or (b) except to the extent caused by a written release or amendment of any Loan Document, (i) a material impairment of the rights and remedies of Administrative Agent or any Lender Party under any Loan Document, or (ii) a material adverse effect upon the legality, validity, binding effect or enforceability against any Restricted Person of any Loan Document to which it is a party.
“ Material Contracts ” means, individually or collectively as the context requires, (a) any Material Gathering Contract, and (b) any other contract or other arrangement to which any Restricted Person is a party (other than the Loan Documents) for which breach, nonperformance, cancellation or failure to renew would reasonably be expected to have a Material Adverse Effect.
“ Material Disposition ” means any disposition of property or series of related dispositions of properties that yields gross proceeds to Borrower or any of its Restricted Subsidiaries in excess of $10,000,000.
“ Material Gathering Contract ” means each gathering, treating or processing contract entered into by Borrower or any Restricted Subsidiary that (a) if a fee-based contract, provides for aggregate payments to Borrower or such Restricted Subsidiary during any twelve (12) month period in excess of $3,000,000, and (b) if a percentage of proceeds contract, is reasonably anticipated to result in a share of proceeds retained by Borrower or such Restricted Subsidiary for its own account during any twelve (12) month period in excess of $3,000,000.
“ Material Indebtedness ” means any Indebtedness (other than the Loans and Letters of Credit), or any obligations in respect of one or more Hedging Contracts, of any one or more of Borrower and its Restricted Subsidiaries in an aggregate principal amount exceeding the Threshold Amount. For purposes of determining Material Indebtedness, the “principal amount” of the obligations of Borrower or any Restricted Subsidiary in respect of any Hedging Contract at any time shall be the Swap Termination Value of such Hedging Contract.
“ Material Project EBITDA Adjustment ” means, with respect to each Material Project:
(a) with the prior written consent of the Administrative Agent, prior to the date on which a Material Project has achieved completion of construction and commencement of commercial operation (the “ Commercial Operation Date ”) (but including the Rolling Period ending on the last day of the Fiscal Quarter in which such Commercial Operation Date occurs), a
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percentage (based on the then-current completion percentage of such Material Project as of the relevant date of determination) of an amount to be approved by the Administrative Agent as the incremental projected Consolidated EBITDA attributable to such Material Project for the first 12-month period following the scheduled Commercial Operation Date of such Material Project (such amount to be determined based upon incremental projected revenues from enforceable fee based contracts, dedications, minimum revenue contracts and other contracts acceptable to the Administrative Agent and entered into between one or more Restricted Persons, on the one hand, and third-party customers, on the other, the creditworthiness and applicable projected production of such customers, capital and other costs, operating and administrative expenses, the scheduled Commercial Operation Date and other factors reasonably deemed appropriate by the Administrative Agent), which may, at Borrower’s option exercised as provided below, be added to Consolidated EBITDA for the Rolling Period ending on the last day of the Fiscal Quarter in which construction or expansion of such Material Project commences and for each Rolling Period thereafter until the Commercial Operation Date of such Material Project (including the Rolling Period ending on the last day of the Fiscal Quarter in which such Commercial Operation Date occurs, but net of any Consolidated EBITDA attributable to such Material Project following such Commercial Operation Date); provided, that if the actual Commercial Operation Date does not occur by the scheduled Commercial Operation Date, then the foregoing amount shall be reduced, for Rolling Periods ending after the scheduled Commercial Operation Date to (but excluding) the Rolling Period ending on the last day of the first full quarter after its Commercial Operation Date, by the following percentage amounts depending on the period of delay (based on the period of actual delay or then-estimated delay, whichever is longer): (i) 60 days or less, 0%, (ii) longer than 60 days, but not more than 90 days, 33-1/3%, (iii) longer than 90 days but not more than 120 days, 66-2/3%, and (iv) longer than 120 days, 100%; and
(b) with the prior written consent of the Administrative Agent, beginning with the Rolling Period ending on the last day of the first full Fiscal Quarter following the Commercial Operation Date of a Material Project and for the two immediately succeeding Rolling Periods, an amount approved by the Administrative Agent as the projected Consolidated EBITDA (determined in the same manner set forth in clause (a) above) attributable to such Material Project for the then remaining balance of the four full Fiscal Quarter period following such Commercial Operation Date, which may, at Borrower’s option exercised as provided below, be added to Consolidated EBITDA for such Rolling Periods.
Notwithstanding the foregoing:
(1) no such Material Project EBITDA Adjustment shall be allowed with respect to a Material Project unless:
(x) at least thirty (30) days (or such lesser period as is reasonably acceptable to the Administrative Agent) prior to the delivery of any Compliance Certificate required by Section 6.2(b) for the most recently ended Rolling Period for which Borrower desires to commence inclusion of a proposed Material Project EBITDA Adjustment in Consolidated Adjusted EBITDA (the “ Initial MPA Period ”), Borrower shall have given written notice to the Administrative Agent of Borrower’s request to include a proposed Material Project EBITDA Adjustment, which notice shall be accompanied by pro forma projections of the Consolidated EBITDA attributable to such Material Project; and
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(y) prior to the delivery of any Compliance Certificate required by Section 6.2(b) for the Initial MPA Period, the Administrative Agent shall have (i) received such other information and documentation as the Administrative Agent reasonably request in form and substance satisfactory to the Administrative Agent and (ii) shall have approved the inclusion of such Material Project EBITDA Adjustment and shall have approved the applicable amount or amounts thereof, which approved amount or amounts shall the Material Project EBITDA Adjustment for the applicable Rolling Period; and
(2) the aggregate amount of all Material Project EBITDA Adjustments during any Rolling Period shall not exceed 15% of Consolidated EBITDA for such Rolling Period (i.e., before giving effect to any Material Project EBITDA Adjustments).
“ Material Projects ” means any capital project of any Restricted Person with respect to the construction or expansion of pipelines, wells, gathering systems or other facilities, provided that the aggregate capital cost of such capital project (inclusive of capital costs expended prior to the acquisition thereof) is reasonably expected to exceed, or exceeds, $20,000,000, as determined by Borrower in its reasonable discretion; provided further that the scheduled commercial operation date for each Material Project shall be reasonably projected by Borrower and shall be reasonably acceptable to the Administrative Agent.
“ Matured LC Obligations ” means all obligations of any Restricted Person to reimburse the LC Issuer for amounts paid by LC Issuer on drafts or demands for payment drawn or made under or purported to be drawn on or made under any Letter of Credit and all other amounts due and owing to LC Issuer under any LC Application for any Letter of Credit, to the extent the same have not been repaid to LC Issuer (with the proceeds of Loans or otherwise).
“ Maturity Date ” means August 8, 2021.
“ Midstream Properties ” means all tangible property used in (a) gathering, compressing, treating, processing and transporting Hydrocarbons; (b) fractionating and transporting Hydrocarbons; (c) marketing Hydrocarbons; and (d) water distribution, supply, treatment and disposal services thereof, including, Gathering Systems, Plants, storage facilities, surface leases, Rights of Way and servitudes related to each of the foregoing. Unless otherwise specified herein, “ Midstream Properties ” shall be deemed to refer to such properties owned by the Restricted Persons.
“ Moody’s ” means Moody’s Investors Service, Inc., or its successor.
“ Mortgaged Properties ” means all present and future properties of one or more of Borrower and its Restricted Subsidiaries in which one or more of Borrower and its Restricted Subsidiaries has granted or does hereafter grant a mortgage or Lien to or for the benefit of Administrative Agent for the benefit of the Secured Parties.
“ Multiemployer Plan ” means any plan described in Section 4001(a)(3) of ERISA.
“ Net Cash Proceeds ” means the cash payments received by Borrower or any of its Restricted Subsidiaries from any Disposition or proceeds of any casualty event or condemnation, net of (a) the direct costs incurred in connection with such Disposition (including fees payable to
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brokers and attorneys) or collection of such proceeds of casualty event or condemnation, and (b) property taxes, transfer taxes, income taxes and any other taxes paid or payable by Borrower or any of its Restricted Subsidiaries in connection with such Disposition.
“ Nominated Person ” means “nominated person” as defined in Article 5 of the UCC.
“ Note ” has the meaning given to such term in Section 2.1 .
“ Note Purchase Agreements ” means, together, (a) that certain Note Purchase Agreement dated as of August 31, 2015, among ARM Midstream, LLC, Highbridge Principal Strategies, LLC, and the holders party thereto (as amended, restated, supplemented or otherwise modified prior to the date hereof) and (b) that certain Note Purchase Agreement dated as of August 31, 2015, among HMS Kingfisher HoldCo, LLC, Highbridge Principal Strategies, LLC, and the holders party thereto (as amended, restated, supplemented or otherwise modified prior to the date hereof).
“ Obligations ” means all Liabilities from time to time owing by any Restricted Person to any Lender Party under or pursuant to any of the Loan Documents, including all LC Obligations. “Obligation” means any part of the Obligations.
“ Organizational Documents ” means, (a) with respect to any corporation, the certificate or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect to any non-U.S. jurisdiction); (b) with respect to any limited liability company, the certificate or articles of formation or organization and limited liability company agreement or operating agreement; and (c) with respect to any partnership, joint venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement of formation or organization and any agreement, instrument, filing or notice with respect thereto filed in connection with its formation or organization with the applicable Governmental Authority in the jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or organization of such entity.
“ Other Connection Taxes ” means, with respect to any Recipient, Taxes imposed as a result of a present or former connection between such Recipient and the jurisdiction imposing such Tax (other than connections arising from such Recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in any Loan or Loan Document).
“ Other Taxes ” means all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Loan Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment (other than an assignment made pursuant to Section 3.7(b) ).
“ Participant ” has the meaning given to such term in Section 10.5(d) .
“ Participant Register ” has the meaning given to such term in Section 10.5(d) .
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“ Patriot Act ” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Title III of Pub. L. 107-56), which was signed into law October 26, 2001.
“ Payment in Full ” means the full and final payment of all Obligations (other than contingent indemnification and reimbursement obligations for which no demand has been made) owing to Administrative Agent, LC Issuer or the Lenders under the Loan Documents, the termination of all Commitments, and the expiration or termination of all Letters of Credit (other than Letters of Credit as to which other arrangements satisfactory to Administrative Agent and LC Issuer have been made).
“ PBGC ” means the Pension Benefit Guaranty Corporation.
“ Permitted Acquisition ” means any acquisition consummated in accordance with Section 7.17.
“ Permitted Investments ” means any Investment permitted under Section 7.7.
“ Permitted Liens ” means:
(a) statutory Liens for taxes, assessments or other governmental charges or levies that are not yet delinquent or that are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP;
(b) landlords’, operators’, carriers’, warehousemen’s, repairmen’s, mechanics’, materialmen’s, or other like Liens that do not secure Indebtedness, in each case only to the extent arising in the ordinary course of business and only to the extent securing obligations that are not delinquent or that are being contested in good faith by appropriate proceedings and for which adequate reserves have been maintained in accordance with GAAP;
(c) minor defects and irregularities in title to property consisting of easements or right of way, so long as such defects and irregularities neither secure Indebtedness nor materially impair the value of such property or the use of such property for the purposes for which such property is held;
(d) deposits of cash, letters of credit, or securities to secure the performance of bids, trade contracts, leases, statutory obligations and other obligations of a like nature (excluding appeal bonds) incurred in the ordinary course of business and not constituting Indebtedness;
(e) Liens under the Security Documents;
(f) easements, restrictions, servitudes, permits, conditions, covenants, exceptions or reservations in any property of any Restricted Person for purpose of roads, pipelines, transmission lines, transportation lines, distribution lines for the removal of gas, oil, coal or other minerals or timber, and other like purposes, or for the joint or common use of real estate, rights of way, facilities and equipment, that do not secure Indebtedness and that do not materially interfere with the future development of such property or with cash flow from such property;
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(g) encumbrances consisting of deed restrictions, zoning restrictions, easements, governmental or environmental permitting and operation restrictions, the exercise by Governmental Authorities or third parties of eminent domain or condemnation rights, or any other similar restrictions on the use of the Midstream Properties, none of which materially impairs the use of such property by Restricted Person in the operation of its business, and none of which is or shall be violated in any material respect by existing or proposed operations;
(h) judgment and attachment Liens not giving rise to an Event of Default, provided that any appropriate legal proceedings that may have been duly initiated for the review of such judgment shall not have been finally terminated or the period within which such proceeding may be initiated shall not have expired no action to enforce such Lien has been commenced, and such Liens are covered by a bond or insurance reasonably acceptable to Administrative Agent; and
(i) Liens on property to secure purchase money Indebtedness used to acquire such property and Liens constituting of Capital Leases, in each case to the extent permitted by Section 7.1(f).
“ Person ” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.
“ Plan ” means any employee benefit plan (as defined in Section 3(3) of ERISA) established by a Restricted Person and any ERISA Plan.
“ Plants ” means the Midstream Properties of the Restricted Persons comprised of any plants owned or leased from time to time by any Restricted Person that are used in the business of such Restricted Person for compression, storage, handling, treating, separation or processing of Hydrocarbons.
“ Platform ” has the meaning given to such term in Section 10.3(d)(i).
“ Pledge Agreement ” has the meaning given to such term in the Security Schedule.
“ Pledgor ” has the meaning given to such term in the Security Schedule.
“ Recipient ” means (a) Administrative Agent, (b) any Lender, and (c) any LC Issuer, as applicable.
“ Refined Products ” means gasoline, diesel fuel, jet fuel, asphalt and asphalt products, and other refined products of crude oil.
“ Regulation D ” means Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor thereto or other regulation or official interpretation of said Board of Governors relating to reserve requirements applicable to member banks of the Federal Reserve System.
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“ Regulation U ” means Regulation U of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor or other regulation or official interpretation of said Board of Governors relating to the extension of credit by banks for the purpose of purchasing or carrying margin stocks applicable to member banks of the Federal Reserve System.
“ Related Parties ” means, with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents, trustees, administrators, managers, advisors and representatives of such Person and of such Person’s Affiliates.
“ Required Lenders ” means, as of any date of determination, Lenders having greater than 50% of the Aggregate Commitment or, if the commitment of each Lender to make Loans and the obligation of LC Issuer to issue or extend Letters of Credit have been terminated pursuant to Section 8.1, Lenders holding greater than 50% in the aggregate of the Facility Usage (with the aggregate amount of each Lender’s risk participation and funded participation in LC Obligations being deemed “held” by such Lender for purposes of this definition); provided that the Commitment of, and the portion of the Facility Usage held or deemed held by, any Defaulting Lender shall be excluded for purposes of making a determination of Required Lenders.
“ Reserve Requirement ” means, at any time, the maximum rate at which reserves (including any marginal, special, supplemental, or emergency reserves) are required to be maintained under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) by member banks of the Federal Reserve System against “Eurocurrency liabilities” (as such term is used in Regulation D). Without limiting the effect of the foregoing, the Reserve Requirement shall reflect any other reserves required to be maintained by such member banks with respect to (a) any category of liabilities that includes deposits by reference to which the Adjusted Eurodollar Rate is to be determined, or (b) any category of extensions of credit or other assets that includes Eurodollar Loans.
“ Responsible Officer ” means, with respect to Borrower, the Chief Executive Officer, President or Chief Financial Officer of Borrower, and with respect to any other Restricted Person, if such Restricted Person is a corporation, the President or Chief Financial Officer of such Restricted Person, if such Restricted Person is a limited liability company, a Manager or officer of such Restricted Person, as applicable, and if such Restricted Person is a limited partnership, the applicable officer of the general partner of such limited partnership.
“ Restricted Person ” means any of Borrower, and each Restricted Subsidiary of Borrower.
“ Restricted Subsidiary ” means any Subsidiary of Borrower that is not an Unrestricted Subsidiary.
“ Rights of Way ” has the meaning given to such term in Section 5.17(f).
“ Rolling Period ” means, with respect to the Fiscal Quarters ending on September 30, 2017, December 31, 2017 and March 31, 2018, respectively, the one, two and three Fiscal Quarter periods ending on such dates, and with respect to each Fiscal Quarter ending June 30, 2018 and thereafter, the period of four consecutive Fiscal Quarters ending on the last day of such Fiscal Quarter.
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“ S&P ” means Standard & Poor’s Ratings Services (a division of The McGraw Hill Companies) and any successor thereto that is a nationally recognized rating agency.
“ Sanctioned Country ” means, at any time, a country, region or territory which is itself the subject or target of any Sanctions (at the time of this Agreement, the Crimea region of Ukraine, Cuba, Iran, North Korea, Sudan and Syria).
“ Sanctioned Person ” means, at any time, (a) any Person listed in any Sanctions-related list of designated Persons maintained by OFAC, the U.S. Department of State, the United Nations Security Council, the European Union, any European Union member state, Her Majesty’s Treasury of the United Kingdom or any other relevant sanctions authority, (b) any Person operating, organized or resident in a Sanctioned Country and any other Person that is the subject or target of Sanctions, or (c) any Person owned or controlled by any such Person or Persons described in the foregoing clauses (a) or (b).
“ Sanctions ” means all economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by (a) the U.S. government, including those administered by OFAC or the U.S. Department of State, or (b) the United Nations Security Council, the European Union, any European Union member state, Her Majesty’s Treasury of the United Kingdom or any other relevant sanctions authority.
“ SEC ” means the Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions.
“ Secured Obligations ” means all Obligations, Cash Management Obligations, and Lender Hedging Obligations.
“ Secured Parties ” means the Lender Parties, the Lender Counterparties, and the Cash Management Lenders.
“ Security Documents ” means the guaranties, deeds of trust, mortgages, pledge agreements, security agreements and other documents listed in the Security Schedule and all other security agreements, deeds of trust, mortgages, chattel mortgages, pledges, guaranties, financing statements, continuation statements, extension agreements, subordination agreements, intercreditor agreements, and other agreements or instruments now, heretofore, or hereafter delivered by any Restricted Person to Administrative Agent in connection with this Agreement or any transaction contemplated hereby to secure or guarantee the payment of any part of the Secured Obligations or the performance of any Restricted Person’s other duties and obligations under the Loan Documents.
“ Security Schedule ” means Schedule 3 hereto.
“ Subsidiary ” means, with respect to any Person (the “parent”) at any date, (a) any other Person the accounts of which would be consolidated with those of the parent in the parent’s consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, or (b) any other Person in which more than 50% of the Equity or more than 50% of the ordinary voting power (irrespective of whether or not at the time Equity of any other class or classes of such Person shall have or might have voting power by reason of the happening of any contingency) are, as of such date, owned or held by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent.
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“ Swap ” means any “swap” within the meaning of section 1a(47) of the Commodity Exchange Act.
“ Swap Obligation ” means any obligation to pay or perform under any Swap, whether as a party to such Swap or by providing any guarantee of or provision of support for such Swap (and whether or not such obligation is a Lender Hedging Obligation hereunder).
“ Swap Termination Value ” means, in respect of any one or more Hedging Contracts, after taking into account the effect of any legally enforceable netting agreement relating to such Hedging Contracts, (a) for any date on or after the date such Hedging Contracts have been closed out and termination value(s) determined in accordance therewith, such termination value(s) and (b) for any date prior to the date referenced in clause (a), the amount(s) determined as the mark-to-market value(s) for such Hedging Contracts, as determined by the counterparties to such Hedging Contracts (including, without duplication, any unpaid amounts due on the date of calculation).
“ Synthetic Lease Obligations ” means, with respect to any Person, the sum of (a) all remaining rental obligations of such Person as lessee under so called synthetic leases which are attributable to principal and, without duplication, (b) all rental and purchase price payment obligations of such Person under such synthetic leases assuming such Person exercises the option to purchase the lease property at the end of the lease term.
“ Target EBITDA Date ” means the date on which financial statements for a Fiscal Quarter or Fiscal Year are delivered to Administrative Agent in accordance with Section 6.2(a) or (b), together with the Compliance Certificate in accordance with Section 6.2(b), which demonstrate that Consolidated EBITDA for the Rolling Period ending on the last day of such Fiscal Quarter or Fiscal Year is greater than or equal to $75,000,000; provided, however, if at any time following the occurrence of the Target EBITDA Date, Borrower or any Restricted Subsidiary makes a Material Disposition and Consolidated EBITDA shall be less than $75,000,000 after giving pro forma effect to such Material Disposition, then for all purposes under this Agreement, the Target EBITDA Date shall be deemed to have not occurred beginning on the date of the consummation of such Material Disposition and continuing until the date upon which financial statements for a Fiscal Quarter or Fiscal Year are delivered to Administrative Agent in accordance with Section 6.2(a) or (b), together with the Compliance Certificate in accordance with Section 6.2(b), which demonstrate that Consolidated EBITDA for the Rolling Period ending on the last day of such Fiscal Quarter or Fiscal Year is again greater than or equal to $75,000,000.
“ Taxes ” means all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.
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“ Termination Event ” means (a) the occurrence with respect to any ERISA Plan subject to Title IV of ERISA of (i) a reportable event described in Section 4043(c)(5) or (6) of ERISA or (ii) any other reportable event described in Section 4043(c) of ERISA other than such a reportable event for which the 30-day notice requirement has been waived, or (b) the withdrawal by any ERISA Affiliate from an ERISA Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA, or (c) the filing of a notice of intent to terminate any ERISA Plan subject to Title IV of ERISA or the treatment of any amendment to such an ERISA Plan as a termination under Section 4041 of ERISA, or (d) the institution of proceedings to terminate any ERISA Plan by the PBGC under Section 4042 of ERISA, or (e) any other event or condition which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any ERISA Plan, or (f) any failure by any ERISA Plan to satisfy the ERISA Plan Funding Rules, whether or not waived, or (g) the filing pursuant to Section 412(c) of the Internal Revenue Code or Section 302(c) of ERISA of an application for a waiver of the minimum funding standard with respect to any ERISA Plan, the failure to make by its due date a required installment under Section 430(j) of the Internal Revenue Code with respect to any ERISA Plan, or (h) a determination that any ERISA Plan subject to Title IV of ERISA is, or is expected to be, an at-risk plan (as defined in Section 430 of the Internal Revenue Code or Section 303 of ERISA) and the funding target attainment percentage (as defined in Section 430 of the Internal Revenue Code or Section 303 of ERISA) for such plan is, or is expected to be, less than 60 percent, or (i) the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent, upon any ERISA Affiliate.
“ Threshold Amount ” means $2,000,000.
“ Tranche D Notes ” shall have the meaning assigned to such term in the Note Purchase Agreements.
“ Type ” means, with respect to any Loans, the characterization of such Loans as either Base Rate Loans or Eurodollar Loans.
“ UCC ” means the Uniform Commercial Code in effect in the State of New York from time to time or of any other state the laws of which are required to be applied in connection with the perfecting of security interests in any Collateral.
“ UCP ” means the Uniform Customs and Practice for Documentary Credits (2007 Revision), International Chamber of Commerce Publication No. 600, as the same may be amended, modified or replaced from time to time.
“ United States ” and “U.S.” mean the United States of America.
“ Unrestricted Subsidiary ” means (i) any Subsidiary which Borrower has designated in writing to the Administrative Agent to be an Unrestricted Subsidiary pursuant to Section 7.19 or (ii) that is a subsidiary of an Unrestricted Subsidiary, excluding any such Subsidiary that is subsequently re-designated as a Restricted Subsidiary in accordance with this Agreement.
“ Unused Availability ” means, at any time of determination, an amount equal to (a) the Availability minus (b) the Facility Usage.
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“ U.S. Person ” means any Person that is a “United States Person” as defined in Section 7701(a)(30) of the Internal Revenue Code.
“ Withholding Agent ” means Borrower and Administrative Agent.
“ Write-Down and Conversion Powers ” means, with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule.
Section 1.2 Exhibits and Schedules; Additional Definitions . All Exhibits and Schedules attached to this Agreement are a part hereof for all purposes. Reference is hereby made to the Security Schedule for the meaning of certain terms defined therein and used but not defined herein, which definitions are incorporated herein by reference.
Section 1.3 Terms Generally; References and Titles . The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “ include ,” “ includes ” and “ including ” shall be deemed to be followed by the phrase “without limitation.” The word “ will ” shall be construed to have the same meaning and effect as the word “ shall .” References to a Person’s “ discretion ” means its sole and absolute discretion. Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented, restated or otherwise modified (subject to any restrictions on such amendments, supplements, restatements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (c) the words “ herein ,” “ hereof ” and “ hereunder ,” and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement, (e) any reference to any Law herein shall, unless otherwise specified, refer to such Law, as amended, modified or supplemented from time to time and (f) the words “ asset ” and “ property ” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights. References to any document, instrument, or agreement (a) shall include all exhibits, schedules, and other attachments thereto, and (b) shall include all documents, instruments, or agreements issued or executed in replacement thereof. 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 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 ” is not exclusive. Accounting terms have the meanings assigned to them by GAAP, as applied by the accounting entity to which they refer. References to “ days ” shall mean calendar days, unless the term “ Business Day ” is used.
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Section 1.4 Calculations and Determinations . All calculations under the Loan Documents of interest chargeable with respect to Eurodollar Loans and of fees shall be made on the basis of actual days elapsed (including the first day but excluding the last) and a year of 360 days. All other calculations of interest made under the Loan Documents shall be made on the basis of actual days elapsed (including the first day but excluding the last) and a year of 365 or 366 days, as appropriate. Each determination by a Lender Party of amounts to be paid under Article III or any other matters that are to be determined hereunder by a Lender Party (such as any Eurodollar Rate, Adjusted Eurodollar Rate, Business Day, Interest Period, or Reserve Requirement) shall, in the absence of manifest error, be conclusive and binding. Unless otherwise expressly provided herein or unless Required Lenders otherwise consent all financial statements and reports furnished to any Lender Party hereunder shall be prepared and all financial computations and determinations pursuant hereto shall be made in accordance with GAAP. Notwithstanding the foregoing, all financial statements delivered hereunder shall be prepared, and all financial covenants contained herein shall be calculated, without giving effect to any election under ASC Topic 825 (or any similar accounting principle) permitting a Person to value its financial liabilities at the fair value thereof. Notwithstanding anything herein to the contrary, for the purposes of calculating any of the ratios tested under Section 7.14, and the components of each such ratios, all Unrestricted Subsidiaries, and their subsidiaries (including their assets, liabilities, income, losses, cash flows, and the elements thereof) shall be excluded, except for any cash dividends of distributions actually paid by any Unrestricted Subsidiary or any of its subsidiaries to Borrower or any Restricted Person, which shall be deemed to be income to Borrower or such Restricted Subsidiary when actually received by it to the extent provided in the definition of Consolidated Net Income.
Section 1.5 Rounding . Any financial ratios required to be maintained by Borrower pursuant to this Agreement shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio is expressed herein and rounding the result up or down to the nearest number (with a rounding-up if there is no nearest number).
Section 1.6 Times of Day . Unless otherwise specified, all references herein to times of day shall be references to Eastern time (daylight or standard, as applicable).
Section 1.7 Joint Preparation; Construction of Indemnities and Releases . This Agreement and the other Loan Documents have been reviewed and negotiated by sophisticated parties with access to legal counsel and no rule of construction shall apply hereto or thereto that would require or allow any Loan Document to be construed against any party because of its role in drafting such Loan Document. All indemnification and release provisions of this Agreement shall be construed broadly (and not narrowly) in favor of the Persons receiving indemnification or being released.
ARTICLE II - THE LOANS AND LETTERS OF CREDIT
Section 2.1 Commitments to Lend; Notes . Subject to the terms and conditions hereof, each Lender agrees to make loans to Borrower (herein called such Lender’s “ Loans ”) upon Borrower’s request from time to time during the Commitment Period, provided that (a) subject to Sections 3.3 , 3.4 and 3.6 , Loans of the same Type shall be made by Lenders in accordance with their respective Applicable Percentages and as part of the same Borrowing, and (b) after giving effect to such Loans, the Facility Usage does not exceed the Availability at such time. The aggregate amount of all Loans (other than Loans made pursuant to Section 2.10(b)) in any
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Borrowing must be greater than or equal to (a) in the case of Eurodollar Loans, $1,000,000 or any higher integral multiple of $100,000, (b) in the case of Base Rate Loans, $500,000 or any higher integral multiple of $100,000, or (c) must equal the remaining Unused Availability. Borrower may have no more than four (4) Borrowings of Eurodollar Loans outstanding at any time. Interest on each Loan shall accrue and be due and payable as provided herein. Each Loan shall be due and payable as provided herein, and shall be due and payable in full on the Maturity Date. Subject to the terms and conditions hereof, Borrower may borrow, repay, and reborrow hereunder. The obligation of Borrower to repay to each Lender the aggregate amount of all Loans made by such Lender, together with interest accruing in connection therewith, may, at the option and upon the request of a Lender, be evidenced by a single promissory note (herein called such Lender’s “ Note ”) made by Borrower payable to such Lender or its registered assigns in the form of Exhibit A with appropriate insertions. The amount of principal owing on any Lender’s Note at any given time shall be the aggregate amount of all Loans theretofore made by such Lender minus all payments of principal theretofore received by such Lender on such Note.
Section 2.2 Requests for New Loans . Borrower must give to Administrative Agent written or electronic notice (or telephonic notice promptly confirmed in writing) of any requested Borrowing of new Loans to be advanced by Lenders. Each such notice constitutes a “Borrowing Notice” hereunder and must:
(a) specify (i) the aggregate amount of any such Borrowing of new Base Rate Loans and the date on which such Base Rate Loans are to be advanced, or (ii) the aggregate amount of any such Borrowing of new Eurodollar Loans, the date on which such Eurodollar Loans are to be advanced (which date shall be the first day of the Interest Period that is to apply thereto), and the length of the applicable Interest Period; and
(b) be received by Administrative Agent not later than 11:00 a.m. on (i) the day on which any such Base Rate Loans are to be made, or (ii) the 3 rd Business Day preceding the day on which any such Eurodollar Loans are to be made.
Each such written request or confirmation must be made in the form and substance of the “ Borrowing Notice ” attached hereto as Exhibit B, duly completed. Each such telephonic request shall be deemed a representation, warranty, acknowledgment and agreement by Borrower as to the matters that are required to be set out in such written confirmation. Upon receipt of any such Borrowing Notice, Administrative Agent shall give each Lender prompt notice of the terms thereof. If all conditions precedent to such new Loans have been met, each Lender will on the date requested promptly remit to Administrative Agent at Administrative Agent’s office in New York City the amount of such Lender’s new Loan in immediately available funds, and upon receipt of such funds, unless to its actual knowledge any conditions precedent to such Loans have been neither met nor waived as provided herein, Administrative Agent shall promptly make such Loans available to Borrower. Unless Administrative Agent shall have received notice from a Lender prior to the proposed date of any Borrowing that such Lender will not make available to Administrative Agent such Lender’s share of such Borrowing, Administrative Agent may in its discretion assume that such Lender has made such share available on such date in accordance with this Section 2.2 and may, in reliance upon such assumption, make available to Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to Administrative Agent, then the applicable Lender and Borrower severally
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agree to pay to Administrative Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to Borrower to but excluding the date of payment to Administrative Agent, at (i) in the case of a payment to be made by such Lender, the greater of the Federal Funds Rate and a rate determined by Administrative Agent in accordance with banking industry rules on interbank compensation and (ii) in the case of a payment to be made by Borrower, the interest rate applicable to Base Rate Loans. If Borrower and such Lender shall pay such interest to Administrative Agent for the same or an overlapping period, Administrative Agent shall promptly remit to Borrower the amount of such interest paid by Borrower for such period. If such Lender pays its share of the applicable Borrowing to Administrative Agent, then the amount so paid shall constitute such Lender’s Loan included in such Borrowing. Any payment by Borrower shall be without prejudice to any claim Borrower may have against a Lender that shall have failed to make such payment to Administrative Agent.
Section 2.3 Continuations and Conversions of Existing Loans . Borrower may make the following elections with respect to Loans already outstanding: to convert Base Rate Loans to Eurodollar Loans, to convert Eurodollar Loans to Base Rate Loans on the last day of the Interest Period applicable thereto, and to continue Eurodollar Loans beyond the expiration of such Interest Period by designating a new Interest Period to take effect at the time of such expiration. In making such elections, Borrower may combine existing Loans made pursuant to separate Borrowings into one new Borrowing or divide existing Loans made pursuant to one Borrowing into separate new Borrowings, provided that Borrower may have no more than four (4) Borrowings of Eurodollar Loans outstanding at any time. To make any such election, Borrower must give to Administrative Agent written notice (or telephonic notice promptly confirmed in writing) of any such Conversion or Continuation of existing Loans, with a separate notice given for each new Borrowing. Each such notice constitutes a “ Continuation/Conversion Notice ” hereunder and must:
(a) specify the existing Loans that are to be Continued or Converted;
(b) specify (i) the aggregate amount of any Borrowing of Base Rate Loans into which such existing Loans are to be continued or converted and the date on which such Continuation or Conversion is to occur, or (ii) the aggregate amount of any Borrowing of Eurodollar Loans into which such existing Loans are to be continued or converted, the date on which such Continuation or Conversion is to occur (which date shall be the first day of the Interest Period that is to apply to such Eurodollar Loans), and the length of the applicable Interest Period; and
(c) be received by Administrative Agent not later than 10:00 a.m. on (i) the day on which any such Continuation or Conversion to Base Rate Loans is to occur, or (ii) the 3 rd Business Day preceding the day on which any such Continuation or Conversion to Eurodollar Loans is to occur.
Each such written request or confirmation must be made in the form and substance of the “Continuation/Conversion Notice” attached hereto as Exhibit C, duly completed. Each such telephonic request shall be deemed a representation, warranty, acknowledgment and agreement by Borrower as to the matters that are required to be set out in such written confirmation. Upon
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receipt of any such Continuation/Conversion Notice, Administrative Agent shall give each Lender prompt notice of the terms thereof. Each Continuation/Conversion Notice shall be irrevocable and binding on Borrower. During the continuance of any Default, Borrower may not make any election to convert existing Loans into Eurodollar Loans or continue existing Loans as Eurodollar Loans. If (due to the existence of a Default or for any other reason) Borrower fails to timely and properly give any Continuation/Conversion Notice with respect to a Borrowing of existing Eurodollar Loans at least three (3) Business Days prior to the end of the Interest Period applicable thereto, such Eurodollar Loans shall automatically be converted into Base Rate Loans at the end of such Interest Period. No new funds shall be repaid by Borrower or advanced by any Lender in connection with any Continuation or Conversion of existing Loans pursuant to this section, and no such Continuation or Conversion shall be deemed to be a new advance of funds for any purpose; such Continuations and Conversions merely constitute a change in the interest rate applicable to already outstanding Loans.
Section 2.4 Use of Proceeds . Borrower shall use all Loans to (a) pay fees and expenses payable in connection with the closing of this Agreement and the funding of the initial Loans hereunder, (b) for acquisitions permitted by Section 7.17, (c) to finance capital expenditures, (d) to refinance from time to time Matured LC Obligations, (e) to fund cash distributions to pay interest on the HPS Notes to the extent permitted pursuant to Section 7.6 , (f) to fund cash distributions to repay the Tranche D Notes to the extent permitted by Section 7.6 , and (g) provide working capital for its operations. Borrower shall use all Letters of Credit for its lawful business purposes. In no event shall the funds from any Loan or any Letter of Credit be used directly or indirectly by any Person for personal, family, household or agricultural purposes or for the purpose, whether immediate, incidental or ultimate, of purchasing, acquiring or carrying any “margin stock” (as such term is defined in Regulation U) or to extend credit to others directly or indirectly for the purpose of purchasing or carrying any such margin stock. Borrower represents and warrants that Borrower is not engaged principally, or as one of Borrower’s important activities, in the business of extending credit to others for the purpose of purchasing or carrying such margin stock. No part of the proceeds of any Loan, directly or indirectly, will be used for the purpose of financing the activities of any Person currently subject to any Sanctions.
Section 2.5 Interest Rates and Fees; Payment Dates; Retroactive Adjustments of Applicable Interest Rates .
(a) Interest Rates . Subject to Section 2.5(b) below, (i) each Base Rate Loan shall bear interest on each day outstanding at a per annum rate equal to sum of the Applicable Margin in effect for such day plus the Adjusted Base Rate in effect on such day, and (ii) each Eurodollar Loan shall bear interest on each day during the related Interest Period at a per annum rate equal to sum of the Applicable Margin in effect for such day plus the related Adjusted Eurodollar Rate in effect on such day. Subject to subsection (b) below, all other Obligations shall bear interest on each day outstanding at a per annum rate equal to sum of the Applicable Margin in effect for such day plus the Adjusted Base Rate in effect on such day; provided in no case shall such rate charged shall ever exceed the Highest Lawful Rate.
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(b) Default Rate . If an Event of Default shall have occurred and be continuing under Section 8.1(a), (b), (j)(i), (j)(ii), or (j)(iii), all outstanding Obligations shall bear interest at the applicable Default Rate. In addition, if an Event of Default shall have occurred and be continuing (other than under Section 8.1(a), (b), (j)(i), (j)(ii), or (j)(iii)), Required Lenders (or Administrative Agent at the direction of Required Lenders) may, by notice to Borrower, elect to have all the outstanding Obligations bear interest at the applicable Default Rate, whereupon such Obligations shall bear interest at the applicable Default Rate until the earlier of (i) the first date thereafter upon which there shall be no Event of Default continuing and (ii) the date upon which Required Lenders shall have rescinded such notice.
(c) Commitment Fees . In consideration of each Lender’s commitment to make Loans, Borrower will pay to Administrative Agent for the account of each Lender a commitment fee determined on a daily basis by applying the Commitment Fee Rate to the remainder of (i) such Lender’s Commitment minus (ii) such Lender’s Applicable Percentage of the Facility Usage determined at the end of each day during the Commitment Period. This commitment fee shall be due and payable in arrears on the last day of each Fiscal Quarter and at the end of the Commitment Period.
(d) Fee Letter . In addition to all other amounts due under the Loan Documents, Borrower will pay fees to Administrative Agent as described in the Fee Letter.
(e) Payment Dates . On each Interest Payment Date relating to Base Rate Loans, Borrower shall pay to Lenders all unpaid interest that has accrued on the Base Rate Loans to but not including such Interest Payment Date. On each Interest Payment Date relating to a Eurodollar Loan, Borrower shall pay to Lenders all unpaid interest that has accrued on such Eurodollar Loan to but not including such Interest Payment Date.
(f) Retroactive Adjustments of Applicable Interest Rates . If, as a result of any restatement of or other adjustment to the financial statements of Borrower or for any other reason, Borrower or Required Lenders determine that (i) the Consolidated Leverage Ratio as calculated by Borrower as of any applicable date was inaccurate and (ii) a proper calculation of the Consolidated Leverage Ratio would have resulted in higher pricing for such period, Borrower shall immediately and retroactively be obligated to pay to Administrative Agent for the account of the applicable Lenders, promptly on demand by Administrative Agent (or, after the occurrence of an actual or deemed entry of an order for relief with respect to Borrower under the Bankruptcy Code, automatically and without further action by Administrative Agent, any Lender or LC Issuer), an amount equal to the excess of the amount of interest and fees that should have been paid for such period over the amount of interest and fees actually paid for such period. This paragraph shall not limit the rights of Administrative Agent, any Lender or LC Issuer, as the case may be, under this Section 2.5 or Section 2.11(a) or under Article VIII. Borrower’s obligations under this paragraph shall survive the termination of this Agreement and the other Loan Documents and the repayment of all other Obligations hereunder.
Section 2.6 Optional Prepayments ; Commitment Reductions .
(a) Borrower may, from time to time and without premium or penalty prepay the Loans, in whole or in part, upon prior written notice to Administrative Agent, provided that (i) such notice must be received by Administrative Agent not later than 10:00 a.m. (A) on the day on which any Base Rate Loan is to be prepaid and (B) on the third Business Day preceding
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the day on which any Eurodollar Loan is to be prepaid, (ii) the aggregate amounts of all partial prepayments of principal on the Loans on such date is not less than $500,000 (in the case of any Eurodollar Loan) and $100,000 (in the case of any Base Rate Loan) and, if higher, is an integral multiple of $100,000 in excess thereof, and (iii) if Borrower prepays any Eurodollar Loan on any day other than the last day of the Interest Period applicable thereto, it shall pay to Lenders any amounts due under Section 3.4 . Each prepayment of principal under this section shall be accompanied by all interest then accrued and unpaid on the principal so prepaid. Any principal or interest prepaid pursuant to this section shall be in addition to, and not in lieu of, all payments otherwise required to be paid under the Loan Documents at the time of such prepayment.
(b) Borrower may, upon notice to Administrative Agent, terminate the Aggregate Commitment, or from time to time permanently reduce the Aggregate Commitment; provided that (i) any such notice shall be received by Administrative Agent at least three (3) Business Days prior to the date of termination or reduction, (ii) any such partial reduction shall be in an aggregate amount of $5,000,000 or any whole multiple of $1,000,000 in excess thereof, (iii) Borrower shall not terminate or reduce the Aggregate Commitment if, after giving effect thereto and to any concurrent prepayments hereunder, the Facility Usage would exceed the Aggregate Commitment, and (iv) if, after giving effect to any reduction of the Aggregate Commitment or the LC Sublimit exceeds the amount of the Aggregate Commitment, each such sublimit shall be automatically reduced by the amount of such excess. Administrative Agent will promptly notify the Lenders of any such notice of termination or reduction of the Aggregate Commitment. Any reduction of the Aggregate Commitment shall be applied to the Commitment of each Lender according to its Applicable Percentage. All fees accrued until the effective date of any termination of the Aggregate Commitments shall be paid on the effective date of such termination.
Section 2.7 Mandatory Prepayments .
(a) If any Restricted Person incurred Indebtedness not permitted by Section 7.1 hereof (but without this provision being construed to permit any incurrence of Indebtedness in violation of Section 7.1 ), Borrower shall prepay an aggregate principal amount of the Loans equal to 100% of the net proceeds from the incurrence of such Indebtedness not later than one (1) Business Day after receipt thereof by such Person.
(b) If any Restricted Person Disposes of any property other than any Disposition permitted by Section 7.5 (but without this provision being construed to permit any Disposition in violation of Section 7.5 ), or received proceeds of casualty or condemnation (except to the extent such proceeds are applied within 180 days after receipt thereof to the repair or replacement of the property subject to such casualty or condemnation) that results in the realization by such Person of Net Cash Proceeds in excess of an aggregate amount (for all Dispositions, after deducting amounts that have previously been applied to the principal of the Loans under this Section 2.7(b)) of $5,000,000, Borrower shall prepay an aggregate principal amount of Loans equal to such Net Cash Proceeds that so exceed $5,000,000 no later than two (2) Business Days after receipt thereof by such Person.
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(c) If on any day the Facility Usage exceeds the Availability on such day, Borrower shall prepay the principal of the Loans in an amount equal to such excess no later than one (1) Business Day after such day.
(d) Each prepayment under this Section 2.7 shall be accompanied by a notice from Borrower to Administrative Agent specifying (i) the amount of such prepayment, and (ii) the specific Borrowings that are being prepaid by such prepayment, including the Eurodollar Loans, if any, that are being prepaid by such prepayment, which notice may be delivered electronically. Each prepayment under this Section 2.7 shall be applied to specific Borrowings as specified by Borrower and shall be applied ratably to the Loans included in such prepaid Borrowings; provided that if Borrower fails to so specify such Borrowings, then Administrative Agent shall first prepay any outstanding Base Rate Loans and then to any Eurodollar Loans specified by Administrative Agent in its sole discretion. Each prepayment of principal under this Section shall be accompanied by all interest then accrued and unpaid on the principal so prepaid plus any amounts due under Section 3.4 . Any principal or interest prepaid pursuant to this Section shall be in addition to, and not in lieu of, all payments otherwise required to be paid under the Loan Documents at the time of such prepayment. Prepayment of principal under this Section shall not reduce the Aggregate Commitments.
Section 2.8 Letters of Credit . Subject to the terms and conditions hereof, Borrower may at any time during the Commitment Period request LC Issuer to issue, increase the amount of or otherwise amend or extend, one or more Letters of Credit, provided that, after taking such Letter of Credit into account:
(a) the Facility Usage does not exceed the Availability at such time;
(b) the aggregate amount of LC Obligations at such time does not exceed the LC Sublimit;
(c) the expiration date of such Letter of Credit (as extended, if applicable) is prior to the earliest to occur of (i) twelve (12) months after the issuance thereof, and (ii) the Letter of Credit Termination Date (unless such Letter of Credit has been collateralized on terms acceptable to the LC Issuer);
(d) such Letter of Credit is to be used for general business purposes of a Restricted Person;
(e) such Letter of Credit is not directly or indirectly used to assure payment of or otherwise support any Indebtedness of any Person;
(f) the issuance of such Letter of Credit will be in compliance with all applicable Governmental Requirements and will not subject LC Issuer to any cost that is not reimbursable under Article III;
(g) the form and terms of such Letter of Credit are acceptable to LC Issuer in its discretion; and
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(h) all other conditions in this Agreement to the issuance of such Letter of Credit have been satisfied.
LC Issuer will honor any such request if the foregoing conditions (a) through (h) (the “ LC Conditions ”) have been met as of the date of issuance of such Letter of Credit. LC Issuer may choose to honor any such request for any other Letter of Credit but has no obligation to do so and may refuse to issue any other requested Letter of Credit for any reason that LC Issuer in its discretion deems relevant. Notwithstanding anything to the contrary contained herein, LC Issuer shall not at any time be obligated to issue, amend, renew or extend any Letter of Credit if any Lender is at that time a Defaulting Lender, unless LC Issuer has entered into arrangements, including the delivery of Cash Collateral, satisfactory to LC Issuer (in its discretion) with Borrower or such Lender to eliminate LC Issuer’s actual or potential Fronting Exposure (after giving effect to Section 2.16(a)(iv) ) with respect to the Defaulting Lender arising from either the Letter of Credit then proposed to be issued or that Letter of Credit and all other LC Obligations as to which LC Issuer has actual or potential Fronting Exposure, as it may elect in its discretion.
Borrower may also at any time during the Commitment Period request that LC Issuer extend the expiration date of an existing Letter of Credit or modify an existing Letter of Credit (other than an increase or extension) and LC Issuer will honor such request if the LC Conditions set forth in subsection (c) of this Section 2.8 are met and no Default exists at the time of such request; provided that in the case of any such modification (other than an increase or extension), LC Issuer shall have approved such modification.
LC Issuer shall have at all times the benefits and immunities (i) provided to Administrative Agent in Article IX with respect to any acts taken or omissions suffered by LC Issuer in connection with Letters of Credit issued by it or proposed to be issued by it and documents pertaining to such Letters of Credit as fully as if the term “Administrative Agent” as used in Article IX included LC Issuer with respect to such acts or omissions, and (ii) as additionally provided herein with respect to LC Issuer.
Section 2.9 Requesting Letters of Credit .
(a) Borrower must make written application for any Letter of Credit or amendment or extension of any Letter of Credit at least three (3) Business Days (or such shorter period as LC Issuer may in its discretion from time to time agree) before the date on which Borrower desires for LC Issuer to issue such Letter of Credit. By making any such written application, unless otherwise expressly stated therein, Borrower shall be deemed to have represented and warranted that the LC Conditions described in Section 2.8 will be met as of the date of issuance of such Letter of Credit. Each such written application for a Letter of Credit must be made in writing in the form customarily used by LC Issuer, the terms and provisions of which are hereby incorporated herein by reference (or in such other form as may mutually be agreed upon by LC Issuer and Borrower).
(b) Upon satisfaction of two Business Days after the LC Conditions for a Letter of Credit have been met as described in Section 2.8 (or if LC Issuer otherwise desires to issue such Letter of Credit earlier), LC Issuer will issue such Letter of Credit at LC Issuer’s office in New York City. If any provisions of any LC Application conflict with any provisions
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of this Agreement, the provisions of this Agreement shall govern and control. Borrower shall promptly examine a copy of each Letter of Credit and each amendment thereto that is delivered to it and, in the event of any claim of noncompliance with Borrower’s instructions or other irregularity, Borrower will immediately notify LC Issuer.
Section 2.10 Reimbursement and Participations .
(a) Reimbursement by Borrower . Borrower shall immediately reimburse LC Issuer for the full amount of all amounts paid by LC Issuer on drafts or demands for payment drawn or made under or purported to be drawn on or made under any Letter of Credit. Borrower promises to pay to LC Issuer, or to LC Issuer’s order, on demand, the full amount of each Matured LC Obligation, together with interest thereon (i) at the rate applicable to Base Rate Loans to and including the first Business Day after such demand is made by LC Issuer and (ii) at the Default Rate applicable to Base Rate Loans on each day thereafter. The obligation of Borrower to reimburse LC Issuer for each Matured LC Obligation shall be absolute, unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement (including any LC Application) under all circumstances, including the following: (i) any lack of validity or enforceability of such Letter of Credit or any other agreement or instrument relating thereto; (ii) the existence of any claim, counterclaim, set-off, defense or other right that Borrower may have at any time against any beneficiary or any transferee of such Letter of Credit (or any Person for whom any such beneficiary or any such transferee may be acting), LC Issuer or any other Person, whether in connection with this Agreement, the transactions contemplated hereby or by such Letter of Credit or any agreement or instrument relating thereto, or any unrelated transaction; (iii) any draft, demand, certificate or other document presented under such Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; or any loss or delay in the transmission or otherwise of any document required in order to make a drawing under such Letter of Credit; (iv) any payment by LC Issuer under such Letter of Credit against presentation of a draft or certificate that does not strictly comply with the terms of such Letter of Credit; (v) compliance with any laws, customs and regulations which may be effective in countries of issuance, presentation under, negotiation and/or payment of any Letter of Credit or any ruling of any court or Governmental Authority, or any control or restriction rightfully or wrongfully exercised by any government or group asserting or exercising governmental or paramount powers; (vi) the acceptance by LC Issuer as complying with the applicable Letter of Credit of any draft or document drawn, issued or presented under such Letter of Credit which is issued or purportedly issued by an agent, executor, trustee in bankruptcy, debtor-in-possession, assignee for the benefit of creditors, liquidator, receiver or other representative or successor of the party identified in such Letter of Credit as the party permitted to draw, issue or present such draft or document (or any transferee thereof); (vii) any error, neglect, insolvency, failure of business or default of any of LC Issuer’s Nominated Persons; (viii) any delay, omission, interruption, loss in transit, or mutilation or other errors arising in (A) transmission, dispatch or delivery of any document or draft or proceeds thereof or (B) transmission, dispatch or delivery of any messages by mail, cable, telegraph, wireless or otherwise, whether or not they be in code; (ix) the description, weight, existence, character, quality, quantity, condition, packing, value or delivery of the property, services or performance purporting to be represented by documents, or errors in translation or errors in interpretation of technical terms; (x) any difference in character, quality, quantity, condition or value of the property from that expressed in documents; (xi) the time,
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place, manner or order in which shipment is made; (xii) any partial or incomplete shipment or failure or omission to ship any or all of the property referred to in any Letter of Credit; (xiii) the character, adequacy, validity or genuineness of any insurance; (xiv) the solvency or responsibility of any insurer, or the acts or omissions, performance or standing of any insurer, or any other risk connected with insurance; (xv) any deviation from instructions, delay, default or fraud by the shipper or anyone else in connection with the property or the shipping thereof; (xvi) the solvency, responsibility, performance or standing of, or the acts or omissions of, any consignor, carrier, forwarder or consignee of any goods or any other Person; (xvii) any delay in arrival or failure to arrive of either the property or any of the documents relating thereto; (xviii) any delay in giving or failure to give notice of arrival or any other notice; (xix) any claim, breach of contract or dispute between the beneficiary, shippers or vendors and Borrower; (xx) any waiver of any requirement in a Letter of Credit that exists for LC Issuer’s protection and not the protection of Borrower or any waiver which does not in fact materially prejudice Borrower; (xxi) any payment made in respect of a draft or document presented after the date specified as the expiration date of, or the date by which documents must be received under, such Letter of Credit if payment after such date is authorized by the UCC, the UCP or the ISP, as applicable; (xxii) without limiting the foregoing, any consequences arising (A) from the interruption of LC Issuer’s business, acts of God, riots, civil commotions, insurrections, war, acts of terrorism, strikes, lockouts, or other causes beyond LC Issuer’s control, (B) from any act or omission by LC Issuer or any of its Nominated Persons, Affiliates or agents or any bank whose services are utilized for the purpose of giving effect to Borrower’s instructions, in each case if not done or omitted with LC Issuer’s gross negligence or willful misconduct, or (C) from the failure of another bank to carry out instructions transmitted by LC Issuer, whether such other bank was selected by Borrower, LC Issuer or any other Person; or (xxiii) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing; and none of the above shall affect, impair or prevent the vesting of any of LC Issuer’s rights or powers hereunder. If any Letter of Credit provides that payments are to be made by the applicable LC Issuer’s Nominated Person, neither LC Issuer nor such Nominated Person shall be responsible for the failure of any of the documents specified in such Letter of Credit to come into LC Issuer’s possession or for any delay in connection therewith, and Borrower’s obligations under this Agreement shall not be affected by such failure or delay in the receipt by LC Issuer of any such documents. Without limiting the generality of the foregoing, it is expressly agreed that the absolute and unconditional nature of Borrower’s obligations under this section to reimburse LC Issuer for each drawing under a Letter of Credit will not be excused by the gross negligence or willful misconduct of LC Issuer. However, the foregoing shall not be construed to excuse LC Issuer from liability to Borrower to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by Borrower to the extent permitted by applicable Law) suffered by Borrower that are caused by LC Issuer’s gross negligence or willful misconduct in determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof.
In addition to the exculpatory provisions contained in the UCP, the ISP and/or the UCC, as applicable, the LC Issuer and LC Issuer’s Nominated Persons shall not be responsible for, and Borrower’s obligation to reimburse LC Issuer for each Matured LC Obligation shall not be affected or reduced by, any action or inaction required or permitted under the UCC, the UCP or the ISP, in each case as applicable.
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(b) Letter of Credit Advances . If the beneficiary of any Letter of Credit makes a draft or other demand for payment thereunder then Borrower may, during the interval between the making thereof and the honoring thereof by LC Issuer, request Lenders to make Loans to Borrower in the amount of such draft or demand, which Loans shall be made concurrently with LC Issuer’s payment of such draft or demand and shall be immediately used by LC Issuer to repay the amount of the resulting Matured LC Obligation. Such a request by Borrower shall be made in compliance with all of the provisions hereof, provided that for the purposes of the first sentence of Section 2.1 , the amount of such Loans shall be considered, but the amount of the Matured LC Obligation to be concurrently paid by such Loans shall not be considered.
(c) Participation by Lenders . LC Issuer irrevocably agrees to grant and hereby grants to each Lender, and to induce LC Issuer to issue Letters of Credit hereunder, each Lender irrevocably agrees to accept and purchase and hereby accepts and purchases from LC Issuer, on the terms and conditions hereinafter stated and for such Lender’s own account and risk, an undivided interest equal to such Lender’s Applicable Percentage of LC Issuer’s obligations and rights under each Letter of Credit issued hereunder and the amount of each Matured LC Obligation paid by LC Issuer thereunder. Each Lender unconditionally and irrevocably agrees with LC Issuer that, if a Matured LC Obligation is paid under any Letter of Credit for which LC Issuer is not reimbursed in full by Borrower in accordance with the terms of this Agreement and the related LC Application (including any reimbursement by means of concurrent Loans or by the application of Cash Collateral), such Lender shall (in all circumstances and without set-off or counterclaim) pay to LC Issuer on demand (and Administrative Agent may apply Cash Collateral provided for this purpose), in immediately available funds at LC Issuer’s address for notices hereunder, such Lender’s Applicable Percentage of such Matured LC Obligation (or any portion thereof that has not been reimbursed by Borrower). Each Lender’s obligation to pay LC Issuer pursuant to the terms of this subsection is irrevocable and unconditional. If any amount required to be paid by any Lender to LC Issuer pursuant to this subsection is paid by such Lender to LC Issuer within three (3) Business Days after the date such payment is due, LC Issuer shall in addition to such amount be entitled to recover from such Lender, on demand, interest thereon calculated from such due date at the Federal Funds Rate. If any amount required to be paid by any Lender to LC Issuer pursuant to this subsection is not paid by such Lender to LC Issuer within three (3) Business Days after the date such payment is due, LC Issuer shall in addition to such amount be entitled to recover from such Lender, on demand, interest thereon calculated from such due date at the Default Rate applicable to Base Rate Loans.
(d) Distributions to Participants . Whenever LC Issuer has in accordance with this section received from any Lender payment of such Lender’s Applicable Percentage of any Matured LC Obligation, if LC Issuer thereafter receives any payment of such Matured LC Obligation or any payment of interest thereon (whether directly from Borrower or by application of Cash Collateral or otherwise, and excluding only interest for any period prior to LC Issuer’s demand that such Lender make such payment of its Applicable Percentage), LC Issuer will distribute to such Lender its Applicable Percentage of the amounts so received by LC Issuer; provided, however, that if any such payment received by LC Issuer must thereafter be returned by LC Issuer, such Lender shall return to LC Issuer the portion thereof that LC Issuer has previously distributed to it.
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(e) Calculations . A written advice setting forth in reasonable detail the amounts owing under this section, submitted by LC Issuer to Borrower or any Lender from time to time, shall be conclusive, absent manifest error, as to the amounts thereof.
Section 2.11 Letter of Credit Fees . In consideration of LC Issuer’s issuance of any Letter of Credit, Borrower agrees to pay (a) to Administrative Agent, for the account of all Lenders in accordance with their respective Applicable Percentages, a letter of credit issuance fee at a rate equal to the Letter of Credit Fee Rate then in effect (which fee shall be increased by 2.0% per annum during any period in which interest on the Loans accrues at the Default Rate), and (b) to such LC Issuer for its own account, a letter of credit fronting fee at a rate specified in the Fee Letter times the face amount of such Letter of Credit (but in no event less than $500 per annum); provided, however, any Letter of Credit fees otherwise payable for the account of a Defaulting Lender with respect to any Letter of Credit as to which such Defaulting Lender has not provided Cash Collateral satisfactory to LC Issuer pursuant to Section 2.8 shall be payable, to the maximum extent permitted by applicable Law, to the other Lenders in accordance with the upward adjustments in their respective Applicable Percentages allocable to such Letter of Credit pursuant to Section 2.16(a)(iv) , with the balance of such fee, if any, payable to LC Issuer for its own account. In addition, Borrower will pay to LC Issuer LC Issuer’s customary fees for issuance, amendment and drawing of each Letter of Credit. The letter of credit fee and the letter of credit fronting fee will be calculated on the undrawn face amount of each Letter of Credit outstanding on each day at the above-applicable rates and will be due and payable in arrears on the last Business Day of each Fiscal Quarter and at the end of the Commitment Period.
Section 2.12 No Duty to Inquire .
(a) Drafts and Demands . LC Issuer is authorized and instructed to accept and pay drafts and demands for payment under any Letter of Credit without requiring, and without responsibility for, any determination as to the existence of any event giving rise to said draft, either at the time of acceptance or payment or thereafter. LC Issuer is under no duty to determine the proper identity of anyone presenting such a draft or making such a demand (whether by tested telex or otherwise) as the officer, representative or agent of any beneficiary under any Letter of Credit, and payment by LC Issuer to any such beneficiary when requested by any such purported officer, representative or agent is hereby authorized and approved. LC Issuer shall have the right, in its discretion, to decline to accept documents and to make such payment if such documents are not in strict compliance with the terms of such Letter of Credit. Borrower releases each Lender Party from, and agrees to hold each Lender Party harmless and indemnified against, any liability or claim in connection with or arising out of the subject matter of this section, which indemnity shall apply whether or not any such liability or claim is in any way or to any extent caused, in whole or in part, by any negligent act or omission of any kind by any Lender Party, provided only that no Lender Party shall be released from or entitled to indemnification for that portion, if any, of any liability or claim that is proximately caused by or results from its own individual gross negligence or willful misconduct, as determined in a final judgment.
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(b) Extension of Maturity . If the maturity of any Letter of Credit is extended by its terms or by Law or governmental action, if any extension of the maturity or time for presentation of drafts or any other modification of the terms of any Letter of Credit is made at the request of any Restricted Person, or if the amount of any Letter of Credit is increased at the request of any Restricted Person, this Agreement shall be binding upon all Restricted Persons with respect to such Letter of Credit as so extended, increased or otherwise modified, with respect to drafts and property covered thereby, and with respect to any action taken by LC Issuer, LC Issuer’s correspondents, or any Lender Party in accordance with such extension, increase or other modification.
(c) Transferees of Letters of Credit . If any Letter of Credit provides that it is transferable, LC Issuer shall have no duty to determine the proper identity of anyone appearing as transferee of such Letter of Credit, nor shall LC Issuer be charged with responsibility of any nature or character for the validity or correctness of any transfer or successive transfers, and payment by LC Issuer to any purported transferee or transferees as determined by LC Issuer is hereby authorized and approved, and Borrower releases each Lender Party from, and agrees to hold each Lender Party harmless and indemnified against, any liability or claim in connection with or arising out of the foregoing, which indemnity shall apply whether or not any such liability or claim is in any way or to any extent caused, in whole or in part, by any negligent act or omission of any kind by any Lender Party, provided only that no Lender Party shall be released from or entitled to indemnification for that portion, if any, of any liability or claim that is proximately caused by or results from its own individual gross negligence or willful misconduct, as determined in a final judgment. Borrower hereby assumes all risks of the acts or omissions of any beneficiary or transferee with respect to its use of any Letter of Credit; provided, however, that this assumption is not intended to, and shall not, preclude Borrower from pursuing such rights and remedies as it may have against such beneficiary or transferee.
(d) Role of the LC Issuer .
(i) The responsibility of LC Issuer to Borrower in connection with any draft presented for payment under any Letter of Credit issued on behalf of Borrower shall, in addition to any payment obligation expressly provided for in such Letter of Credit, be limited to determining that the documents (including each draft) delivered by or on behalf of the beneficiary under such Letter of Credit in connection with such presentment appear on their face to be in conformity with such Letter of Credit. In addition, the Lenders and Borrower agree that, in paying any drawing or demand for payment under any Letter of Credit, LC Issuer shall not have any responsibility to inquire as to the validity or accuracy of any document presented in connection with such drawing or demand for payment or the authority of the Person executing or delivering the same.
(ii) Neither LC Issuer nor any of the respective correspondents, participants or assignees of LC Issuer shall be liable to any Lender for: (A) any action taken or omitted in connection herewith in respect of any Letter of Credit at the request or with the approval or deemed approval of the Required Lenders; (B) any action taken or omitted in respect of any Letter of Credit in the absence of gross negligence or willful misconduct; or (C) the due execution, effectiveness, validity or enforceability of any Letter of Credit or any document delivered in connection with the issuance or payment of such Letter of Credit.
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Section 2.13 Sharing of Payments by Lenders . If any Lender shall, by exercising any right of setoff or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of the Loans made by it, or the participations in LC Obligations resulting in such Lender receiving payment of a proportion of the aggregate amount of such Loans or participations and accrued interest thereon greater than its pro rata share thereof as provided herein, then the Lender receiving such greater proportion shall (a) notify Administrative Agent of such fact, and (b) purchase (for cash at face value) participations in the Loans and subparticipations in LC Obligations of the other Lenders, or make such other adjustments as shall be equitable, so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Loans and other amounts owing them (except that with respect to any other Lender that is a Defaulting Lender by virtue of such Lender failing to fund its required share (if any) of any Loan or LC Obligation, such Defaulting Lender’s pro rata share of the excess payment shall be allocated to the Lender (or the Lenders, pro rata) that funded such Defaulting Lender’s required share (if any)), provided that:
(i) if any such participations or subparticipations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations or subparticipations shall be rescinded and the purchase price restored to the extent of such recovery, without interest; and
(ii) the provisions of this Section shall not be construed to apply to (x) any payment made by or on behalf of Borrower pursuant to and in accordance with the express terms of this Agreement (including the application of funds arising from the existence of a Defaulting Lender), (y) the application of Cash Collateral provided for in Section 2.15, or (z) any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or subparticipations in LC Obligations to any assignee or participant, other than an assignment to Borrower or any Affiliate thereof (as to which the provisions of this Section shall apply).
Each Restricted Person consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against such Restricted Person rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of such Restricted Person in the amount of such participation.
Section 2.14 Obligations of Lenders Several . The obligations of the Lenders hereunder to make Loans, to fund participations in Letters of Credit and to make payments pursuant to Section 2.2 are several and not joint. The failure of any Lender to make any Loan; to fund any such participation or to make any payment under Section 10.4(c) on any date required hereunder shall not relieve any other Lender of its corresponding obligation to do so on such date, and no Lender shall be responsible for the failure of any other Lender to so make its Loan, to purchase its participation or to make its payment under Section 10.4(c) .
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Section 2.15 Cash Collateral .
(a) Certain Credit Support Events . Upon the request of Administrative Agent or LC Issuer (i) if LC Issuer has honored any full or partial drawing request under any Letter of Credit and such drawing has resulted in a Matured LC Obligation which have not been reimbursed pursuant to Section 2.10 , or (ii) if, as of the Letter of Credit Termination Date, any LC Obligation for any reason remains outstanding, Borrower shall, in each case, immediately Cash Collateralize the then outstanding amount of (A) in the case of the foregoing clause (i), such Matured LC Obligation and (B) in the case of the foregoing clause (ii), all LC Obligations (unless such Restricted Person has made arrangements to cash collateralize or provide other credit support for such Letter of Credit satisfactory to the LC Issuer on or before the Letter of Credit Termination Date). If, after the making of all mandatory prepayments required under Section 2.7 , the outstanding LC Obligations would cause the Facility Usage to exceed Availability, then in addition to prepayment of the entire principal balance of the Loans required under Section 2.7 , Borrower shall immediately Cash Collateralize the then outstanding LC Obligations in an amount equal to such excess. At any time that there shall exist a Defaulting Lender, immediately upon the request of Administrative Agent or LC Issuer, Borrower shall deliver Cash Collateral to Administrative Agent in an amount sufficient to cover all Fronting Exposure allocable to such Defaulting Lender (after giving effect to Section 2.16(a)(iv) and any Cash Collateral provided by the Defaulting Lender).
(b) Grant of Security Interest . All Cash Collateral (other than credit support not constituting funds subject to deposit) shall be maintained in blocked, non-interest bearing deposit accounts at Administrative Agent. Borrower, and to the extent provided by any Lender, such Lender, hereby grants to (and subjects to the control of) Administrative Agent, for the benefit of Administrative Agent, LC Issuer and the Lenders, and agrees to maintain, a first priority security interest in all such cash, deposit accounts and all balances therein, and all other property so provided as collateral pursuant hereto, and in all proceeds of the foregoing, all as security for the obligations to which such Cash Collateral may be applied pursuant to Section 2.15(c) . If at any time Administrative Agent determines that Cash Collateral is subject to any right or claim of any Person other than Administrative Agent as herein provided, or that the total amount of such Cash Collateral is less than the applicable Fronting Exposure and other obligations secured thereby, Borrower or the relevant Defaulting Lender will, promptly upon demand by Administrative Agent, pay or provide to Administrative Agent additional Cash Collateral in an amount sufficient to eliminate such deficiency.
(c) Application . Notwithstanding anything to the contrary contained in this Agreement, Cash Collateral provided under any of this Section 2.15 or Sections 2.7 , 2.8 , 2.16 , or 8.3 in respect of Letters of Credit shall be held and applied to the satisfaction of the specific LC Obligations, obligations to fund participations therein (including, as to Cash Collateral provided by a Defaulting Lender, any interest accrued on such obligation) and other obligations for which the Cash Collateral was so provided, prior to any other application of such property as may otherwise be provided for herein.
(d) Release . Cash Collateral (or the appropriate portion thereof) provided to reduce Fronting Exposure or other obligations shall be released promptly following (i) the elimination of the applicable Fronting Exposure or other obligations giving rise thereto (including by the termination of Defaulting Lender status of the applicable Lender (or, as appropriate, its assignee following compliance with Section 10.5(b) ) or (ii) Administrative
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Agent’s good faith determination that there exists excess Cash Collateral; provided, however, (x) that Cash Collateral furnished by or on behalf of a Restricted Person shall not be released during the continuance of a Default or Event of Default (and following application as provided in this Section 2.15 may be otherwise applied in accordance with Section 8.3 ), and (y) the Person providing Cash Collateral and LC Issuer may agree that Cash Collateral shall not be released but instead held to support future anticipated Fronting Exposure or other obligations.
Section 2.16 Defaulting Lenders .
(a) Adjustments . Notwithstanding anything to the contrary contained in this Agreement, if any Lender becomes a Defaulting Lender, then, until such time as that Lender is no longer a Defaulting Lender, to the extent permitted by applicable Law:
(i) Waivers and Amendments . That Defaulting Lender’s right to approve or disapprove any amendment, waiver or consent with respect to this Agreement shall be restricted as set forth in Section 10.1 and the definition of Required Lenders.
(ii) Reallocation of Payments . Any payment of principal, interest, fees or other amounts received by Administrative Agent for the account of that Defaulting Lender (whether voluntary or mandatory, at maturity, pursuant to Article III or VIII or otherwise, and including any amounts made available to Administrative Agent by that Defaulting Lender pursuant to Section 10.14 ), shall be applied at such time or times as may be determined by Administrative Agent as follows: first, to the payment of any amounts owing by that Defaulting Lender to Administrative Agent hereunder; second, to the payment on a pro rata basis of any amounts owing by that Defaulting Lender to LC Issuer hereunder; third, if so determined by Administrative Agent or requested by LC Issuer, to be held as Cash Collateral for future funding obligations of that Defaulting Lender of any participation in any Letter of Credit; fourth, as Borrower may request (so long as no Default or Event of Default exists), to the funding of any Loan in respect of which that Defaulting Lender has failed to fund its portion thereof as required by this Agreement, as determined by Administrative Agent; fifth, if so determined by Administrative Agent and Borrower, to be held in a non-interest bearing deposit account and released in order to satisfy obligations of that Defaulting Lender to fund Loans under this Agreement; sixth, to the payment of any amounts owing to Lenders or LC Issuer as a result of any judgment of a court of competent jurisdiction obtained by any Lender or LC Issuer against that Defaulting Lender as a result of that Defaulting Lender’s breach of its obligations under this Agreement; seventh, so long as no Default or Event of Default exists, to the payment of any amounts owing to Borrower as a result of any judgment of a court of competent jurisdiction obtained by Borrower against that Defaulting Lender as a result of that Defaulting Lender’s breach of its obligations under this Agreement; and eighth, to that Defaulting Lender or as otherwise directed by a court of competent jurisdiction; provided that if (x) such payment is a payment of the principal amount of any Loans or Matured LC Obligations in respect of which that Defaulting Lender has not fully funded its appropriate share and (y) such
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Loans or Matured LC Obligations were made at a time when the conditions set forth in Section 4.2 were satisfied or waived, such payment shall be applied solely to pay the Loans of, and Matured LC Obligations owed to, all non-Defaulting Lenders on a pro rata basis prior to being applied to the payment of any Loans of, or Matured LC Obligations owed to, that Defaulting Lender. Any payments, prepayments or other amounts paid or payable to a Defaulting Lender that are applied (or held) to pay amounts owed by a Defaulting Lender or to post Cash Collateral pursuant to this Section 2.16(a)(ii) shall be deemed paid to and redirected by that Defaulting Lender, and each Lender irrevocably consents hereto.
(iii) Certain Fees . That Defaulting Lender (1) shall not be entitled to receive any commitment fee pursuant to Section 2.5(c) for any period during which that Lender is a Defaulting Lender (and Borrower shall not be required to pay any such fee that otherwise would have been required to have been paid to that Defaulting Lender) and (2) shall be limited in its right to receive Letter of Credit Fees as provided in Section 2.11 .
(iv) Reallocation of Applicable Percentages to Reduce Fronting Exposure . All or any part of that Defaulting Lender’s participation in LC Obligations shall be reallocated among the non-Defaulting Lenders in accordance with their respective Applicable Percentages (calculated without regard to that Defaulting Lender’s Commitment) but only to the extent that (x) the conditions set forth in Section 4.2 are satisfied at the time of such reallocation (and, unless Borrower shall have otherwise notified Administrative Agent at such time, Borrower shall be deemed to have represented and warranted that such conditions are satisfied at such time), and (y) such reallocation does not cause the aggregate amount of the Loans and participations in LC Obligations of any non-Defaulting Lender to exceed the lesser of (1) such non-Defaulting Lender’s Commitment and (2) such non-Defaulting Lender’s Applicable Percentage of the Aggregate Commitment (calculated without giving effect to any reallocations pursuant to this clause (iv)). Subject to Section 10.16 , no reallocation hereunder shall constitute a waiver or release of any claim of any party hereunder against a Defaulting Lender arising from that Lender having become a Defaulting Lender, including any claim of a non-Defaulting Lender as a result of such non-Defaulting Lender’s increased exposure following such reallocation.
(b) Defaulting Lender Cure . If Borrower, Administrative Agent and LC Issuer agree in writing in their discretion that a Defaulting Lender should no longer be deemed to be a Defaulting Lender, Administrative Agent will so notify the parties hereto, whereupon as of the effective date specified in such notice and subject to any conditions set forth therein (which conditions may include arrangements with respect to any Cash Collateral), that Lender will, to the extent applicable, purchase at par that portion of outstanding Loans of the other Lenders or take such other actions as Administrative Agent may determine to be necessary to cause the Loans and funded and unfunded participations in Letters of Credit to be held on a pro rata basis by the Lenders in accordance with their Applicable Percentages (without giving effect to Section 2.16(a)(iv) ), whereupon that Lender will cease to be a Defaulting Lender; provided that no
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adjustments will be made retroactively with respect to fees accrued or payments made by or on behalf of Borrower while that Lender was a Defaulting Lender; and provided, further, that except to the extent otherwise expressly agreed by the affected parties, no change hereunder from Defaulting Lender to Lender will constitute a waiver or release of any claim of any party hereunder arising from that Lender’s having been a Defaulting Lender.
Section 2.17 Increase in Aggregate Commitment .
(a) Request for Increase . Provided there exists no Default, upon notice to Administrative Agent (which shall promptly notify the Lenders), Borrower may from time to time, request an increase in the Aggregate Commitment by an amount (for all such requests) not exceeding $50,000,000 (with the resulting Aggregate Commitments not to exceed, after giving effect to all requests, $250,000,000), provided that (i) any such request for an increase shall be in a minimum amount of $10,000,000, and (ii) Borrower may make a maximum of three (3) such requests. At the time of sending such notice, Borrower (in consultation with Administrative Agent) shall specify the time period within which each Lender is requested to respond (which shall in no event be less than ten (10) Business Days from the date of delivery of such notice to the Lenders).
(b) Lender Elections to Increase . Each Lender shall notify Administrative Agent within such time period whether or not it agrees to increase its Commitment and, if so, whether by an amount equal to, greater than, or less than its Applicable Percentage of such requested increase, provided that each such increasing Lender shall be subject to the approval of Administrative Agent, and LC Issuer. Any Lender not responding within such time period shall be deemed to have declined to increase its Commitment.
(c) Notification by Administrative Agent; Additional Lenders . Administrative Agent shall notify Borrower and each Lender of the Lenders’ responses to each request made hereunder. To achieve the full amount of a requested increase, and subject to the approval of Administrative Agent and the LC Issuer, Borrower may also invite additional Eligible Assignees to become Lenders pursuant to a joinder agreement in form and substance satisfactory to Administrative Agent and its counsel.
(d) Effective Date and Allocations . If the Aggregate Commitments are increased in accordance with this Section, Administrative Agent and Borrower shall determine the effective date (the “ Increase Effective Date ”) and the final allocation of such increase. Administrative Agent shall promptly notify Borrower and the Lenders of the final allocation of such increase and the Increase Effective Date.
(e) Conditions to Effectiveness of Increase . As a condition precedent to such increase, Borrower shall deliver to Administrative Agent a certificate of each Restricted Person dated as of the Increase Effective Date signed by a Responsible Officer of such Restricted Person (i) certifying and attaching the resolutions adopted by such Restricted Person approving or consenting to such increase, and (ii) in the case of Borrower, certifying that, before and after giving effect to such increase, (A) the representations and warranties contained in Article V and the other Loan Documents are true and correct in all material respects (without duplication of any materiality qualifiers contained therein) on and as of the Increase Effective Date, except to
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the extent that such representations and warranties specifically refer to an earlier date, in which case they are true and correct as of such earlier date, and (B) no Default exists. The (1) Borrower shall borrow additional Loans from the Lenders whose Commitments have been increased and/or prepay any Loans (and pay any additional amounts required pursuant to Section 3.4 ) or (2) Lenders, Borrower and the Administrative Agent shall have entered into an assignment and assumption agreement to the extent necessary, in either case, to keep the outstanding Loans ratable with any revised Applicable Percentages arising from any nonratable increase in the Commitments under this Section.
(f) Conflicting Provisions . This Section shall supersede any provisions in Section 2.13 or 10.1 to the contrary.
ARTICLE III - PAYMENTS TO LENDERS
Section 3.1 General Procedures . Borrower will make each payment that it owes under the Loan Documents to Administrative Agent for the account of the Lender Party to whom such payment is owed, in lawful money of the United States, without set-off, deduction or counterclaim, and in immediately available funds. Each such payment must be received by Administrative Agent not later than 11:00 a.m. on the date such payment becomes due and payable. Any payment received by Administrative Agent after such time will be deemed to have been made on the next following Business Day. 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 payable thereon for the period of such extension as provided in the Loan Document under which such payment is due. Each payment under a Loan Document shall be due and payable at the place set forth for Administrative Agent on the Lenders Schedule. When Administrative Agent collects or receives money on account of the Obligations, Administrative Agent shall distribute all money so collected or received, and each Lender Party shall apply all such money so distributed, as follows (except as otherwise provided in Section 8.3 ):
(a) first, for the payment of all Obligations that are then due (and if such money is insufficient to pay all such Obligations, first to any reimbursements due to Administrative Agent under Section 6.9 or 10.4 and then to the partial payment of all other Obligations then due in proportion to the amounts thereof, or as Lender Parties shall otherwise agree);
(b) then for the prepayment of principal of the Loans, together with accrued and unpaid interest on the principal so prepaid; and
(c) last, for the payment or prepayment of any other Obligations.
All payments applied to principal or interest shall be applied first to any interest then due and payable, then to principal then due and payable, and last to any prepayment of principal and interest in compliance with Sections 2.6 and 2.7 . All distributions of amounts described in any of subsections (b) or (c) above shall be made by Administrative Agent pro rata to each Lender Party then owed Obligations described in such subsection in proportion to all amounts owed to
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all Lender Parties that are described in such subsection; provided that if any Lender then owes payments to LC Issuer for the purchase of a participation under Section 2.10(c) or to Administrative Agent under Section 10.4(c) , any amounts otherwise distributable under this section to such Lender shall be deemed to belong to LC Issuer, or Administrative Agent, respectively, to the extent of such unpaid payments, and Administrative Agent shall apply such amounts to make such unpaid payments rather than distribute such amounts to such Lender.
Section 3.2 Increased C osts .
(a) Increased Costs Generally . If any Change in Law shall:
(i) impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, any Lender (except any Reserve Requirement reflected in the Adjusted Eurodollar Rate) or LC Issuer;
(ii) subject any Recipient to any Taxes (other than (A) Indemnified Taxes, (B) Taxes described in clauses (b) through (d) of the definition of Excluded Taxes and (C) Connection Income Taxes) with respect to this Agreement, any Letter of Credit, any participation in a Letter of Credit, any Commitment, any Eurodollar Loan made by it, or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto or change the basis of taxation of payments to such Recipient; or
(iii) impose on any Lender or LC Issuer or the London interbank market any other condition, cost or expense (other than Taxes) affecting this Agreement or Eurodollar Loans made by such Lender or any Letter of Credit or participation therein;
and the result of any of the foregoing shall be to increase the cost to such Lender or such other Recipient of making, converting to, continuing or maintaining any Eurodollar Loan (or of maintaining its obligation to make any such Loan), or to increase the cost to such Lender, LC Issuer, or such other Recipient of participating in, issuing or maintaining any Letter of Credit (or of maintaining its obligation to participate in or to issue any Letter of Credit), or to reduce the amount of any sum received or receivable by such Lender, LC Issuer, or other Recipient hereunder (whether of principal, interest or any other amount) then, upon request of such Lender, LC Issuer, or other Recipient, Borrower will pay to such Lender, LC Issuer, or other Recipient, as the case may be, such additional amount or amounts as will compensate such Lender, LC Issuer, or other Recipient, as the case may be, for such additional costs incurred or reduction suffered.
(b) Capital Requirements . If any Lender or LC Issuer determines that any Change in Law affecting such Lender or LC Issuer or any lending office of such Lender or such Lender’s or LC Issuer’s holding company, if any, regarding capital or liquidity requirements, has or would have the effect of reducing the rate of return on such Lender’s or LC Issuer’s capital or on the capital of such Lender’s or LC Issuer’s holding company, if any, as a consequence of this
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Agreement, the Commitments of such Lender or the Loans made by, or participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by LC Issuer, to a level below that which such Lender or LC Issuer or such Lender’s or LC Issuer’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s or LC Issuer’s policies and the policies of such Lender’s or LC Issuer’s holding company with respect to capital adequacy), then from time to time Borrower will pay to such Lender or LC Issuer, as the case may be, such additional amount or amounts as will compensate such Lender or LC Issuer or such Lender’s or LC Issuer’s holding company for any such reduction suffered.
(c) Certificates for Reimbursement . A certificate of a Lender or LC Issuer setting forth the amount or amounts necessary to compensate such Lender or LC Issuer or its holding company, as the case may be, as specified in subsection (a) or (b) of this Section and delivered to Borrower, shall be conclusive absent manifest error. Borrower shall pay such Lender or LC Issuer, as the case may be, the amount shown as due on any such certificate within 10 days after receipt thereof.
(d) Delay in Requests . Failure or delay on the part of any Lender or LC Issuer to demand compensation pursuant to this Section shall not constitute a waiver of such Lender’s or LC Issuer’s right to demand such compensation, provided that Borrower shall not be required to compensate a Lender or LC Issuer pursuant to this Section for any increased costs incurred or reductions suffered more than nine (9) months prior to the date that such Lender or LC Issuer, as the case may be, notifies Borrower of the Change in Law giving rise to such increased costs or reductions, and of such Lender’s or LC Issuer’s intention to claim compensation therefor (except that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the nine (9) month period referred to above shall be extended to include the period of retroactive effect thereof).
Section 3.3 Illegality . If any Change in Law after the date hereof shall make it unlawful for any Lender Party to fund or maintain Eurodollar Loans, then, upon notice by such Lender Party to Borrower and Administrative Agent, (a) Borrower’s right to elect Eurodollar Loans from such Lender Party shall be suspended to the extent and for the duration of such illegality, (b) all Eurodollar Loans of such Lender Party that are then the subject of any Borrowing Notice and that cannot be lawfully funded shall be funded as Base Rate Loans of such Lender Party, and (c) all Eurodollar Loans of such Lender Party shall be converted automatically to Base Rate Loans on the respective last days of the then current Interest Periods with respect to such Loans or within such earlier period as required by Law. If any such conversion of a Eurodollar Loan occurs on a day that is not the last day of the then current Interest Period with respect thereto, Borrower shall pay to such Lender Party such amounts, if any, as may be required pursuant to Section 3.4 .
Section 3.4 Funding Losses . In addition to its other obligations hereunder, Borrower will indemnify each Lender Party against, and reimburse each Lender Party on demand for, any loss or expense incurred or sustained by such Lender Party (including any loss or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by a Lender Party to fund or maintain Eurodollar Loans), as a result of (a) any payment or prepayment (whether authorized or required hereunder or otherwise) of all or a portion of a Eurodollar Loan on a day other than the day on which the applicable Interest Period ends, (b) any
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payment or prepayment, whether required hereunder or otherwise, of a Loan made after the delivery, but before the effective date, of a Continuation/Conversion Notice requesting the continuation of outstanding Eurodollar Loans as, or the conversion of outstanding Base Rate Loans to, Eurodollar Loans, if such payment or prepayment prevents such Continuation/ Conversion Notice from becoming fully effective, (c) the failure of any Loan to be made or of any Continuation/Conversion Notice requesting the continuation of outstanding Eurodollar Loans as, or the conversion of outstanding Base Rate Loans to, Eurodollar Loans to become effective due to any condition precedent not being satisfied or due to any other action or inaction of any Restricted Person, (d) any Conversion or other conversion (whether authorized or required hereunder or otherwise) of all or any portion of any Eurodollar Loan into a Base Rate Loan or into a different Eurodollar Loan on a day other than the day on which the applicable Interest Period ends, or (e) any assignment of a Eurodollar Loan on a day other than the last day of the Interest Period therefor as a result of a request by Borrower pursuant to Section 3.7(b). Such indemnification shall be on an after-tax basis.
Section 3.5 Taxes .
(a) Defined Terms . For purposes of this Section 3.5 , the term “Lender” includes any LC Issuer and the term “applicable Law” includes FATCA.
(b) Payments Free of Taxes . Any and all payments by or on account of any obligation of Borrower hereunder or under any other Loan Document shall be made free and clear of and without reduction or withholding for any Taxes, except as required by applicable Law. If any applicable Law (as determined in the good faith discretion of an applicable Withholding Agent) requires the deduction or withholding of any Tax from any such payment by a Withholding Agent, then (i) the applicable Withholding Agent shall be entitled to make such deduction or withholding and shall timely pay the full amount deducted or withheld to the relevant Governmental Authority in accordance with applicable Law and, (ii) if such Tax is an Indemnified Tax, then the sum payable by Borrower shall be increased as necessary so that after such deduction or withholding has been made (including such deductions and withholdings of Indemnified Taxes applicable to additional sums payable under this Section) the applicable Recipient receives an amount equal to the sum it would have received had no such deduction or withholding been made.
(c) Payment of Other Taxes by Borrower . Without limiting the provisions of subsection (b) above, Borrower shall timely pay to the relevant Governmental Authority in accordance with applicable Law, or at the option of Administrative Agent timely reimburse it for the payment of, any Other Taxes.
(d) Indemnification by Borrower . Borrower shall indemnify each Recipient, within 10 days after demand therefor, for the full amount of any Indemnified Taxes (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section) payable or paid by such Recipient or required to be withheld or deducted from a payment to such Recipient and any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to Borrower by a Lender (with a copy to Administrative Agent), or by Administrative Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error.
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(e) Indemnification by Lenders . Each Lender shall severally indemnify Administrative Agent, within 10 days after demand therefor, for (i) any Indemnified Taxes attributable to such Lender (but only to the extent that Borrower has not already indemnified Administrative Agent for such Indemnified Taxes and without limiting the obligation of Borrower to do so), (ii) any Taxes attributable to such Lender’s failure to comply with the provisions of Section 10.5(d) relating to the maintenance of a Participant Register and (iii) any Excluded Taxes attributable to such Lender, in each case, that are payable or paid by Administrative Agent in connection with any Loan Document, and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to any Lender by Administrative Agent shall be conclusive absent manifest error. Each Lender hereby authorizes Administrative Agent to set off and apply any and all amounts at any time owing to such Lender under any Loan Document or otherwise payable by Administrative Agent to the Lender from any other source against any amount due to Administrative Agent under this subsection (e).
(f) Evidence of Payments . As soon as practicable after any payment of Taxes by Borrower to a Governmental Authority pursuant to this Section 3.5 , Borrower shall deliver to Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to Administrative Agent.
(g) Status of Lenders .
(i) Any Lender that is entitled to an exemption from or reduction of withholding Tax with respect to payments made under any Loan Document shall deliver to Borrower and Administrative Agent, at the time or times reasonably requested by Borrower or Administrative Agent, such properly completed and executed documentation reasonably requested by Borrower or Administrative Agent as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if reasonably requested by Borrower or Administrative Agent, shall deliver such other documentation prescribed by applicable law or reasonably requested by Borrower or Administrative Agent as will enable Borrower or Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements. Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation (other than such documentation set forth in Section 3.4(g)(ii)(A) , (ii)(B) and (ii)(D) below) shall not be required if in such Lender’s reasonable judgment such completion, execution or submission would subject such Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Lender.
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(ii) Without limiting the generality of the foregoing, in the event that Borrower is a U.S. Person,
(A) any Lender that is a U.S. Person shall deliver to Borrower and Administrative Agent on or prior to the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of Borrower or Administrative Agent), executed originals of IRS Form W-9 certifying that such Lender is exempt from U.S. federal backup withholding tax;
(B) any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to Borrower and Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of Borrower or Administrative Agent), whichever of the following is applicable:
(1) in the case of a Foreign Lender claiming the benefits of an income tax treaty to which the United States is a party (x) with respect to payments of interest under any Loan Document, executed originals of IRS Form W-8BEN establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “interest” article of such tax treaty and (y) with respect to any other applicable payments under any Loan Document, IRS Form W-8BEN establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “business profits” or “other income” article of such tax treaty;
(2) executed originals of IRS Form W-8ECI;
(3) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (x) a certificate substantially in the form of Exhibit F -1 to the effect that such Foreign Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a “10 percent shareholder” of Borrower within the meaning of Section 881(c)(3)(B) of the Code, or a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code (a “ U.S. Tax Compliance Certificate ”) and (y) executed originals of IRS Form W-8BEN; or
(4) to the extent a Foreign Lender is not the beneficial owner, executed originals of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN, a U.S. Tax Compliance Certificate substantially in the form of Exhibit F -2 or Exhibit F -3 , IRS Form W-9, and/or other certification documents from each beneficial owner, as applicable; provided that if the Foreign Lender
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is a partnership and one or more direct or indirect partners of such Foreign Lender are claiming the portfolio interest exemption, such Foreign Lender may provide a U.S. Tax Compliance Certificate substantially in the form of Exhibit F-4 on behalf of each such direct and indirect partner;
(C) any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to Borrower and Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of Borrower or Administrative Agent), executed originals of any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in U.S. federal withholding Tax, duly completed, together with such supplementary documentation as may be prescribed by applicable law to permit Borrower or Administrative Agent to determine the withholding or deduction required to be made; and
(D) if a payment made to a Lender under any Loan Document would be subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to Borrower and Administrative Agent at the time or times prescribed by law and at such time or times reasonably requested by Borrower or Administrative Agent such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by Borrower or Administrative Agent as may be necessary for Borrower and Administrative Agent to comply with their obligations under FATCA and to determine that such Lender has complied with such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this clause (D) , “FATCA” shall include any amendments made to FATCA after the date of this Agreement.
Each Lender agrees that if any form or certification it previously delivered expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify Borrower and Administrative Agent in writing of its legal inability to do so.
(h) Treatment of Certain Refunds . If any party determines, in its sole discretion exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified pursuant to this Section 3.5 (including by the payment of additional amounts pursuant to this Section 3.5 ), it shall pay to the indemnifying party an amount equal to such refund (but only to the extent of indemnity payments made under this Section 3.5 with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses of such indemnified party and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund). Such indemnifying party, upon the request of such indemnified party,
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shall repay to such indemnified party the amount paid over pursuant to this paragraph (h) (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) in the event that such indemnified party is required to repay such refund to such Governmental Authority. Notwithstanding anything to the contrary in this paragraph (h), in no event will the indemnified party be required to pay any amount to an indemnifying party pursuant to this paragraph (h) the payment of which would place the indemnified party in a less favorable net after-Tax position than the indemnified party would have been in if the indemnification payments or additional amounts giving rise to such refund had never been paid. This paragraph shall not be construed to require any indemnified party to make available its Tax returns (or any other information relating to its Taxes that it deems confidential) to the indemnifying party or any other Person.
(i) Survival . Each party’s obligations under this Section 3.5 shall survive the resignation or replacement of Administrative Agent or any assignment of rights by, or the replacement of, a Lender, the termination of the Commitments and the repayment, satisfaction or discharge of all obligations under any Loan Document.
Section 3.6 Alternative Rate of Interest . If prior to the commencement of any Interest Period for a Borrowing of Eurodollar Loans:
(a) Administrative Agent determines that adequate and reasonable means do not exist for ascertaining the Eurodollar Rate for such Interest Period (any such determination shall be conclusive absent manifest error); or
(b) Administrative Agent is advised by Required Lenders that the Eurodollar Rate for such Interest Period will not adequately and fairly reflect the cost to such Lenders of making or maintaining their Loans included in such Borrowing for such Interest Period;
then Administrative Agent shall give notice thereof to Borrower and Lenders by telephone or facsimile as promptly as practicable thereafter and, until Administrative Agent notifies Borrower and Lenders that the circumstances giving rise to such notice no longer exist, (i) any Continuation/Conversion Notice that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Borrowing of Eurodollar Loans shall be ineffective and shall be deemed a request to continue such Borrowing as a Borrowing of Base Rate Loans and (ii) if any Borrowing Notice requests a Borrowing of Eurodollar Loans, such Borrowing shall be made as a Borrowing of Base Rate Loans. Upon receipt of such notice, Borrower may revoke any pending request for a Borrowing of, conversion to or continuation of Eurodollar Loans.
Section 3.7 Mitigation Obligations; Replacement of Lenders .
(a) Designation of a Different Lending Office . If any Lender requests compensation under Section 3.2 , or requires Borrower to pay any Indemnified Taxes or additional amounts to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.5 , then such Lender shall (at the request of Borrower) use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce
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amounts payable pursuant to Section 3.2 or 3.5 , as the case may be, in the future, and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.
(b) Replacement of Lenders . If any Lender requests compensation under Section 3.2 , or if Borrower is required to pay any Indemnified Taxes or additional amounts to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.5 and, in each case, such Lender has declined or is unable to designate a different lending office in accordance with Section 3.7(a) , or if any Lender is a Defaulting Lender, then Borrower may, at its sole expense and effort, upon notice to such Lender and Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in, and consents required by, Section 10.5 ), all of its interests, rights (other than its existing rights to payments pursuant to Section 3.2 and Section 3.5 ) and obligations under this Agreement and the related Loan Documents to an Eligible Assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that:
(i) Borrower shall have paid to Administrative Agent the assignment fee specified in Section 10.5 ;
(ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and participations in Matured LC Obligations, accrued interest thereon, accrued fees and all other amounts payable to it hereunder and under the other Loan Documents (including any amounts under Section 3.4 ) from the assignee (to the extent of such outstanding principal and accrued interest and fees) or Borrower (in the case of all other amounts);
(iii) in the case of any such assignment resulting from a claim for compensation under Section 3.2 or payments required to be made pursuant to Section 3.5 , such assignment will result in a reduction in such compensation or payments thereafter; and
(iv) such assignment does not conflict with applicable Law.
A Lender shall not be required to make any such assignment or delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling Borrower to require such assignment and delegation cease to apply.
Section 3.8 Payments by Borrower; Presumptions by Administrative Agent . Unless Administrative Agent shall have received notice from Borrower prior to the date on which any payment is due to Administrative Agent for the account of Lenders or LC Issuer hereunder that Borrower will not make such payment, Administrative Agent may assume that Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or LC Issuer, as the case may be, the amount due. In such event, if Borrower has not in fact made such payment, then each of the Lenders or LC Issuer, as the case may be, severally agrees to repay to Administrative Agent forthwith on demand the
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amount so distributed to such Lender or LC Issuer, with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to Administrative Agent, at the greater of the Federal Funds Rate and a rate determined by Administrative Agent in accordance with banking industry rules on interbank compensation.
ARTICLE IV - CONDITIONS PRECEDENT TO LENDING
Section 4.1 Closing Date Conditions . The obligation of each Lender to make its initial Loan hereunder and LC Issuer to issue the initial Letter of Credit hereunder is subject to satisfaction of the following conditions precedent:
(a) Loan Documents . Administrative Agent shall have received duly executed and delivered counterparts of each Loan Document (i) in form, substance and date satisfactory to Administrative Agent and the Arranger, and (ii) in such numbers as Administrative Agent or its counsel may reasonably request. In connection with the execution and delivery of the Security Documents, Administrative Agent shall (i) have received duly executed and acknowledged counterparts of the deeds of trust and mortgages in respect of each Restricted Person’s real property and permits sufficient for recording purposes and (ii) have received UCC financing statements as Administrative Agent may request to perfect the Liens granted pursuant to such Security Documents.
(b) Organizational Documents; Incumbency . Administrative Agent shall have received (i) one or more certificates from the secretary, assistant secretary or another Responsible Officer of each Restricted Person, certifying as of the Closing Date to (1) attached copies of each Restricted Person’s Organizational Documents, certified, to the extent applicable, as of a recent date by the appropriate governmental official, (2) the offices and specimen signatures of the officers of such Restricted Person who are authorized to execute Loan Documents in its name, and (3) attached resolutions of the board of directors or managers, as applicable, such Restricted Person approving and authorizing its execution, delivery and performance of this Agreement and the other Loan Documents to which it is a party or by which it or its assets may be bound; (ii) an existence and good standing certificate from the applicable Governmental Authority of each Restricted Person’s jurisdiction of incorporation, organization or formation and in each jurisdiction in which it owns real property Collateral, each dated a recent date prior to the Closing Date; and (iii) such other documents as Administrative Agent may reasonably request.
(c) Closing Certificate . Administrative Agent shall have received a “Closing Certificate” of a Responsible Officer of Borrower, of even date with this Agreement, in which such officer certifies to the satisfaction of each of the conditions set out in subsections Section 4.1 and Section 4.2 .
(d) Governmental Authorizations and Consents . Each Restricted Person shall have obtained all governmental authorizations from any Governmental Authority and all consents of other Persons, in each case that are necessary or reasonably deemed by Administrative Agent to be advisable in connection with the transactions contemplated by the Loan Documents and each of the foregoing shall be in full force and effect and in form and substance reasonably satisfactory to Administrative Agent. All applicable waiting periods shall
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have expired without any action being taken or threatened by any competent authority that would restrain, prevent or otherwise impose adverse conditions on the transactions contemplated by the Loan Documents or the financing thereof and no action, request for stay, petition for review or rehearing, reconsideration, or appeal with respect to any of the foregoing shall be pending, and the time for any applicable agency to take action to set aside its consent on its own motion shall have expired.
(e) Environmental Reports . Administrative Agent shall have received reports and other information, in form, scope and substance reasonably satisfactory to Administrative Agent, regarding environmental matters relating to Restricted Persons’ Midstream Properties and material real property assets, which reports shall include a Phase I environmental assessment dated as of a date satisfactory to Administrative Agent and prepared by an environmental consulting firm satisfactory to Administrative Agent
(f) Capital Expenditures . Administrative Agent shall have received a budget of projected Capital Expenditures to be incurred by Borrower and other Restricted Persons for the period from the Closing Date through December 31, 2018, which shall be in form reasonably satisfactory to the Administrative Agent, along with any other items requested by the Administrative Agent with regard to projects undertaken by any Restricted Person and under construction on the date hereof, and any other diligence items related to the foregoing as may be requested by the Administrative Agent or any Lender.
(g) Evidence of Insurance . Administrative Agent shall have received a certificate from Restricted Persons’ insurance broker or other evidence reasonably satisfactory to them that all insurance required to be maintained pursuant to Section 6.8 is in full force and effect and that Administrative Agent have been named as additional insured and loss payee thereunder as its interests may appear and to the extent required under Section 6.8. In addition, Administrative Agent shall have received (i) standard flood hazard determination forms and, (ii) if any property is located in a special flood hazard area, (x) notices to (and confirmations of receipt by) Borrower as to the existence of a special flood hazard and, if applicable, the unavailability of flood hazard insurance under the National Flood Insurance Program and (y) evidence of applicable flood insurance, if available, in each case in such form, on such terms and in such amounts as required by The National Flood Insurance Reform Act of 1994 or as otherwise required by Administrative Agent.
(h) Opinions of Counsel to Restricted Persons . Administrative Agent shall have received executed copies of the favorable written opinions of (a) counsel to Restricted Persons and (b) local counsel to the Restricted Persons (or such other counsel acceptable to the Administrative Agent) in the State of Oklahoma, in each case opining as to such matters as Administrative Agent may reasonably request, dated as of the Closing Date and in form and substance reasonably satisfactory to Administrative Agent (and each Restricted Person hereby instructs such counsels to deliver such opinions to Administrative Agent, the Arranger and Lenders).
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(i) Fees . Administrative Agent shall have received all commitment, facility, agency, recording, filing, and other fees or reimbursements required to be paid to Administrative Agent, the Arranger or any Lender pursuant to the Fee Letter or any other Loan Documents or any commitment agreement heretofore entered into, including all fees, expenses and disbursements of counsel for Administrative Agent. Administrative Agent shall have received advance payment from Borrower for estimated fees and expenses of counsel for post closing matters and for fees anticipated to be charged by filing officers and other public officials incurred or to be incurred in connection with filing any recordation of any Security Documents and for which invoices have been presented as of the Closing Date.
(j) Financial Statements . Lenders shall have received the Initial Financial Statements, which shall be in form reasonably satisfactory to Administrative Agent, together with a certificate by a Responsible Officer certifying the Initial Financial Statements.
(k) Title . Administrative Agent shall have received title reports, title opinions and other title information in form, scope, substance and authorship reasonably satisfactory to Administrative Agent, covering not less than 85% of the value of Mortgaged Properties as determined by Administrative Agent, reflecting title of Borrower and its Restricted Subsidiaries in such Mortgaged Properties which Administrative Agent shall have received, and be satisfied with, the title information (including Rights of Way and permits) with respect to the Mortgaged Properties and the Midstream Properties and shall, in its discretion, be satisfied with the status of title to the Mortgaged Properties and the Midstream Properties.
(l) No Litigation . There shall not exist any action, suit, investigation, litigation or proceeding or other legal or regulatory developments, pending or threatened in any court or before any arbitrator or Governmental Authority that, in the reasonable opinion of Administrative Agent, singly or in the aggregate, materially impairs the financing hereunder or any of the other transactions contemplated by the Loan Documents, or that could reasonably be expected to have a Material Adverse Effect.
(m) Completion of Proceedings . All partnership, corporate and other proceedings taken or to be taken in connection with the transactions contemplated hereby and all documents incidental thereto not previously found acceptable by Administrative Agent and its counsel shall be reasonably satisfactory in form and substance to Administrative Agent and such counsel, and Administrative Agent and such counsel shall have received all such counterpart originals or certified copies of such documents as Administrative Agent may reasonably request.
(n) Material Adverse Effect . No event or circumstance shall have occurred or be continuing since December 31, 2016 that has resulted in, or could be reasonably expected to result in, either individually or in the aggregate, a Material Adverse Effect.
(o) Material Contracts . Borrower shall have delivered to Administrative Agent a certificate certifying that the documents listed therein are true and correct copies of all Material Contracts, in each case, in the form existing on the Closing Date, which Material Contracts shall be in form and substance satisfactory to Lenders.
(p) Discharge of Existing Liens . Administrative Agent shall have received documents, in form and substance reasonably satisfactory to Administrative Agent, (i) confirming that with the making of the Loans by Lenders on the Closing Date, all lien terminations, UCC-3 termination statements and other documentation evidencing the termination of Liens, if any, on any Restricted Person’s property, that are not Permitted Liens shall be delivered to Administrative Agent.
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(q) Account Control Agreements. Administrative Agent shall have received account control agreements, in form and substance satisfactory to Administrative Agent, with respect to each securities account or deposit account of Borrower sufficient to perfect the security interest of Administrative Agent therein.
(r) Due Diligence . Administrative Agent and Lenders shall have completed satisfactory due diligence review of the assets, liabilities, business, operations and condition (financial or otherwise) of the Restricted Persons, including, all legal, financial, accounting, governmental, environmental, tax and regulatory matters, and fiduciary aspects of the financing contemplated hereby.
(s) Know-Your-Customer; Patriot Act . Administrative Agent and Lenders shall have received, and be reasonably satisfied in form and substance with, all documentation and other information required by bank regulatory authorities under applicable “know-your-customer” and anti-money laundering rules and regulations, including but not restricted to the Patriot Act.
(t) Other Documentation . Administrative Agent shall have received all documents and instruments that Administrative Agent has then reasonably requested, in addition to those described in this Section 4.1 . All such additional documents and instruments shall be reasonably satisfactory to Administrative Agent in form, substance and date.
Section 4.2 Additional Conditions Precedent . No Lender has any obligation to make any Loan (including its first), and LC Issuer has no obligation to issue any Letter of Credit (including its first), unless the following conditions precedent have been satisfied:
(a) All representations and warranties made by any Restricted Person in any Loan Document shall be true and correct in all material respects (except where qualified by materiality, in which case, true and correct in all respects) on and as of the date of such Loan or such Letter of Credit as if such representations and warranties had been made as of the date of such Loan or such Letter of Credit, except to the extent that such representation or warranty was made as of a specific date, in which case such representation or warranty shall be true and correct in all material respects (except where qualified by materiality, in which case, true and correct in all respects) as of such specific date and except that for purposes of this Section 4.2 , the representations and warranties contained in subsections (a) of Section 5.6 shall be deemed to refer to the most recent statements furnished pursuant to subsections (a) and (b), respectively, of Section 6.2 .
(b) No Default shall exist at the date of such Loan or the date of issuance of such Letter of Credit (or would result after giving effect thereto).
(c) The making of such Loan or the issuance of such Letter of Credit shall not be prohibited by any Law and shall not subject any Lender or any LC Issuer to any penalty or other material onerous condition under or pursuant to any such Law.
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(d) At the time of and immediately after giving effect to any Borrowing of Loans (and any application of the proceeds thereof on the date of the requested Borrowing), the Restricted Persons shall not have any Excess Cash.
(e) At the time of and immediately after giving effect to any Borrowing of Loans (and any application of the proceeds thereof on the date of the requested Borrowing), the Facility Usage will not be in excess of the Availability.
(f) Administrative Agent shall have received all documents and instruments that Administrative Agent has then requested, in addition to those described in Section 4.1 (including opinions of legal counsel for Restricted Persons and Administrative Agent; corporate documents and records; documents evidencing governmental authorizations, consents, approvals, licenses and exemptions; and certificates of public officials and of officers and representatives of Borrower and other Persons), as to (i) the accuracy and validity of or compliance with all representations, warranties and covenants made by any Restricted Person in this Agreement and the other Loan Documents, (ii) the satisfaction of all conditions contained herein or therein, and (iii) all other matters pertaining hereto and thereto. All such additional documents and instruments shall be satisfactory to Administrative Agent in form, substance and date.
ARTICLE V - REPRESENTATIONS AND WARRANTIES
To confirm each Lender’s understanding concerning Restricted Persons and Restricted Persons’ businesses, properties and obligations and to induce Administrative Agent and each Lender to enter into this Agreement and to extend credit hereunder, Borrower represents and warrants to Administrative Agent and each Lender that:
Section 5.1 No Default . No Restricted Person is in default in the performance of any of its covenants and agreements contained in any Loan Document. No event has occurred and is continuing that constitutes a Default.
Section 5.2 Organization and Good Standing . Each Restricted Person is duly organized, validly existing and, as applicable, in good standing under the Laws of its jurisdiction of organization. Each Restricted Person has all powers, authority and approvals required to carry on its business, to enter into the Loan Documents and make the payments required thereunder, and to perform its other material obligations thereunder. Each Restricted Person is duly qualified and authorized to do business, and is in good standing, in all jurisdictions within the United States in which it owns real property that is Collateral and in all other jurisdictions where failure to do so could reasonably be expected to have a Material Adverse Effect.
Section 5.3 Authorization . The execution, delivery and performance by each Restricted Person of each Loan Document to which it is a party has been duly authorized by all necessary corporate, limited liability company and partnership action and, if required, by the holders of the Equity in such Restricted Person. Each Loan Document has been duly executed and delivered by the Restricted Persons that are party thereto. Borrower is duly authorized to borrow and repay the Loans as contemplated herein.
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Section 5.4 No Conflicts or Consents . The execution and delivery by the various Restricted 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 (a) conflict with, violate or result in a breach of any provision of (i) any Law, (ii) the Organizational Documents of any Restricted Person, or (iii) any material agreement, judgment, license, order or permit applicable to or binding upon any Restricted Person, (b) result in the acceleration of any Indebtedness owed by any Restricted Person, or (c) result in or require the creation of any Lien upon any assets or properties of any Restricted Person except as expressly contemplated or permitted in the Loan Documents. Except (i) as expressly contemplated in the Loan Documents and (ii) such as have been obtained or made and are in full force and effect, no permit, license, consent, approval, authorization or order of, and no notice to or filing with, any Governmental Authority or third party is required on the part of or in respect of a Restricted Person in connection with the execution, delivery or performance by any Restricted Person of any Loan Document or to consummate any transactions contemplated by the Loan Documents.
Section 5.5 Enforceable Obligations . This Agreement is, and the other Loan Documents when duly executed and delivered will be, legal, valid and binding obligations of each Restricted Person that is a party hereto or thereto, enforceable against such Restricted Person in accordance with their terms except as such enforcement may be limited by bankruptcy, insolvency or similar Laws of general application relating to the enforcement of creditors’ rights and by general principles of equity.
Section 5.6 Financial Statements ; Material Adverse Effect; Equity Contributions .
(a) Restricted Persons have heretofore delivered to each Lender true, correct and complete copies of the Initial Financial Statements. Each of the Initial Financial Statements fairly present Borrower’s Consolidated financial position at the date thereof and the Consolidated results of Borrower’s operations and Borrower’s Consolidated cash flows for the period thereof. All Initial Financial Statements were prepared in accordance with GAAP.
(b) Since the date of the annual Initial Financial Statements no Material Adverse Effect has occurred
(c) The total cash contributions made to Borrower as Equity as of the date of this Agreement is not less than $273,280,000.
Section 5.7 Other Obligations and Restrictions . No Restricted Person has any outstanding Liabilities of any kind (including contingent obligations, tax assessments, and unusual forward or long-term commitments) that are, in the aggregate, material to Borrower or material with respect to Borrower’s Consolidated financial condition and not shown in the Initial Financial Statements or disclosed in Section 5.7 of the Disclosure Schedule or otherwise permitted under Section 7.1 . Except as shown in the Initial Financial Statements or disclosed in Section 5.7 of the Disclosure Schedule, no Restricted Person is subject to or restricted by any franchise, contract, deed, charter restriction, or other instrument or restriction that could reasonably be expected to have a Material Adverse Effect.
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Section 5.8 Full Disclosure . Borrower has disclosed, or caused to be disclosed, to the Administrative Agent and the Lenders all agreements, instruments, and corporate or other restrictions, and all other matters known to it (other than industry-wide risks normally associated with the types of businesses conducted by Restricted Persons), that could reasonably be expected to have a Material Adverse Effect. No certificate, statement or other information delivered herewith or heretofore by any Restricted Person to Administrative Agent or any Lender in connection with the negotiation of this Agreement or otherwise from time to time delivered hereunder contains any untrue statement of a material fact or omits to state any material fact known to any Restricted Person (other than industry-wide risks normally associated with the types of businesses conducted by Restricted Persons) necessary to make the statements contained herein or therein not misleading as of the date made or deemed made.
Section 5.9 Litigation . Except as disclosed in the Initial Financial Statements or in Section 5.9 of the Disclosure Schedule: (a) there are no actions, suits or legal, equitable, arbitrative or administrative proceedings pending, or to the knowledge of any Restricted Person threatened, against any Restricted Person or affecting any Collateral (including any that challenge or otherwise pertain to Borrower’s or any of its Restricted Subsidiaries’ title to such Collateral or use such Collateral for its intended purposes) before any Governmental Authority that could reasonably be expected to have a Material Adverse Effect, (b) there are no outstanding judgments, injunctions, writs, rulings or orders by any such Governmental Authority against any Restricted Person or any Restricted Person’s stockholders, partners, members, directors or officers or affecting any Collateral or any of its material assets or property that could reasonably be expected to have a Material Adverse Effect, and (c) there are no actions, suits or legal, equitable, arbitrative or administrative proceedings or demands pending (or, to any Restricted Person’s knowledge, threatened) that could materially and adversely affect the rights of Borrower and its Restricted Subsidiaries in and to any such Collateral, including any that challenge or otherwise pertain to Borrower’s or any of its Restricted Subsidiaries’ title to such Collateral or the rights to operate consistent with then current and proposed operations.
Section 5.10 ERISA Plans and Liabilities . All currently existing ERISA Plans are listed in Section 5.10 of the Disclosure Schedule. Except as disclosed in the Initial Financial Statements or in Section 5.10 of the Disclosure Schedule, no Termination Event has occurred with respect to any ERISA Plan, and no event or circumstance has occurred or exists that could reasonably be expected to constitute or result in a Termination Event. All ERISA Affiliates are in compliance with ERISA, the Internal Revenue Code and other applicable Laws with respect to each Plan, except to the extent that any noncompliance would not reasonably be expected to have a Material Adverse Effect. No ERISA Affiliate is required to contribute to, or has any other absolute or contingent liability in respect of, any Multiemployer Plan or any ERISA Plan subject to Section 4064 of ERISA. There are no pending or, to the best knowledge of Borrower, threatened claims, actions or lawsuits with respect to any Plan that could reasonably be expected to have a Material Adverse Effect, and there has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan that has resulted or could reasonably be expected to result in a Material Adverse Effect. Except as set forth in Section 5.10 of the Disclosure Schedule: (a) the current value of each ERISA Plan’s benefits does not exceed the current value of such ERISA Plan’s assets available for the payment of such benefits by more than the Threshold Amount, (b) neither Borrower nor any other ERISA Affiliate is obligated to provide benefits to any retired employees (or their dependents) under any employee welfare benefits plan (as defined in Section 3(1) of ERISA) other than as required by applicable Law and (c) neither Borrower nor any other ERISA Affiliate has engaged in a transaction that could be subject to Section 4069 or Section 4212(c) of ERISA.
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Section 5.11 Environmental Matters . Except as disclosed in Section 5.11 of the Disclosure Schedule:
(a) Restricted Persons are conducting their businesses in material compliance with all Environmental Laws, and have, and are in compliance with, all licenses and permits required under any Environmental Laws, and no Restricted Person has received any written notice or otherwise has knowledge that any such permit or license will be revoked or that any application for or renewal of any such permit or license will be denied;
(b) none of the operations or properties of any Restricted Person is the subject of federal, state or local investigation evaluating whether any material remedial action is needed to respond to a release of any Hazardous Materials into the environment or to the improper storage or disposal (including storage or disposal at offsite locations) of any Hazardous Materials;
(c) no Restricted Person (and to the best knowledge of Borrower, no other Person) has filed any notice under any Law indicating that any Restricted Person is responsible for the improper release into the environment, or the improper storage or disposal, of any material amount of any Hazardous Materials or that any Hazardous Materials have been improperly released, or are improperly stored or disposed of, upon any property of any Restricted Person;
(d) there are no claims, demands, suits, orders, inquiries, or proceedings concerning any violation of, or any liability (including as a potentially responsible party) under, any applicable Environmental Law that is pending or, to Borrower’s knowledge, threatened against any Restricted Person or any property of a Restricted Person or as a result of any operations at any such property;
(e) no Restricted Person has transported or arranged for the transportation of any Hazardous Material to any location that is (i) listed on the National Priorities List under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, listed for possible inclusion on such National Priorities List by the Environmental Protection Agency in its Comprehensive Environmental Response, Compensation and Liability Information System List, or listed on any similar state list or (ii) the subject of federal, state or local enforcement actions or other investigations that may lead to claims against any Restricted Person for material clean-up costs, remedial work, damages to natural resources or for personal injury claims (whether under Environmental Laws or otherwise); and
(f) no Restricted Person otherwise has any known material contingent liability under any Environmental Laws or in connection with the release into the environment, or the storage or disposal, of any Hazardous Materials.
Each Restricted Person undertook, at the time of its acquisition of each of its material properties, all commercially reasonable inquiry into the previous ownership and uses of the property and any potential environmental liabilities associated therewith.
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Section 5.12 Names and Places of Business . No Restricted Person has, during the five (5) years preceding the Closing Date, been known by, or used any other trade or fictitious name, except as disclosed in Section 5.12 of the Disclosure Schedule or been organized in a jurisdiction other than its jurisdiction of organization as of the date hereof. Each Unrestricted Subsidiary’s jurisdiction of organization and name as listed in the public records of its jurisdiction of organization is stated in Section 5.12 of the Disclosure Schedule.
Section 5.13 Subsidiaries . Section 5.13 of the Disclosure Schedule (as supplemented from time to time by Borrower in written notices to Administrative Agent and Lenders) sets forth a true, correct and complete description of (a) the Subsidiaries of Borrower and the ownership of such Subsidiaries’ outstanding Equity and (b) any other Equity in any other Person that are owned by Borrower or any of its Subsidiaries. Each Subsidiary listed in Section 5.13 of the Disclosure Schedule is a Restricted Subsidiary unless specifically designated as an Unrestricted Subsidiary, and each Restricted Subsidiary on such schedule is wholly-owned by Borrower or another Restricted Subsidiary. All of Borrower’s Equity in its Subsidiaries, and all other Equity set forth in such section of the Disclosure Schedule, have been duly authorized and are validly issued, fully paid and non-assessable. Except for Liens under the Loan Documents, Borrower and its indicated Restricted Subsidiaries own such Restricted Subsidiaries and Equity free and clear of any Liens and other restrictions (including any restrictions on the right to vote, sell or otherwise dispose of any such Equity) and free and clear of any preemptive rights, rescission rights, or other rights to subscribe for or to purchase or repurchase any such Equity.
Section 5.14 Government Regulation . No Restricted Person is an “investment company” or a company “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940, as amended. No Restricted Person is subject to regulation under any Law that regulates the incurring by such Person of Indebtedness or that may otherwise render all or any portion of the Obligations unenforceable, including Laws relating to common contract carriers or the sale of electricity, gas, steam, water or other public utility services.
Section 5.15 Solvency . Upon giving effect to the making of the Loans, the execution and delivery of the Loan Documents by Borrower and each Guarantor and the consummation of the transactions contemplated hereby and thereby, no Restricted Person will be Insolvent.
Section 5.16 Taxes . Each Restricted Person has filed all United States Federal income tax returns and all other material tax returns that are required to be filed by it and have paid all taxes due pursuant to such returns or pursuant to any assessment received by any Restricted Person (including all ad valorem taxes that are payable and have been assessed against its properties or any part thereof) and all other penalties or charges. The charges, accruals and reserves on the books of each Restricted Person in respect of taxes and other governmental charges are, in the opinion of Borrower, adequate. No Restricted Person has given or been requested to give a waiver of the statute of limitations relating to the payment of any federal or other taxes. No Restricted Person is delinquent in the payment and discharge of ad valorem taxes that have been assessed against its property or any part thereof.
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Section 5.17 Title to Properties; Intellectual Property .
(a) Except as disclosed in Section 5.17(a) of the Disclosure Schedule, each Restricted Person has good and marketable title to, or, as applicable, valid leasehold or easement interests in, the Mortgaged Properties and in all of its other real and personal property necessary to its business, including all properties reflected in the most recent Consolidated balance sheet of Restricted Persons referred to in Section 5.6 or purported to have been acquired by Restricted Persons after such date, except as disposed of in the ordinary course of business or as otherwise permitted under Section 7.5 ), which is free and clear of any and all Liens or encumbrances of any nature or kind except for the Permitted Liens and has full company power and lawful authority to bargain, grant, sell, mortgage, assign, transfer, convey and grant a security interest in all of its property in which a security interest is granted or purported to be granted under the Security Documents, subject to obtaining any necessary waiver, consent or approval of any lessor, sublessor, governmental agency or entity or other Person required under applicable Law or any leases, licenses or other contracts in respect of any such property.
(b) Neither Borrower nor any of its Subsidiaries has conveyed or transferred to any other Person a beneficial interest in the Mortgaged Properties or in any of its other real and personal property necessary to its business, owned by it of record, whether pursuant to unrecorded assignments or transfers or accounting mechanisms.
(c) No condemnation proceeding has been commenced or, to the knowledge of any Responsible Officer of Borrower, is contemplated by any Governmental Authority having the jurisdiction to do so with respect to all or any portion of the Mortgaged Properties or any Midstream Property or in any of its other real and personal property necessary to its business, except for that which, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.
(d) Each Restricted Person possesses all material licenses, permits, patents, copyrights, trademarks and trade names, and other intellectual property (or otherwise possesses the right to use such intellectual property without violation of the rights of any other Person) that are material and necessary to carry out its business as presently conducted and as presently proposed to be conducted hereafter, and no Restricted Person is in violation in any material respect of the terms under which it possesses such intellectual property or the right to use such intellectual property.
(e) No Restricted Person has granted control over any Deposit Accounts to any Person, other than Administrative Agent and the bank with which any Deposit Account is maintained. No Restricted Person has any “securities accounts” as defined and described in the UCC.
(f) The Gathering Systems are covered by valid and subsisting recorded fee deeds, leases, easements, rights of way, servitudes, permits, licenses and other instruments and agreements (collectively, “ Rights of Way ”) in favor of Borrower or any other applicable Restricted Subsidiary (or their predecessors in interest), except where the failure of the Gathering Systems to be so covered, individually or in the aggregate, (i) does not interfere with the ordinary conduct of business of Borrower or any Restricted Subsidiary, and (ii) does not materially detract from the value or the use of the portion of the Gathering Systems which are not covered.
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(g) Except as disclosed in Section 5.17(g) of the Disclosure Schedule, the Rights of Way establish a contiguous and continuous right of way for the Gathering Systems and grant Borrower or any applicable Restricted Subsidiary (or their predecessors in interest) the right to construct, operate, and maintain the Gathering Systems in, over, under, or across the land covered thereby in the same way that a prudent owner and operator would inspect, operate, repair, and maintain similar assets and in the same way as Borrower and any applicable Restricted Subsidiary have inspected, operated, repaired, and maintained the Gathering Systems prior to the Closing Date; provided, however, (i) some of the Rights of Way granted to Borrower or any applicable Restricted Subsidiary (or their predecessors in interest) by private parties and Governmental Authorities are revocable at the right of the applicable grantor, (ii) some of the Rights of Way cross properties that are subject to Liens in favor of third parties that have not been subordinated to the Rights of Way, and (iii) some Rights of Way are subject to certain defects, limitations and restrictions; provided, further, none of the limitations, defects, and restrictions described in clauses (i), (ii) and (iii) above, individually or in the aggregate, (A) interfere with the ordinary conduct of business of Borrower or any Restricted Subsidiary, or (B) materially detract from the value or the use of the portion of the Gathering Systems which are covered.
(h) Each Plant is or will be located on lands owned in fee by Borrower or any applicable Restricted Subsidiary, or subject to a valid real property lease (any deeds in respect of such lands owned in fee, such real property leases and such other instruments burdening such land, collectively, the “ Deeds ”) in favor of Borrower or any applicable Restricted Subsidiary (or their predecessors in interest) and their respective successors and assigns. Borrower and any applicable Restricted Subsidiary (or their predecessors in interest) have the right to construct, operate, and maintain such Plant on the land covered by any the applicable Deeds in the same way that a prudent owner and operator would inspect, operate, repair, and maintain similar assets.
(i) All Rights of Way and all Deeds necessary for the conduct of the business of Borrower and the Restricted Subsidiaries are valid and subsisting, in full force and effect, and there exists no breach, default or event or circumstance that, with the giving of notice or the passage of time or both, would give rise to a default under any such Rights of Way or Deeds that could reasonably be expected to have a Material Adverse Effect. All rental and other payments due under any Rights of Way or Deeds by Borrower or any Restricted Subsidiary (and their predecessors in interest) have been duly paid in accordance with the terms thereof, except to the extent that a failure to do so, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.
(j) The rights and properties presently owned, leased or licensed by Borrower or any Restricted Subsidiary, including all Rights of Way and Deeds, include all rights and properties necessary to permit Borrower and the Restricted Subsidiaries to conduct their businesses in all material respects in the same manner as such businesses have been conducted prior to the date hereof or presently proposed to be conducted hereafter.
(k) No portion of the Midstream Properties has, since the date of this Agreement, suffered any material damage by fire or other casualty loss except that which has heretofore been repaired or replaced or is in the process of being repaired or replaced.
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Section 5.18 Regulation U . None of Borrower and its Restricted Subsidiaries are engaged in the business of extending credit for the purpose of purchasing or carrying “margin stock” (as such term is defined in Regulation U), and no proceeds of any Loans will be used for a purpose that violates Regulation U.
Section 5.19 Operation and Condition of Properties; Compliance with Law .
(a) Except for such acts or failures to act as could not reasonably be expected to have a Material Adverse Effect, the material properties of each Restricted Person (i) are in good repair, working order, and condition in all material respects, normal wear and tear excepted, (ii) have been maintained and operated in a good and workmanlike manner and in compliance in all material respects with all requirements of applicable Law and any Governmental Authority having the jurisdiction over such properties and (iii) have not been affected in any material adverse manner by accident, fire, explosion, or other casualty or act of God.
(b) Each Restricted Person (i) is in compliance with the requirements of all Laws and other requirements of Governmental Authorities and with all orders, writs, injunctions and decrees applicable to it or to its properties, and (ii) has, and is in compliance with, all licenses, permits, franchises, exemptions, approvals and other authorizations required under any such Laws and other requirements of Governmental Authorities, except, with respect to clause (i) and/or (ii) above, in such instances where the failure to do so, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.
Section 5.20 Insurance . The properties of each Restricted Person are insured with financially sound and reputable insurance companies that are not Affiliates of such Restricted Person, in such amounts, with such deductibles and covering such risks as are required to comply with Section 6.8 .
As to all improved real property constituting collateral security for the Secured Obligations, (i) Administrative Agent has received (x) such flood hazard determination forms, notices and confirmations thereof, and effective flood hazard insurance policies (if applicable) with respect to real property Collateral on the Closing Date, (ii) all flood hazard insurance policies required hereunder have been obtained and remain in full force and effect, and the premiums thereon have been paid in full, and (iii) except as Borrower has previously given written notice thereof to Administrative Agent, there has been no redesignation of any property into or out of special flood hazard area.
Section 5.21 No Restriction on Liens or Distributions . No Restricted Person is a party to any contractual restriction or other consensual restriction, or subject to any order, judgment, writ or decree, which either restricts or purports to restrict its ability (or the ability of any other Restricted Person) to (a) grant Liens to the Administrative Agent for the benefit of the Secured Parties on or in respect of its properties, (b) pay dividends or make other distributions to any other Restricted Person, (c) redeem Equity in such Restricted Person that is held by any other Restricted Person, (d) repay loans and other Liabilities owing by such Restricted Person to any other Restricted Person, or (e) transfer any assets of such Restricted Person to any other Restricted Person.
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Section 5.22 A nti-Corruption Laws and Sanctions . Borrower has implemented and maintains in effect policies and procedures designed to ensure compliance by Borrower, its Subsidiaries and their respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions, and Borrower, its Subsidiaries and their respective officers and directors and to the knowledge of Borrower its employees and agents, are in compliance with Anti-Corruption Laws and applicable Sanctions in all material respects. None of (a) Borrower, any Subsidiary or any of their respective directors, officers or employees, or (b) to the knowledge of Borrower, any agent of Borrower or any Subsidiary that will act in any capacity in connection with or benefit from the credit facility established hereby, is a Sanctioned Person. No Borrowing or Letter of Credit, use of proceeds or other transaction contemplated by this Agreement will violate any Anti-Corruption Law or applicable Sanctions.
Section 5.23 State Regulation . Each Restricted Person is in compliance, in all material respects, with all rules, regulations and orders of any State Pipeline Regulatory Agency with jurisdiction to regulate its Midstream Properties, and as of the date of this Agreement no Restricted Person is liable for any refunds or interest thereon as a result of an order from any such agency.
Section 5.24 FERC . No portion of the Gathering Systems is an interstate common carrier pipeline subject to the jurisdiction of the FERC.
Section 5.25 Title to Hydrocarbons . No Restricted Person has title to any of the Hydrocarbons which are transported, processed and/or distributed through or stored in the Gathering Systems or any other Midstream Properties, except pursuant to agreements under which the relevant Restricted Person does not have any exposure to commodity price volatility as a result of having title to such Hydrocarbons.
Section 5.26 EEA Financial Institutions . No Restricted Person is an EEA Financial Institution.
ARTICLE VI - AFFIRMATIVE COVENANTS
To conform with the terms and conditions under which each Lender is willing to have credit outstanding to Borrower, and to induce each Lender to enter into this Agreement and extend credit hereunder, Borrower covenants and agrees that until Payment in Full, unless Required Lenders have previously agreed otherwise:
Section 6.1 Payment and Performance . Each Restricted Person will pay all amounts due under the Loan Documents, to which it is a party, in accordance with the terms thereof and will observe, perform and comply with every covenant, term and condition set forth in the Loan Documents to which it is a party. Borrower will cause each other Restricted Person to observe, perform and comply with every such term, covenant and condition in any Loan Document.
Section 6.2 Books, Financial Statements and Reports . Each Restricted Person will at all times maintain full and accurate books of account and records. Borrower will maintain and will cause its Restricted Subsidiaries to maintain a standard system of accounting, will maintain its Fiscal Year, and will furnish the following statements and reports to Administrative Agent and each Lender Party at Borrower’s expense:
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(a) As soon as available, and in any event within one hundred-twenty (120) days after the end of each Fiscal Year, complete Consolidated and consolidating financial statements of Borrower together with all notes thereto, prepared in reasonable detail in accordance with GAAP, together with an unqualified opinion, based on an audit using generally accepted auditing standards, by an independent certified public accounting firm of recognized standing selected by Borrower and acceptable to Administrative Agent, stating that such Consolidated financial statements have been so prepared. These financial statements shall contain a Consolidated and consolidating balance sheet as of the end of such Fiscal Year and Consolidated and consolidating statements of earnings, of cash flows, and of changes in owners’ equity for such Fiscal Year, each setting forth in comparative form the corresponding figures for the preceding Fiscal Year.
(b) As soon as available, and in any event within sixty (60) days after the end of each Fiscal Quarter, Borrower’s Consolidated and consolidating balance sheet as of the end of such Fiscal Quarter and Consolidated and consolidating statements of Borrower’s earnings and cash flows for such Fiscal Quarter and for the period beginning on the first day of the then current Fiscal Year to the end of such Fiscal Quarter, all in reasonable detail and prepared in accordance with GAAP, subject to changes resulting from normal year-end adjustments and the absence of footnotes. In addition Borrower will, together with each such set of financial statements and each set of financial statements furnished under subsection (a) of this section, furnish a Compliance Certificate signed by a Responsible Officer of Borrower stating that such financial statements present fairly the financial condition and the results of operations of Borrower and its Restricted Subsidiaries for such Fiscal Year on a consolidated basis in accordance with GAAP (subject to normal year-end adjustments and the absence of footnotes), stating that he/she has reviewed the Loan Documents, containing calculations showing compliance (or non-compliance) at the end of such Fiscal Quarter with the requirements of Section 7.14 and stating that no Default exists at the end of such Fiscal Quarter or at the time of such certificate or specifying the nature and period of existence of any such Default.
(c) Together with each set of financial statements furnished under subsections (a) and (b) of this section, reports (in form reasonably satisfactory to Administrative Agent) describing (i) all Hedging Contracts of Borrower and each of its Restricted Subsidiaries, setting forth the type, term, effective date, termination date and notional amounts or volumes and the counterparty to each such agreement, (ii) throughput volumes, wells connected to the Midstream Properties, and other operational results for such Fiscal Quarter or Fiscal Year of Borrower and the Restricted Persons, prepared on a monthly basis and otherwise in form and substance reasonably acceptable to the Administrative Agent, and (iii) all real property interests then owned by Borrower and its Restricted Subsidiaries and not covered by a deed of trust, mortgage, leasehold deed of trust or leasehold mortgage, as applicable, along with the book value of each such real property interest as determined in accordance with GAAP, along with appropriate land description and/or recording data and all other information necessary to allow the preparation of such a Security Document covering such real property interests.
(d) As soon as available, and in any event within ninety (90) days after the end of each Fiscal Year, an annual budget and financial projections for Borrower and its Restricted Subsidiaries (in form reasonably satisfactory to Administrative Agent), prepared by a senior financial officer of Borrower, setting forth yearly financial projections and budgets.
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(e) Promptly after receipt thereof, copies of any reports or management letters submitted to the board of directors (or equivalent governing body) (or the audit committee thereof) of any Restricted Person by independent accountants in connection with the annual audit of the accounts or books of any Restricted Person made by independent accountants.
(f) Together with each set of annual financial statements required under subsections (a) of this section, the insurance certificates and other information required under Section 6.8(b).
(g) Promptly upon its becoming available, copies of all notices or documents received by Borrower or any other Restricted Person pursuant to any Material Contract alleging a material default or nonperformance by such Person thereunder or terminating or suspending any such Material Contract.
(h) If, at any time, all of the Consolidated Subsidiaries of Borrower are not Restricted Subsidiaries, then concurrently with any delivery of financial statements under Section 6.1(a) or Section 6.1(b) , a certificate of a Responsible Officer setting forth consolidating spreadsheets that show all Unrestricted Subsidiaries and the eliminating entries, in such form as would be presentable to the auditors of Borrower.
(i) No later than twenty (20) Business Days (or such shorter time as Administrative Agent may approve in writing) prior to any such change, written notice of any change in (i) any Restricted Person’s corporate, company or partnership name, (ii) the jurisdiction in which any Restricted Person is incorporated, formed, or otherwise organized, (iii) the location of any Restricted Person’s chief executive office, (iv) any Restricted Person’s identity or corporate, company or partnership structure, (v) any Restricted Person’s federal taxpayer identification number (and, if it is organized in New York or Oklahoma, its organizational identification number in such jurisdiction), or (vi) any other amendment, modification or supplement to the Organizational Documents of any Restricted Person if such amendment, modification or supplement is material to the Lenders
(j) The information concerning environmental matters that is from time to time required under Section 6.12 .
(k) Promptly, but in any event within five (5) Business Days after receipt thereof by any Restricted Person, Borrower will furnish a copy of any form of notice, summons, citation, proceeding or order received from the FERC asserting jurisdiction over any material portion of the Gathering Systems.
Section 6.3 Other Information and Inspections . Each Restricted Person will furnish to Administrative Agent and each Lender any information that Administrative Agent may from time to time reasonably request concerning any provision of the Loan Documents, any Collateral, or any matter in connection with the businesses, properties, prospects, financial condition and operations of any Restricted Person, including all evidence that Administrative Agent from time to time reasonably requests in writing as to the accuracy and validity of or compliance with all representations, warranties and covenants made by any Restricted Person in the Loan Documents, the satisfaction of all conditions contained therein, and all other matters
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pertaining thereto. Each Restricted Person will permit representatives appointed by Administrative Agent (including independent accountants, auditors, agents, attorneys, appraisers and any other Persons) to visit and inspect during normal business hours as mutually agreed or upon advance notice of ten (10) Business Days any of such Restricted Person’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 photographs thereof, and to write down and record any information such representatives obtain, and each Restricted Person shall permit Administrative Agent or its representatives to investigate and verify the accuracy of the information furnished to Administrative Agent or any Lender in connection with the Loan Documents and to discuss all such matters with its officers, employees and representatives.
Section 6.4 Notice of Material Events and Change of Address . Borrower will promptly, and in no event later than the third Business Day, after becoming aware thereof, notify Administrative Agent and each Lender Party in writing, stating that such notice is being given pursuant to this Agreement, of:
(a) the occurrence of any Material Adverse Effect;
(b) the occurrence of any Default;
(c) the acceleration of the maturity of any Indebtedness owed by any Restricted Person in an aggregate principal amount of $500,000 or more, or the occurrence of any event which, with the giving of notice or the passage of time, or both, would allow any such acceleration or the occurrence of any default by any Restricted Person under any indenture, mortgage, agreement, contract or other instrument to which any of them is a party or by which any of them or any of their properties is bound, if such default could reasonably be expected to have a Material Adverse Effect;
(d) the occurrence of any Termination Event;
(e) any (i) claim of $500,000 or more, any notice of potential liability of any Restricted Person under any Environmental Laws (or any environmental permits, licenses or authorizations in connection with any Restricted Person’s ownership or use of its properties or the operation of its business) that might exceed such amount, or any other material adverse claim asserted against any Restricted Person or with respect to any Restricted Person’s properties, or (ii) action or proceeding against or of any noncompliance by any Restricted Person with any Environmental Laws or environmental permit that could reasonably be expected to cause any Restricted Person’s property to be subject to any material restrictions on use in the Restricted Persons’ businesses under any Environmental Law;
(f) the occurrence of any casualty in respect of any property of any Restricted Person, or the commencement of any condemnation proceeding or the suspension of any right to operate, in each case in respect of any property of any Restricted Person, which could have a Material Adverse Effect; and
(g) the filing or commencement of, or the threat in writing of, any action, suit, proceeding, investigation or arbitration by or before any arbitrator or Governmental Authority against or affecting any Restricted Person that has not previously disclosed in writing to the
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Lenders or any material adverse development in any action, suit, proceeding, investigation or arbitration (whether or not previously disclosed to the Lenders) that, in either case, if adversely determined, could reasonably be expected to result in (i) the obligation of any Restricted Person to pay damages or make remediation expenditures in excess of $500,000, (ii) the disruption or delay of any Restricted Person’s operations that could reasonably be expected to reduce annual revenues by more than $500,000, or (iii) any Material Adverse Effect.
Upon the occurrence of any of the foregoing events, Restricted Persons will take all necessary or appropriate steps to remedy promptly any such Material Adverse Effect, Default, acceleration, potential acceleration, default, or Termination Event, to defend any such action, suit, proceeding investigation or arbitration, and to resolve all controversies on account of any of the foregoing. Each notice pursuant to this Section shall be accompanied by a statement of a Responsible Officer of Borrower setting forth details of the occurrence referred to therein and stating what action, if any, the applicable Restricted Person has taken or proposes to take with respect thereto. Borrower will notify the Administrative Agent in writing no later than ten (10) days prior to the date that any Restricted Person changes its name, or the location of its chief executive office or location of jurisdiction under the Uniform Commercial Code.
Section 6.5 Maintenance and Operation of Properties .
(a) Each Restricted Person will maintain, preserve, protect, and keep all Collateral and all other property (including material easements, rights of way, servitudes, leases, licenses and permits) used or useful in the conduct of its business in good condition (ordinary wear and tear excepted) in accordance with prudent industry standards, and in material compliance with all applicable Laws, in conformity with all applicable contracts, servitudes, leases and agreements, and will from time to time make all repairs, renewals and replacements needed to enable the business and operations carried on in connection therewith to be promptly and advantageously conducted at all times. Each Restricted Person will operate all Collateral and all of its other property (including easements, rights of way, servitudes, leases, licenses and permits) used or useful in the conduct of its business in a good and workmanlike manner, in accordance with prudent industry standards, and in material compliance with all applicable Laws and all requirements of Governmental Authorities and in conformity with all applicable contracts, servitudes, leases and agreements.
(b) Each Restricted Person will cause to be maintained in full force and effect all Rights of Way, Deeds and other agreements necessary to the operations of the Midstream Properties and will properly and timely pay all rents and other payments due under the provisions thereof. Subject to Permitted Liens, each Restricted Person will maintain the Gathering Systems within the confines of the applicable Rights of Way and maintain the Plants within the confines of the applicable Deeds, in each case, without material encroachment upon any adjoining property. Each Restricted Person will maintain such rights of ingress and egress necessary to permit the Restricted Subsidiaries to inspect, operate, repair, and maintain the Midstream Properties to the extent that failure to maintain such rights, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect and provided that the Restricted Subsidiaries may hire third parties to perform these functions. No Restricted Person will permit any Gathering Systems, other Midstream Property or any material part thereof to be leased to a third party, to cease to operate (except as a result of customary events of force majeure) or to be abandoned, except as permitted by Section 7.5 .
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(c) No Restricted Person will permit any of the Midstream Properties to be subject to any contractual or other arrangement for gathering, transporting, storage, processing or other services (i) whereby payment is or can be deferred for a substantial period after the month in which performance occurred or is or can be made other than in cash, (ii) that is not on a bona fide arms-length basis and at commercially reasonable prices, on terms that are customary in the industry, or (iii) for which prepayments have been received other than prepayments for services to be performed and settled within sixty (60) days after the date of such prepayment in the ordinary course of business. No Restricted Person will permit to exist any imbalances with respect to the Midstream Properties except for those imbalances incurred in the ordinary course of business that are settled within sixty (60) days after the end of the month in which such imbalance occurs. No Restricted Person will permit to exist curtailment of services in connection with the Midstream Properties other than as required by applicable Laws or as a result of events of force majeure. The Restricted Persons will use reasonable efforts to cure any events of force majeure. No Restricted Person will permit to exist any contract in connection with the Midstream Properties for consideration or other terms in contravention of applicable Laws and will not receive consideration other than in accordance with applicable contracts and applicable Laws. Each Restricted Person will cause all material equipment, improvements, fixtures and other tangible personal property forming a part of the Midstream Properties to remain located on the real property constituting part of the Midstream Properties except for (i) portions thereof temporarily located elsewhere in the course of normal operations of the Midstream Properties, (ii) temporary relocation of meters, treatment units, and other equipment at storage locations and on terms acceptable to Administrative Agent, and (iii) Dispositions permitted by Section 7.5 . Each Restricted Person will at all times cause to be maintained all material governmental licenses and permits necessary or appropriate to own and operate the Midstream Properties.
Section 6.6 Maintenance of Existence and Qualifications. Each Restricted Person will maintain and preserve its existence and its rights and powers to do business 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 could not reasonably be expected to have a Material Adverse Effect.
Section 6.7 Payment of Trade Liabilities, Taxes, etc . Each Restricted Person will (a) timely file all required tax returns including any extensions; (b) timely pay all taxes, assessments, and other governmental charges or levies imposed upon it or upon its income, profits or property before the same become delinquent; (c) within ninety (90) days past the original invoice billing date therefore, or, if earlier, when due in accordance with its terms, pay and discharge all Liabilities 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; (d) pay and discharge before the same becomes delinquent all other Liabilities now or hereafter owed by it; and (e) maintain appropriate accruals and reserves for all of the foregoing in accordance with GAAP. Each Restricted Person may, however, delay paying, filing or discharging any of the foregoing so long as (a) it is in good faith contesting the validity thereof by appropriate proceedings, if necessary, and has set aside on its books adequate reserves therefore that are required by GAAP or (b) the failure to pay, file or discharge relates to taxes or Liabilities which do not exceed $2,000,000 in the aggregate at any one time and where such failure could not reasonably be expected to have a Material Adverse Effect.
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Section 6.8 Insurance .
(a) Each Restricted Person shall at all times (i) keep and maintain all of its property in good working order and condition, ordinary wear and tear excepted, and (ii) maintain insurance with responsible and reputable insurance companies or associations (including comprehensive general liability, hazard, and business interruption insurance) with respect to its business and properties (including all real properties leased or owned by it), in such amounts and covering such risks as required by any Governmental Requirements or as carried generally in accordance with sound business practice by similarly situated companies in similar businesses. If any Restricted Person fails to maintain such insurance, Administrative Agent may arrange for such insurance, but at Borrower’s expense and without any responsibility on the part of Administrative Agent for obtaining the insurance, the solvency of the insurance companies, the adequacy of the coverage, or the collection of claims. Upon the occurrence and during the continuance of an Event of Default, Administrative Agent shall have the sole right (both in the name of Lenders and in the name of the Restricted Persons), to file claims under any insurance policies, to receive, receipt and give acquittance for any payments that may be payable thereunder, and to execute any and all endorsements, receipts, releases, assignments, reassignments or other documents that may be necessary to effect the collection, compromise or settlement of any claims under any such insurance policies.
(b) On or prior to the Closing Date and annually thereafter, at the same time as annual financial statements are required under Section 6.2(a) , and upon reasonable request of Administrative Agent, each Restricted Person will furnish or cause to be furnished to Administrative Agent a summary of the respective insurance coverage of such Restricted Person and certificates from the Restricted Persons’ insurance brokers confirming such coverage, all in form and substance reasonably satisfactory to Administrative Agent, and, if requested, copies of the applicable policies. Each Restricted Person will cause any insurance policies covering any Collateral to be endorsed (i) to provide that such policies may not be cancelled, reduced or affected in any manner for any reason without 30 days prior notice to Administrative Agent (10 days prior notice for cancellation due to failure to pay premiums), (ii) to name Administrative Agent as an additional insured (in the case of all liability insurance policies) and loss payee (in the case of all casualty and property insurance policies), and (iii) to provide for such other matters as any Lender Party may reasonably require.
(c) Without limiting the foregoing, each Restricted Person shall (i) maintain, if available, fully paid flood hazard insurance on all real property that is located in a special flood hazard area and that constitutes Collateral security for the Secured Obligations, on such terms and in such amounts as required by The National Flood Insurance Reform Act of 1994 or as otherwise required by Administrative Agent, (ii) furnish to Administrative Agent evidence of the renewal (and payment of renewal premiums therefor) of all such policies prior to the expiration or lapse thereof, and (iii) furnish to Administrative Agent prompt written notice of any redesignation of any such improved real property into or out of a special flood hazard area.
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(d) Upon the occurrence and during the continuance of an Event of Default, all insurance payments in respect of such Collateral in excess of $1,000,000 shall be paid to Administrative Agent and shall be applied to the prepayment of the Obligations unless otherwise agreed to by Administrative Agent and Borrower.
Section 6.9 Performance on Borrower ’ s Behalf . If any Restricted Person fails to pay any taxes, insurance premiums, expenses, attorneys’ fees or other amounts it is required to pay under any Loan Document, Administrative Agent may (but need not) pay the same. Borrower shall immediately reimburse Administrative Agent for any such payments and Borrower’s obligation to do so shall constitute an Obligation owed hereunder that is due and payable on the date such amount is paid by Administrative Agent.
Section 6.10 Interest . Subject to Sections 2.5 and 2.11(a) , Borrower hereby promises to Administrative Agent and each Lender Party to pay interest at the Default Rate applicable to Base Rate Loans on all Obligations (including Obligations to pay fees or to reimburse or indemnify Administrative Agent or any Lender but excluding principal of, and interest on, any Loan, and any Matured LC Obligation, interest on which is covered by Section 2.5 and clause (a) of Section 2.11 ) that Borrower has in this Agreement promised to pay to Administrative Agent or such Lender Party and that are not paid when due. Such interest shall accrue from the date such Obligations become due until they are paid.
Section 6.11 Compliance with Agreements and Law ; Permits . Each Restricted Person will observe, perform, and comply with 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. Each Restricted Person will conduct its business and affairs in material compliance with all Laws applicable thereto. Each Restricted Person will cause all material easements, Rights of Way, servitudes, agreements, leases, privileges, franchises licenses and permits necessary or appropriate for the conduct of its business and the ownership and operation of its property used and useful in the conduct of its business to be at all times maintained in good standing and in full force and effect. Borrower shall, and shall cause each of its Restricted Subsidiaries to, conduct its business in conformity with prudent industry practice by companies owning similar properties in the same general areas in which Borrower and its Restricted Subsidiaries operate. Borrower will maintain in effect and enforce policies and procedures designed to ensure compliance by Borrower, its Subsidiaries and their respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions.
Section 6.12 Environmental Matters; Environmental Reviews .
(a) Each Restricted Person will comply in all material respects with all Environmental Laws now or hereafter applicable to such Restricted Person, as well as all contractual obligations and agreements with respect to environmental remediation or other environmental matters, and shall obtain, at or prior to the time required by applicable Environmental Laws, all environmental, health and safety permits, licenses and other authorizations necessary for its operations and will maintain such authorizations in full force and effect. No Restricted Person will do anything or permit anything to be done that will subject any of its properties to any material remedial obligations under, or result in noncompliance with
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applicable permits and licenses issued under, any applicable Environmental Laws, assuming disclosure to the applicable governmental authorities of all relevant facts, conditions and circumstances. Upon Administrative Agent’s reasonable request, at any time and from time to time but no more frequent than once per annum, Borrower will provide at its own expense an environmental inspection of any of the Restricted Persons’ material real properties and audit of their environmental compliance procedures and practices, in each case from an engineering or consulting firm approved by Administrative Agent.
(b) Borrower will promptly furnish to Administrative Agent copies of all written notices of violation, orders, claims, citations, complaints, penalty assessments, suits or other proceedings received by any Restricted Person, or of which Borrower otherwise has notice, pending or threatened against any Restricted Person by any Governmental Authority with respect to any alleged material violation of or material non-compliance with any Environmental Laws or any permits, licenses or authorizations in connection with any Restricted Person’s ownership or use of its properties or the operation of its business.
(c) Borrower will promptly furnish to Administrative Agent all requests for information, notices of claim, demand letters, and other notifications, received by Borrower in connection with any Restricted Person’s ownership or use of its properties or the conduct of its business, relating to potential responsibility with respect to any investigation or clean-up of Hazardous Material at any location.
Section 6.13 Evidence of Compliance . Each Restricted Person will furnish to each Lender at such Restricted Person’s or Borrower’s expense all evidence that Administrative Agent from time to time reasonably requests in writing as to the accuracy and validity of or compliance with all representations, warranties and covenants made by any Restricted Person in the Loan Documents, the satisfaction of all conditions contained therein, and all other matters pertaining thereto.
Section 6.14 Bank Accounts; Offset . To secure the repayment of the Obligations, Borrower hereby grants to each Lender and LC Issuer a security interest, a lien, and a right of offset, each of which shall be in addition to all other interests, liens, and rights of any Lender and LC Issuer at common Law, under the Loan Documents, or otherwise, and each of which shall be upon and against (a) any and all moneys, securities or other property (and the proceeds therefrom) of Borrower now or hereafter held or received by or in transit to any Lender or LC Issuer 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 final) of Borrower with any Lender or LC Issuer and (c) any other credits and claims of Borrower at any time existing against any Lender or LC Issuer, including claims under certificates of deposit, in each case excepting (i) any accounts exclusively used for payroll, payroll taxes or employee benefits and funded in the ordinary course of business, (ii) any insurance trust accounts maintained in the ordinary course of business and holding only funds necessary to fund the accrued insurance obligations of Borrower and its Subsidiaries in respect of self-insured health insurance and workers’ compensation insurance, (iii) any escrow accounts maintained in connection with acquisitions permitted hereunder, and (iv) any other amounts held for others in trust or escrow as required by contract or applicable Law. At any time and from time to time after the occurrence and during the continuance of any Default, each Lender and LC
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Issuer is hereby authorized to foreclose upon, or to offset against the Obligations then due and payable (in either case without notice to Borrower), any and all items hereinabove referred to. The remedies of foreclosure and offset are separate and cumulative, and either may be exercised independently of the other without regard to procedures or restrictions applicable to the other.
Section 6.15 Non-Consolidation . Unless otherwise consented to by Administrative Agent or Required Lenders, each Restricted Person shall: (a) maintain entity records and books of account separate from those of any other entity that is an Affiliate of such entity; (b) not commingle its funds or assets with those of any other entity that is an Affiliate of such entity; and (c) provide that its board of directors or other analogous governing body will hold all appropriate meetings to authorize and approve such entity’s actions, which meetings will be separate from those of other entities.
Section 6.16 Guaranties of Borrower ’ s Subsidiaries . Each Restricted Subsidiary of Borrower now existing or created, acquired or coming into existence (including the redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary pursuant to the terms hereof) after the date hereof shall, promptly and in any event within ten (10) days after it has become a Restricted Subsidiary of Borrower, execute and deliver to Administrative Agent an absolute and unconditional guaranty of the timely repayment of the Secured Obligations and the due and punctual performance of the obligations of Borrower hereunder, which guaranty shall be satisfactory to Administrative Agent in form and substance; provided, however, that notwithstanding anything in this Agreement or any Security Document to the contrary, no Guarantor shall guarantee (or grant a Lien to support, as applicable) any Excluded Swap Obligations of such Guarantor for purposes of determining any obligations of such Guarantor. Each Restricted Subsidiary of Borrower existing on the date hereof shall duly execute and deliver such a guaranty prior to the making of any Loan hereunder. Borrower will cause each of its Restricted Subsidiaries to deliver to Administrative Agent, simultaneously with its delivery of such a guaranty, written evidence satisfactory to Administrative Agent and its counsel that such Restricted Subsidiary has taken all company action necessary to duly approve and authorize its execution, delivery and performance of such guaranty and any other documents that it is required to execute.
Section 6.17 Agreement to Deliver Security Documents . Borrower agrees to deliver, and to cause each other Restricted Person to deliver, to further secure the Secured Obligations, promptly after a request by Administrative Agent in its reasonable discretion, deeds of trust, mortgages, chattel mortgages, security agreements, flood hazard certification, title searches, title insurance (in respect of any real property with an acquisition cost in excess of $500,000), financing statements and other Security Documents in form and substance reasonably satisfactory to Administrative Agent for the purpose of granting, confirming, and perfecting first and prior liens or security interests, subject only to Permitted Liens and other Liens (if any) permitted under the Loan Documents, on any real or personal property now owned or hereafter acquired by such Person to the extent otherwise consistent with and required by the Loan Documents; provided, however, that notwithstanding anything in this Agreement or any Security Document to the contrary, no Guarantor shall be required to grant a Lien to support any Excluded Swap Obligations of such Guarantor for purposes of determining any obligations of such Guarantor. In furtherance thereof, each Restricted Person shall promptly notify Administrative Agent of any individual real properties in which a Restricted Person has an
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interest (whether by acquisition, lease or otherwise) with an acquisition cost in excess of $500,000. In addition, Borrower agrees to provide, and to cause each other Restricted Person to provide, title information in form and substance reasonably satisfactory to Administrative Agent for any property on which a Lien is required to be granted pursuant to this Section 6.16. Borrower will, and will cause each of its Restricted Subsidiaries to, use commercially reasonable efforts in negotiating any new lease, right-of-way or similar instrument or the renewal or extension of any existing lease, easement estate, right-of-way or similar instrument covering real property to provide in such lease, easement estate, right-of-way or similar instrument that the interest of the lessee or grantee may be hypothecated without any further approval of or notice to the landlord under such lease or the grantor under any such easement, right-of-way or similar instrument.
Section 6.18 Revenues . Notwithstanding that, by the terms of the various Security Documents, Restricted Persons are and will be assigning to Administrative Agent for the benefit of the Secured Parties all of the “Revenues” (as defined therein) derived from the property covered thereby, so long as no Event of Default has occurred and is continuing Restricted Persons may continue to receive from the payors thereof all such Revenues, subject, however, to the Liens created under the Security Documents, which Liens are hereby affirmed and ratified. Upon the occurrence and during the continuance of an Event of Default, Administrative Agent may exercise all rights and remedies granted under the Security Documents subject to the terms thereof, including the right to obtain possession of all Revenues then held by Restricted Persons or to receive directly from the payors thereof all other Revenues. In no case shall any failure, whether intentioned or inadvertent, by Administrative Agent or the Secured Parties to collect directly any such Revenues constitute in any way a waiver, remission or release of any of their rights under the Security Documents, nor shall any release of any Revenues by Administrative Agent or the Secured Parties to Restricted Persons constitute a waiver, remission, or release of any other Revenues or of any rights of Administrative Agent or the Secured Parties to collect other Revenues thereafter.
Section 6.19 Perfection and Protection of Security Interests and Liens . Each Restricted Person shall from time to time deliver to Administrative Agent any financing statements, continuation statements, extension agreements, amendments to Security Documents, Deposit Account Control Agreements, Securities Account Control Agreements and other documents, properly completed and executed (and acknowledged when required) by such Restricted Person in form and substance reasonably satisfactory to Administrative Agent, which Administrative Agent requests for the purpose of (i) perfecting, confirming, or protecting any Liens or other rights in Collateral securing any Secured Obligations and (ii) maintaining compliance with all applicable Laws, including those of any applicable Indian tribe, the Bureau of Indian Affairs, and the U.S. Bureau of Land Management. Each Restricted Person hereby authorizes Administrative Agent to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the collateral describing the Collateral as “all assets” without the signature of any Restricted Person.
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Section 6.20 Unrestricted Subsidiaries . Borrower:
(a) will cause the management, business and affairs of each of Borrower and the Restricted Subsidiaries to be conducted in such a manner (including, without limitation, by keeping separate books of account, furnishing separate financial statements of Unrestricted Subsidiaries to creditors and potential creditors thereof and by not permitting properties of Borrower and the Restricted Subsidiaries to be commingled) so that each Unrestricted Subsidiary that is a corporation will be treated as a corporate entity separate and distinct from Borrower and the Restricted Subsidiaries.
(b) will not, and will not permit any of the Restricted Subsidiaries to, incur, assume, guarantee or be or become liable for any Debt of any of the Unrestricted Subsidiaries.
(c) will not permit any Unrestricted Subsidiary to hold any Equity Interest in, or any Debt of, Borrower or any Restricted Subsidiary.
Section 6.21 Commodity Exchange Act Keepwell Provisions .
(a) Borrower hereby absolutely, unconditionally and irrevocably undertakes to provide such funds or other support as may be needed from time to time by each Restricted Person that is not otherwise an Eligible Contract Participant in order for such Restricted Person to honor its obligations under its Guaranty and any other Loan Document with respect to Lender Hedging Obligations (provided, however, that Borrower shall only be liable under this section for the maximum amount of such liability that can be hereby incurred without rendering its obligations under this Section, or otherwise under this Agreement or any Loan Document, voidable under applicable Law relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount). The obligations of Borrower under this section shall remain in full force and effect until Payment in Full. Borrower intends for this section to constitute, and this section shall be deemed to constitute, a “keepwell, support, or other agreement” for the benefit of each Restricted Subsidiary for all purposes of Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.
(b) Notwithstanding any other provisions of this Agreement or any other Loan Document, the Secured Obligations guaranteed by any Guarantor, or secured by the grant of any Lien by such Guarantor under any Loan Document, shall exclude all Excluded Swap Obligations with respect to such Guarantor.
Section 6.22 Post Closing . Not later than:
(a) forty-five (45) days after the Closing Date (or such later date as is reasonably acceptable to Administrative Agent), Administrative Agent shall have received a fully paid mortgagee title policy, in form, substance and amount reasonably satisfactory to Administrative Agent, with respect to the fee-owned tract containing Borrower’s cryogenics processing plant and storage tanks, and
(b) sixty (60) days after the Closing Date (or such later date as is reasonably acceptable to Administrative Agent), Borrower shall deliver to Administrative Agent (i) assignments in recordable form executed by Oklahoma Energy Acquisitions, LP pursuant to which Oklahoma Energy Acquisitions, LP conveys and assigns the rights-of-way and easements listed on Section 5.17(g) to the Disclosure Schedule to Borrower, and (ii) a mortgage supplement executed by Borrower in for sufficient to grant a mortgage Lien to Administrative Agent in such rights-of-way and easements.
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ARTICLE VII - NEGATIVE COVENANTS
To conform with the terms and conditions under which each Lender is willing to have credit outstanding to Borrower, and to induce each Lender to enter into this Agreement and make the Loans, Borrower covenants and agrees that until the Payment in Full, unless Required Lenders have previously agreed otherwise:
Section 7.1 Indebtedness . No Restricted Person will in any manner owe or be liable for Indebtedness except:
(a) the Obligations and Cash Management Obligations.
(b) Indebtedness arising under Hedging Contracts permitted under Section 7.3 .
(c) Indebtedness among Borrower and the Guarantors arising in the ordinary course of business; provided, that all such Indebtedness shall be unsecured and subordinated in right of payment to the payment in full of all of the Obligations in a manner and on terms and conditions reasonably satisfactory to Administrative Agent.
(d) Indebtedness existing on the date hereof and set forth on the Disclosure Schedule, including any extensions, renewals, refinancings and replacements thereof.
(e) Indebtedness arising under insurance premium financing arrangements for insurance policies required hereunder or otherwise maintained by a Restricted Person in the ordinary course of business in an aggregate amount not to exceed $500,000 at any time outstanding;
(f) purchase money Indebtedness and Capital Leases in an aggregate principal amount not to exceed $1,000,000 at any time outstanding;
(g) Indebtedness associated with bonds or surety obligations required by Governmental Authorities in connection with the operation of the businesses of Restricted Persons;
(h) endorsements of negotiable instruments or instruments for deposit in the ordinary course of business; and
(i) miscellaneous items of unsecured Indebtedness of Restricted Persons not described in subsections (a) through (h) that do not in the aggregate (taking into account all such Indebtedness of all Restricted Persons) exceed $10,000,000 at any one time outstanding and so long as no Default or Event of Default exists at the time of incurring such Indebtedness or would result therefrom.
Section 7.2 Limitation on Liens . Except for Permitted Liens, no Restricted Person will create, assume or permit to exist any Lien upon any of the properties or assets that it now owns or hereafter acquires.
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Section 7.3 Hedging Contracts . No Restricted Person will be a party to or in any manner be liable on any Hedging Contract except Hedging Contracts entered into by a Restricted Person with the purpose and effect of fixing interest rates on a principal amount of indebtedness of such Restricted Person that is accruing interest at a variable rate, provided that (i) at the time such Hedging Contract is entered into, the aggregate notional amount of such contracts does not exceed 75% of the anticipated outstanding principal balance of the indebtedness to be hedged by such contracts or an average of such principal balances calculated using a generally accepted method of matching interest swap contracts to declining principal balances, (ii) the floating rate index of each such contract generally matches the index used to determine the floating rates of interest on the corresponding indebtedness to be hedged by such contract, (iii) except for the Collateral under the Security Documents with respect to Lender Hedging Obligations, no such contract requires any Restricted Person to put up money, assets, or other security against the event of its nonperformance prior to actual default by such Restricted Person in performing its obligations thereunder, and (iv) each such contract is with an Approved Counterparty.
Section 7.4 Limitation on Mergers, Issuances of Securities . No Restricted Person will merge or consolidate with or into any other Person or sell, transfer, lease or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of its property to any other Person (each of the foregoing transactions, a “consolidation” and the verb thereof “consolidate”), or liquidate or dissolve, except that any Subsidiary of Borrower may consolidate with (a) another Subsidiary of Borrower, so long as a Guarantor is the surviving business entity, or (b) Borrower, so long as Borrower is the surviving business entity. No Restricted Person will issue any Equity, provided that (i) Restricted Subsidiaries of Borrower may issue additional Equity to Borrower and its wholly-owned Restricted Subsidiaries, and (ii) Borrower may issue additional common Equity (other than Disqualified Capital Stock) to its owners so long as no Change of Control exists after giving effect to such issuance. No Restricted Subsidiary of Borrower will otherwise allow any diminution of Borrower’s Equity (direct or indirect) in such Restricted Subsidiary.
Section 7.5 Limitation on Dispositions . No Restricted Person will Dispose of any of its properties or any interest therein, except, to the extent not otherwise forbidden under the Security Documents:
(a) equipment that is worthless or obsolete or worn out in the ordinary course of business, which is no longer used or useful in the conduct of its business or which is replaced by equipment of equal suitability and value;
(b) inventory (including oil and gas sold as produced and seismic data) that is sold in the ordinary course of business on ordinary trade terms;
(c) Equity of any of Borrower’s Restricted Subsidiaries that is transferred to Borrower or a wholly-owned Restricted Subsidiary of Borrower;
(d) property by any Restricted Subsidiary that is transferred to Borrower or to a wholly-owned Restricted Subsidiary of Borrower, provided that if the transferor of such property is a Guarantor, the transferee thereof must either be Borrower or a Guarantor; and
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(e) any other properties that are Disposed of not in the aggregate in excess of $1,000,000 during any Fiscal Year, provided that such sales do not materially impair or diminish the value of the Collateral or Borrower’s Consolidated financial condition, business or operations.
No Disposition may be made pursuant to Section 7.5(e) unless (i) made for fair consideration to a Person who is not an Affiliate and (ii) no Default has occurred and is continuing at the time of such Disposition or would result therefrom.
Section 7.6 Limitation on Dividends, Distributions and Redemptions . No Restricted Person will declare or make directly or indirectly any Distribution, other than:
(a) Distributions payable to Borrower by any Restricted Subsidiary or to any Restricted Subsidiary by another Restricted Subsidiary;
(b) subject to Section 7.14(c)(ii)(F), cash Distributions by Borrower to the holders of its Equity, as Permitted Tax Distributions, during the thirty (30) day period following the end of a Fiscal Quarter, provided that (i) Borrower is treated as a pass through entity for federal income tax purposes and (ii) no Default then exists or would result therefrom;
(c) provided no Default or Event of Default has occurred and is continuing on such date, cash distributions by Borrower to the holders of its Equity on or about September 29, 2017 for the purpose of satisfying then current obligations relating to outstanding interest on the HPS Notes under the Note Purchase Agreements in an aggregate amount not to exceed $6,500,000;
(d) at any time after the First Reporting Date and prior to the Target EBITDA Date, but subject to Section 7.14(c)(ii)(F), cash Distributions by Borrower to the holders of its Equity at any time, (i) in each Fiscal Quarter, in an aggregate amount not to exceed a per annum rate of thirteen percent (13%), computed for a quarterly period pursuant to the Note Purchase Agreements, of the outstanding principal balance of the HPS Notes (including in such principal balance any interest capitalized at the PIK Interest Rate as defined in the Note Purchase Agreements) for the purpose of satisfying then current obligations under the Note Purchase Agreements related to such interest and (ii) in an aggregate amount necessary to repay the Tranche D Notes upon the maturity thereof; provided , that at the time of such Distribution and after giving pro forma effect to such Distribution, any Distributions under Section 7.6(b) and to any Borrowing hereunder to be made on or prior to such Distribution (w) no Default or Event of Default has occurred and is continuing, or would exist upon making such Distribution, (x) the ratio of Consolidated Funded Indebtedness upon making such Distribution to Consolidated Adjusted EBITDA for the Rolling Period ending with the end of the most recently ended Fiscal Quarter does not exceed 4.00 to 1.00, (y) Unused Availability is not less than $5,000,000, and (z) not greater than five (5) Business Days nor less than one (1) Business Day prior to such Distribution, Borrower shall deliver a certificate signed by a Responsible Officer certifying and reflecting computations satisfactory to Administrative Agent that the conditions set forth in the foregoing clauses (w), (x) and (y) have been satisfied;
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(e) at any time on or after the Target EBITDA Date, but subject to Section 7.14(c)(ii)(F), cash Distributions by Borrower to the holders of its Equity; provided , that at the time of such Distribution and after giving pro forma effect to such Distribution, any Distributions under Section 7.6(b) and to any Borrowing hereunder to be made on or prior to such Distribution (w) no Default or Event of Default has occurred and is continuing, or would exist upon making such Distribution, (x) the ratio of Consolidated Funded Indebtedness upon making such Distribution to Consolidated Adjusted EBITDA for the Rolling Period ending with the end of the most recently ended Fiscal Quarter does not exceed 3.50 to 1.00, (y) Unused Availability is not less than $5,000,000, and (z) not greater than five Business Days nor less than one Business Day prior to such Distribution, Borrower shall deliver a certificate signed by a Responsible Officer certifying and reflecting computations satisfactory to Administrative Agent that the conditions set forth in the foregoing clauses (w), (x) and (y) have been satisfied; and
(f) Distributions payable in additional common Equity (excluding Disqualified Capital Stock), so long as Borrower’s interest in any of its Restricted Subsidiaries is not thereby reduced.
For purposes of this Section 7.6 , “ Permitted Tax Distribution ” means a cash Distribution to the holders of Borrower’s Equity, calculated with respect to the Fiscal Quarter most recently ended, and shall equal the product of (i) the maximum highest combined federal, state and local income tax rate applicable to an individual resident or a corporation, whichever rate is higher, in New York, New York, utilizing the respective rates for ordinary income or capital gain, depending on the characterization of income as described below, and without giving effect to any phase-out of exemptions or deductions (the “Rate”), multiplied by (ii) the excess of the amount of Borrower’s estimated taxable income for such quarter over Borrower’s cumulative net loss for all prior taxable periods (the excess of the net losses for all prior periods over the net income for all prior periods) allocated to the holders of Borrower’s Equity; provided however, no such Permitted Tax Distribution shall exceed the amount required to be made pursuant to Pledgor’s Amended and Restated Limited Liability Company Agreement as in effect on the Closing Date, and Administrative Agent shall have received prior to each Permitted Tax Distribution a written certificate of Borrower specifying the amount thereof and that such amount was reasonably determined by Pledgor’s board of managers in good faith. Distributions with respect to the fourth Fiscal Quarter shall be based on the estimated taxable income of Borrower for the entire taxable year and shall take into account the prior quarterly distributions for such year.
Section 7.7 Limitation on Investments . No Restricted Person will make any Investments, other than:
(a) Cash Equivalents;
(b) Investments existing on the date hereof described in the Disclosure Schedule;
(c) Investments consisting of Hedging Contracts permitted under Section 7.3 ;
(d) normal and prudent extensions of credit by Restricted Persons to their customers for 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;
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(e) Investments consisting of (i) extensions of credit among Restricted Persons that are subordinated to the Obligations upon terms and conditions satisfactory to Administrative Agent in its reasonable discretion and (ii) Equity Investments (A) made by Borrower in or to its Restricted Subsidiaries which are Guarantors or become Guarantors contemporaneously with such Investment, or (B) made by Restricted Subsidiaries of Borrower which are Guarantors to each other and/or Borrower, including as a Restricted Subsidiary, any Person that becomes a Restricted Subsidiary of Borrower as a result of such Investment and is a Guarantor or contemporaneously becomes a Guarantor pursuant to Section 6.16 ;
(f) Investments in stock, obligations or securities received in settlement of extensions of credit permitted under clause (d) above owing to a Restricted Person as a result of a bankruptcy or other insolvency proceeding of the obligor in respect of such debts or upon the enforcement of any Lien in favor of a Restricted Person, provided that Borrower shall give Administrative prompt written notice in the event the aggregate amount of all Investments held at any one time pursuant to this clause (f) exceeds $500,000;
(g) Investments received in connection with the Disposition of assets permitted by Section 7.5;
(h) Loans or advances to employees, officers or directors in the ordinary course of business, provided that the aggregate principal amount of all such loans or advances at any time outstanding does not exceed $250,000; and
(i) To the extent not permitted by any of the foregoing clauses, other Investments by Borrower or any of its Restricted Subsidiaries in any Person, including Investments in Unrestricted Subsidiaries, in an amount equal to any cash equity contribution made after the date of this Agreement and received by Borrower from the holders of its Equity (excluding any such cash equity contribution made for purposes of exercising the Cure Right), so long as, at the time of such Investment (i) no Default or Event of Default has occurred and is continuing, or would result from such Investment, (ii) the aggregate amount of such Investment does not exceed the aggregate amount of a cash equity contributions received by Borrower from holders of its Equity, (iii) Borrower has delivered a certificate signed by a Responsible Officer in form satisfactory to the Administrative Agent certifying compliance with the conditions of this clause (h) and (iv) such Investment will be made within five (5) days following Borrower’s receipt of such cash equity contribution (or such later date as may be acceptable to the Administrative Agent, provided such cash is deposited in an amount subject to a deposit account control agreement in favor of the Administrative Agent until such Investment is made).
Section 7.8 Limitation on Credit Extensions . Except for Permitted Investments, no Restricted Person will extend credit, make advances or make loans other than (a) 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, and (b) loans to employees of any Restricted Person, for reimbursable expenses of such employees in the ordinary course of business.
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Section 7.9 Transactions with Affiliates . No Restricted Person will enter into or engage in any transaction with any Affiliate of a Restricted Person (other than other Restricted Persons) unless such transaction is in the ordinary course of business of such Restricted Person and upon fair and reasonable terms no less favorable to it than it would obtain in a comparable arm’s length transaction with a Person not an Affiliate. The restrictions set forth in this Section shall not apply to (a) the execution and delivery of any Loan Document, (b) compensation to, and the terms of any employment contracts with, individuals who are officers, managers or directors of Restricted Persons (or a related management company), provided that, to the extent such approval is required, such compensation is approved by such Restricted Person’s board of directors or provided for in such Restricted Person’s Organizational Documents, (c) Distributions permitted pursuant to Section 7.6 , (d) Permitted Investments, (e) consolidations permitted by Section 7.4 , (f) usual and customary indemnification agreements with respect to directors, officers and managers of the Restricted Persons and their Affiliates, and (h) the issuance and sale of Equity in Borrower (other than Disqualified Capital Stock) or the amendment of the terms of any Equity issued by Borrower (other than amendments relating to Disqualified Capital Stock).
Section 7.10 Prohibited Contracts . No Restricted Person will, directly or indirectly, enter into, create, or otherwise allow to exist any contractual restriction or other consensual restriction on its ability (or the ability of any other Restricted Person) to (a) grant Liens to the Administrative Agent for the benefit of the Secured Parties on or in respect of its properties, (b) pay dividends or make other distributions to any other Restricted Person, (c) redeem Equity in such Restricted Person that is held by any other Restricted Person, (d) repay loans and other Liabilities owing by such Restricted Person to any other Restricted Person, or (e) transfer any assets of such Restricted Person to any other Restricted Person, except, in the case of clause (d) of this sentence, (1) restrictions under purchase money Liens and Capital Leases permitted under this Agreement with respect to the property that is the subject thereof, (2) customary restrictions on the assignment or transfer of any contract or agreement that are contained in such contract or agreement, and (3) any restriction imposed on particular properties pursuant to an agreement entered into for a sale of such properties pending the closing of such sale. No Restricted Person will create or allow to exist any agreement (other than under the Loan Documents) containing the prohibitions set forth in the preceding sentence. No Restricted Person will enter into any contract or other contract or arrangement for the purchase of goods or services that obligates it to pay for such goods or service regardless of whether they are delivered or furnished to it. No Restricted Person will amend or permit any amendment to any contract or lease that releases, qualifies, limits, makes contingent or otherwise detrimentally affects, in each case in any material respect, the rights and benefits of Administrative Agent or any Lender under or acquired pursuant to any Security Documents taken as a whole. No ERISA Affiliate will incur any obligation to contribute to any Multiemployer Plan or any plan subject to Section 4064 of ERISA.
Section 7.11 Conduct of Business . Borrower will not, and will not permit any Restricted Person to, engage to any material extent in any business other than businesses of the type conducted by Borrower and the Restricted Persons on the date of execution of this Agreement and businesses reasonably related thereto or the date such Restricted Person became
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a Guarantor, as the case may be. No Restricted Person will make any expenditure or commitment or incur any obligation or enter into or engage in any transaction or engage directly or indirectly in any business or conduct any operations except in connection with or incidental to the businesses and operations conducted by Borrower and the Restricted Persons on the date of execution of this Agreement and businesses reasonably related thereto or conducted on the date such Restricted Person became a Subsidiary after the date of this Agreement. From and after the date hereof, Borrower and the Restricted Subsidiaries will not acquire or make any other expenditure (whether such expenditure is capital, operating or otherwise) to purchase or lease, or acquire Rights of Way in, any real property not located within the geographical boundaries of the United States and they will not form or acquire any Subsidiaries not organized under the laws of the United States or any state thereof or the District of Columbia.
Section 7.12 Amendments to Organizational Documents . Borrower will not and will not permit any of its Restricted Subsidiaries to, enter into or permit any modification of, or waive any material right or obligation of any Person under its, Organizational Documents in a manner adverse to the Lenders.
Section 7.13 Fiscal Year . No Restricted Person shall, nor shall it permit any of its Restricted Subsidiaries to, change its Fiscal Year end from December 31.
Section 7.14 Financial Covenants .
(a) Maximum Leverage Ratio . As of the end of each Fiscal Quarter, beginning September 30, 2017, Borrower will not permit the ratio of (i) Consolidated Funded Indebtedness as of the end of such Fiscal Quarter to (ii) Consolidated Adjusted EBITDA for the Rolling Period ending with the end of such Fiscal Quarter, to be greater than (A) 4.50 to 1.00 for each determination thereof prior to the Target EBITDA Date, and (B) 4.75 to 1.00 for each determination thereof on or after the Target EBITDA Date.
(b) Minimum Interest Coverage Ratio . Borrower will not permit the ratio of (i) Consolidated Adjusted EBITDA for any the Rolling Period, beginning with the Rolling Period ending September 30, 2017 to (ii) Consolidated Interest Expense for such period to be less than 2.50 to 1.00.
(c) Equity Cure Right . Notwithstanding anything to the contrary contained in this Section 7.14 or in any Loan Document, in the event that Borrower fails to comply with any covenant set forth in this Section 7.14 during any Fiscal Quarter ending on or after September 30, 2017, then Borrower shall have the right to cure such failure (the “ Cure Right ”) by receiving cash proceeds from an issuance of common Equity (other than Disqualified Stock) as a cash capital contribution made to Borrower after the end of such Fiscal Quarter and on or prior to the day (the “ Cure Deadline ”) that is ten (10) Business Days after delivery by Borrower to Lenders of a written notice of its intent to cure an Event of Default under Section 7.14 (which written notice shall be delivered on or prior to the date that is five (5) days after the day on which financial statements are required to be delivered with respect to such Fiscal Quarter) solely for purpose of such cure and not otherwise required for working capital or capital expenditures purposes, and upon receipt by Borrower of such cash proceeds (such cash amount being referred to as the “ Cure Amount ”) pursuant to the exercise of such Cure Right, the covenant set forth in this Section 7.14 shall be recalculated as follows:
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(i) Consolidated Adjusted EBITDA shall be increased, solely for the purpose of determining compliance with the financial covenants contained herein at the end of the Fiscal Quarter for which the Cure Right was exercised and each applicable subsequent period that include such Fiscal Quarter for which the Cure Right was exercised and not for any other purpose under this Agreement, by an amount equal to the Cure Amount; provided that neither Administrative Agent or Lenders shall exercise any rights or remedies (other than instituting at the Default Rate) with respect to any Event of Default that exists pursuant to Section 7.14 during the ten (10) Business Day period following notice by Borrower that it intends to exercise such Cure Right and affect such recalculation;
(ii) if, after giving effect to the foregoing recalculations, Borrower shall then be in compliance with the requirements of a covenant of this Section 7.14 , Borrower shall be deemed to have satisfied the requirements of such covenant as of the relevant date of determination with the same effect as though there had been no failure to comply therewith at such date; provided that (A) in each period of four (4) consecutive Fiscal Quarters there shall be at least two (2) Fiscal Quarters in which no Cure Right is exercised and the Cure Right shall not be used in two (2) consecutive Fiscal Quarters, (B) each Cure Amount shall be no greater than the amount required to cause Borrower to be in compliance with the applicable covenants of this Section 7.14 (such amount, the “ Necessary Cure Amount ”); provided that if the Cure Right is exercised prior to the date financial statements are required to be delivered for such Fiscal Quarter, then the Cure Amount shall be equal to the amount reasonably determined by Borrower in good faith that is required for purposes of complying with the applicable covenants of this Section 7.14 for such Fiscal Quarter (such amount, the “ Expected Cure Amount ”), (C) all Cure Amounts shall be disregarded for the purposes of any financial ratio determination under the Loan Documents other than for determining compliance with the applicable covenants of this Section 7.14 , (D) no Lender or LC Issuer shall be required to make any extension of credit hereunder during the ten (10) Business Days after delivery by Borrower to Lenders of a written notice of its intent to cure an Event of Default referred to above, unless Borrower shall have received the Cure Amount, (E) Borrower may not exercise the Cure Right in more than four (4) Fiscal Quarters during the period from the Closing Date to the Maturity Date and (F) Borrower may not make any cash Distributions unless it is in compliance with this Section 7.14 and in compliance with the conditions for such cash Distribution, in each case where the then immediately preceding four (4) Fiscal Quarter period did not include any Cure Amount.
(iii) To the extent that the Expected Cure Amount is less than the Necessary Cure Amount, then not later than the applicable Cure Deadline, Borrower must (i) receive cash proceeds from issuance of common Equity as a cash capital contribution made to Borrower, which cash proceeds received by
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Borrower shall be equal to the shortfall between such Expected Cure Amount and such Necessary Cure Amount, and (ii) furnish evidence satisfactory to Administrative Agent of such receipt and an additional Compliance Certificate evidencing the modified calculations. To the extent that the Expected Cure Amount is greater than the Necessary Cure Amount, the Cure Amount included in Consolidated Adjusted EBITDA pursuant to clause (i) shall nevertheless be limited to the actual amount required to cause Borrower to be in compliance with the applicable covenants of this Section 7.14 .
Section 7.15 Sale and Leaseback Transactions . No Restricted Person will, directly or indirectly, enter into any arrangement with any Person whereby in a substantially contemporaneous transaction such Restricted Person sells or transfers all or substantially all of its right, title and interest in an asset and, in connection therewith, acquires or leases back the right to use such asset.
Section 7.16 Use of Proceeds . No Restricted Person will use the proceeds of any Loan or any Letter of Credit contrary to any provision of Section 2.4 . Borrower will not request any Loan or Letter of Credit, and Borrower shall not use, and shall procure that its Restricted Subsidiaries and its or their respective directors, officers, employees and agents shall not use, the proceeds of any Loan or Letter of Credit (A) in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any Person in violation of any Anti-Corruption Laws, (B) to directly or indirectly fund, finance or facilitate any activities, business or transaction of or with any Sanctioned Person, or in any Sanctioned Country, to the extent such activities, business or transaction would be prohibited by Sanctions if conducted by a corporation incorporated in the United States or in a European Union member state, or (C) in any manner that would result in the violation of any Sanctions applicable to any party hereto.
Section 7.17 Permitted Acquisitions . Borrower shall not, except as otherwise permitted or required in this Agreement, purchase or otherwise acquire, or permit any Restricted Subsidiary to purchase or acquire, any Equity Interests in, any obligations or stock of, or any other interest in, or all or substantially all of the assets of, any Person whatsoever unless (i) permitted by Section 7.4 , or (ii) (a) immediately prior to and immediately after giving effect to any such purchase or acquisition, no Default or Event of Default shall have occurred or be continuing or will result therefrom, (b) such purchase or acquisition is consummated in accordance with applicable Law, and (c) immediately after giving effect to such purchase or acquisition of a company or business pursuant to this Section 7.17 , Borrower shall be in pro forma compliance with the covenants set forth in Section 7.14 , as evidenced by a certificate of a Responsible Officer of Borrower delivered to Administrative Agent on the earlier of (i) the date that Borrower submits a Borrowing Notice if Borrower is making a Borrowing in connection therewith, or (ii) the date that Borrower consummates the transaction requiring the delivery of such certificate.
Section 7.18 Subsidiaries . Borrower will not, and will not permit any Restricted Subsidiary to, create or acquire any additional Restricted Subsidiary or redesignate an Unrestricted Subsidiary as a Restricted Subsidiary unless Borrower gives written notice to the Administrative Agent of such creation or acquisition and complies with Sections 6.16 and 6.17 .
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Borrower will not, and will not permit any Restricted Subsidiary to, sell or otherwise transfer any Equity Interests in any Restricted Subsidiary except (i) to Borrower or another Restricted Subsidiary or (ii) in compliance with Section 7.5 . Borrower will not permit any Equity Interests of any Restricted Subsidiary to be directly owned by any Person other than Borrower or any Restricted Subsidiary.
Section 7.19 Designation and Conversion of Restricted and Unrestric ted Subsidiaries .
(a) Any Person that becomes a Subsidiary of Borrower or any Restricted Subsidiary shall be a Restricted Subsidiary unless such Person is hereafter designated as an Unrestricted Subsidiary in compliance with Section 7.19(b) .
(b) The Borrower may designate by written notification thereof (including, for the avoidance of doubt, by delivering a supplement to Section 5.13 of the Disclosure Schedule) to the Administrative Agent, any Restricted Subsidiary, including a newly formed or newly acquired Subsidiary, as an Unrestricted Subsidiary if (i) prior, and after giving effect, to such designation, no Default or Event of Default would exist, (ii) such designation is deemed to be an Investment in such Unrestricted Subsidiary on the date of such designation and such Investment is a Permitted Investment under Section 7.7(i) and (iii) after giving effect to such designation, Borrower will be in compliance with the financial covenants set forth in Section 7.14 . To the extent that any newly designated Unrestricted Subsidiary itself has any Subsidiaries when it is designated as an Unrestricted Subsidiary, such Subsidiaries must also be designated as Unrestricted Subsidiaries in compliance with this Section 7.19(b) . Except as provided in this Section 7.19(b) , no Restricted Subsidiary may be designated as an Unrestricted Subsidiary.
(c) Borrower may designate any Unrestricted Subsidiary to be a Restricted Subsidiary if after giving effect to such designation, (i) the representations and warranties of Borrower and the Restricted Subsidiaries contained in each of the Loan Documents are true and correct in all material respects on and as of such date as if made on and as of the date of such redesignation except to the extent (A) any such representations and warranties are expressly limited to an earlier date, in which case, on and as of the date of such redesignation, such representations and warranties shall continue to be true and correct as of such specified earlier date and (B) to the extent that any such representation and warranty is expressly qualified by materiality or by reference to a Material Adverse Effect, such representation and warranty (as so qualified) shall be true and correct in all respects on and as of the date of such redesignation, (ii) no Event of Default would exist, (iii) after giving effect to such designation, Borrower will be in compliance with the financial covenants set forth in Section 7.14 and (iv) Borrower complies with the requirements of Section 6.16 , Section 6.17 and Section 7.18 with respect to such Subsidiary. Upon any such designation, an amount equal to the lesser of the fair market value of Borrower’s direct and indirect ownership interest in such Subsidiary or the amount of Borrower’s cash investment previously made in such Subsidiary shall be deemed no longer outstanding for purposes of the limitation on Investments under Section 7.7 .
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ARTICLE VIII - EVENTS OF DEFAULT AND REMEDIES
Section 8.1 Events of Default . Each of the following events constitutes an “ Event of Default ” under this Agreement:
(a) Any Restricted Person fails to pay any principal component of any Obligation when due and payable, whether at a date for the payment of a fixed installment or as a contingent or other payment becomes due and payable or as a result of acceleration or otherwise;
(b) Any Restricted Person fails to pay any Obligation (other than the Obligations in subsection (a) above) when due and payable, whether at the due date thereof or at a date fixed for prepayment or as a contingent or other payment becomes due and payable or as a result of acceleration or otherwise, within three (3) Business Days after the same becomes due;
(c) Any “default” or “event of default” occurs under any Loan Document that defines either such term, and the same is not remedied within the applicable period of grace (if any) provided in such Loan Document;
(d) Any Restricted Person fails to duly observe, perform or comply with any covenant, agreement or provision of Section 6.4 , Section 6.6 , or Article VII ;
(e) Any Restricted Person or Pledgor fails (other than as referred to in subsections (a), (b), (c) or (d) above) to duly observe, perform or comply with any covenant, agreement, condition or provision of any Loan Document to which it is a party, and such failure remains unremedied for a period of 30 days after the earlier to occur of (i) notice of such failure is given by Administrative Agent to Borrower or (ii) Borrower otherwise becomes aware of such failure;
(f) Any representation or warranty previously, presently or hereafter made in writing by or on behalf of any Restricted Person or Pledgor 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 any Loan Document at any time ceases to be valid, binding and enforceable as warranted in Section 5.5 for any reason other than its release or subordination by Administrative Agent; or any Restricted Person or any of their Affiliates shall so state in writing;
(g) Any Restricted Person fails to duly observe, perform or comply with any agreement with any Person or any term or condition of any instrument, if such agreement or instrument is materially significant to Borrower or to Borrower and its Subsidiaries on a Consolidated basis or materially significant to any Guarantor, and such failure is not remedied within the applicable period of grace (if any) provided in such agreement or instrument;
(h) Any Restricted Person (i) fails to pay any portion, when such portion is due, of any Material Indebtedness or (ii) breaches or defaults in the performance of any agreement or instrument by which any of its Material Indebtedness is issued, evidenced, governed, or secured, and any such failure, breach or default continues beyond any applicable period of grace provided therefor; or any event or condition occurs that results in any Material Indebtedness of any Restricted Person becoming due prior to its scheduled maturity, or that enables or permits (with or without the giving of notice, the lapse of time or both) the holder or holders of such Material Indebtedness or any trustee or agent on its or their behalf to cause such Material Indebtedness to become due, or to require the redemption thereof or any offer to redeem to be made in respect thereof, prior to its scheduled maturity;
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(i) A Termination Event occurs which, when taken together with all other Termination Events that have occurred, has resulted or would reasonably be expected to result in, liability of any Restricted Person in an aggregate amount in excess of the Threshold Amount, or (ii) any other event or condition shall occur or exist with respect to a Plan and such event or condition, together with all other such events or conditions and Termination Events, if any, could reasonably be expected to result in a Material Adverse Effect;
(j) Any Restricted Person or Pledgor:
(i) suffers the entry against it of a judgment, decree or order for relief by a Governmental Authority of competent jurisdiction in an involuntary proceeding commenced under any applicable Debtor Relief Laws now or hereafter in effect, or any proceeding under any Debtor Relief Law commenced against it remains undismissed for a period of 60 days; or
(ii) commences a voluntary case under any applicable Debtor Relief Laws now or hereafter in effect; or applies for or consents to the entry of an order for relief in an involuntary case under any such Debtor Relief Law; or makes a general assignment for the benefit of creditors; or is generally not paying (or admits in writing its inability to pay) its debts as such debts become due; or takes corporate or other action authorizing any of the foregoing; or
(iii) suffers the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of all or a substantial part of its assets or of any part of the Collateral in a proceeding brought against or initiated by it, and such appointment or taking possession is neither made ineffective nor discharged within 30 days after the making thereof, or such appointment or taking possession is at any time consented to, requested by, or acquiesced to by it; or
(iv) suffers the entry against it of (1) one or more final judgments or orders for the payment of money in an aggregate amount (as to all such judgments or orders) in excess of the Threshold Amount (not covered by insurance satisfactory to Administrative Agent in its discretion), or (2) one or more non-monetary final judgments that have, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect and, in either case, (x) enforcement proceedings are commenced by any creditor upon such judgment or order, or (y) there is a period of 10 consecutive days during which a stay of enforcement of such judgment, by reason of a pending appeal or otherwise, is not in effect; or
(v) suffers a writ or warrant of attachment or any similar process to be issued by any Governmental Authority against all or any substantial part of its assets or any part of the Collateral, and such writ or warrant of attachment or any similar process is not stayed or released within 30 days after the entry or levy thereof or after any stay is vacated or set aside;
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(k) Any material provision of any Loan Document, at any time after its execution and delivery and for any reason other than as expressly permitted hereunder or thereunder or satisfaction in full of all the Obligations, ceases to be in full force and effect; or any Restricted Person, Pledgor or any other Person contests in any manner the validity or enforceability of any provision of any Loan Document; or any Restricted Person or Pledgor denies that it has any or further liability or obligation under any Loan Document, or purports to revoke, terminate or rescind any provision of any Loan Document; and
(l) Any Change of Control occurs.
Upon the occurrence and during the continuance of an Event of Default described in subsection (j)(i), (j)(ii) or (j)(iii) of this section with respect to any Restricted Person, all of the Obligations shall thereupon be immediately due and payable, without demand, presentment, notice of demand or of dishonor and nonpayment, protest, notice of protest, notice of intention to accelerate, declaration or notice of acceleration, or any other notice or declaration of any kind, all of which are hereby expressly waived by Borrower and each Restricted Person who at any time ratifies or approves this Agreement. Upon any such acceleration, any obligation of any Lender to make any further Loans and any obligation of LC Issuer to issue Letters of Credit hereunder shall be permanently terminated. Upon the occurrence and during the continuance of any other Event of Default, Administrative Agent at any time and from time to time may (and upon written instructions from Required Lenders, Administrative Agent shall), without notice to Borrower or any other Restricted Person, do either or both of the following: (1) terminate any obligation of Lenders to make Loans hereunder, and any obligation of LC Issuer to issue Letters of Credit hereunder, and (2) declare any or all of the Obligations immediately due and payable, and all such Obligations shall thereupon be immediately due and payable, without demand, presentment, notice of demand or of dishonor and nonpayment, protest, notice of protest, notice of intention to accelerate, declaration or notice of acceleration, or any other notice or declaration of any kind, all of which are hereby expressly waived by Borrower and each Restricted Person who at any time ratifies or approves this Agreement.
Section 8.2 Remedies . If any Event of Default shall occur and be continuing, Required Lenders, or Administrative Agent at the direction of Required Lenders, 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. All rights, remedies and powers conferred upon Lender Parties 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 8.3 Application of Proceeds After Acceleration . After the exercise of remedies provided for in Section 8.2 (or after the Loans have automatically become immediately due and payable and the LC Obligations have automatically been required to be Cash Collateralized as set forth in Section 2.15 ), any amounts received on account of the Secured Obligations shall be applied by Administrative Agent in the following order:
First , to payment of that portion of the Obligations constituting fees, indemnities, expenses and other amounts (including fees, charges and disbursements of counsel to Administrative Agent (including fees and time charges for attorneys who may be employees of Administrative Agent) and amounts payable under Article III ) payable to Administrative Agent in its capacity as such;
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Second , to payment of that portion of the Secured Obligations constituting fees, indemnities and other amounts (excluding other amounts provided for in clauses “Third” or “Fourth” below) payable to Lenders, LC Issuer and Lender Counterparties (including fees, charges and disbursements of counsel to the respective Lenders, LC Issuer, and the Lender Counterparties and amounts payable under Article III ), ratably among them in proportion to the respective amounts described in this clause Second payable to them;
Third , to payment of that portion of the Secured Obligations constituting accrued and unpaid Letter of Credit fees, accrued and unpaid interest on the Loans, accrued and unpaid interest on Matured LC Obligations, and accrued and unpaid interest on Cash Management Obligations, and accrued and unpaid interest on Lender Hedging Obligations, ratably among Lenders, LC Issuer, Cash Management Lenders, and the Lender Counterparties, in proportion to the respective amounts described in this clause Third payable to them;
Fourth , to payment of that portion of the Secured Obligations constituting unpaid principal of the Loans and Matured LC Obligations, obligations to Cash Collateralize LC Obligations pursuant to Section 2.15 , Cash Management Obligations, and amounts due under or in connection with Hedging Contracts (including amounts payable in connection with the early termination of Hedging Contracts), ratably among Lenders, LC Issuer, Cash Management Lenders, and the Lender Counterparties in proportion to the respective amounts described in this clause Fourth held by them; and
Last , the balance, if any, after all of the Secured Obligations have been indefeasibly paid in full, to Borrower or as otherwise required by Law;
provided that, to the extent that any Excluded Swap Obligations exist with respect to any Guarantor, monies or property received from such Guarantor or from the proceeds of any Collateral provided by such Guarantor may not be shared with the Lender Counterparties to the extent that doing so would violate the Commodity Exchange Act (but to the maximum extent allowed under applicable law the amounts received or recovered from the other Restricted Persons will instead be allocated to the Lender Counterparties as necessary to achieve the overall ratable applications of monies and property intended by this Section but for this proviso).
Subject to Section 2.15 , amounts used to Cash Collateralize the aggregate undrawn amount of Letters of Credit pursuant to clause Fourth above shall be applied to satisfy drawings under such Letters of Credit as they occur. If any amount remains on deposit as Cash Collateral after all Letters of Credit have either been fully drawn or expired, such remaining amount shall be applied to the other Secured Obligations, if any, in the order set forth above.
Notwithstanding the foregoing, Lender Hedging Obligations and Cash Management Obligations and shall be excluded from the application described above if Administrative Agent has not received written notice thereof, together with such supporting documentation as Administrative Agent may request, from the applicable Lender Counterparty or Cash Management Lender, as
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the case may be. Each Lender Counterparty or Cash Management Lender not a party to this Agreement that has given the notice contemplated by the preceding sentence shall, by such notice, be deemed to have acknowledged and accepted the appointment of Administrative Agent pursuant to the terms of Article IX hereof for itself and its Affiliates as if a “Lender” party hereto.
ARTICLE IX - ADMINISTRATIVE AGENT
Section 9.1 Appointment and Authority . Each of the Lenders and LC Issuer hereby irrevocably appoints ABN AMRO Capital USA LLC to act on its behalf as Administrative Agent hereunder and under the other Loan Documents and authorizes Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to Administrative Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto. The provisions of this Article are solely for the benefit of Administrative Agent, the Lenders and LC Issuer, and neither Borrower nor any other Restricted Person shall have rights as a third party beneficiary of any of such provisions. It is understood and agreed that the use of the term “agent” herein or in any other Loan Documents (or any other similar term) with reference to Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable Law. Instead such term is used as a matter of market custom, and is intended to create or reflect only an administrative relationship between contracting parties.
Section 9.2 Exculpatory Provisions .
(a) Administrative Agent shall not have any duties or obligations except those expressly set forth herein and in the other Loan Documents, and its duties hereunder shall be administrative in nature. Without limiting the generality of the foregoing, Administrative Agent:
(i) shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing;
(ii) shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that Administrative Agent is required to exercise as directed in writing by the Required Lenders (or such other number or percentage of Lenders as shall be expressly provided for herein or in the other Loan Documents), provided that Administrative Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose Administrative Agent to liability or that is contrary to any Loan Document or applicable Law, including for the avoidance of doubt any action that may be in violation of the automatic stay under any Debtor Relief Law or that may effect a forfeiture, modification or termination of property of a Defaulting Lender in violation of any Debtor Relief Law;
(iii) shall not, except as expressly set forth herein and in the other Loan Documents, have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to Borrower or any of its Affiliates that is communicated to or obtained by the Person serving as Administrative Agent or any of its Affiliates in any capacity; and
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(iv) shall not be responsible in any manner to any of the Lenders for any failure of any Restricted Person to perform its obligations hereunder or in any Loan Document.
Administrative Agent shall not be liable for any action taken or not taken by it (i) with the consent or at the request of Required Lenders (or such other number or percentage of the Lenders as shall be necessary, or as Administrative Agent shall believe in good faith shall be necessary, under the circumstances as provided in Sections 10.1 and 8.2 ) or (ii) in the absence of its own gross negligence or willful misconduct as determined by a court of competent jurisdiction by final and nonappealable judgment. Administrative Agent shall be deemed not to have knowledge of any Default unless and until notice describing such Default is given to Administrative Agent by Borrower, a Lender or LC Issuer.
(b) Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article IV or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to Administrative Agent.
Section 9.3 Reliance by Administrative Agent . Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message, Internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper Person. Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon. In determining compliance with any condition hereunder to the making of a Loan, or the issuance, extension, renewal, or increase of a Letter of Credit, that by its terms must be fulfilled to the satisfaction of a Lender or LC Issuer, Administrative Agent may presume that such condition is satisfactory to such Lender or LC Issuer unless Administrative Agent shall have received notice to the contrary from such Lender or LC Issuer prior to the making of such Loan or the issuance of such Letter of Credit. Administrative Agent may consult with legal counsel (who may be counsel for Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts. Administrative Agent may deem and treat the payee of any Note as the owner thereof for all purposes unless a notice of assignment, negotiation or transfer thereof shall have been filed with Administrative Agent. Administrative Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of Required Lenders, as it deems appropriate or as
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otherwise required by Sections 8.2 or 10.1 or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Loan Documents in accordance with a request of Required Lenders, or as otherwise required by Sections 8.2 or 10.1 and such request and any action taken or failure to act pursuant thereto shall be binding upon all of the Lenders and all future holders of the Loans and all other Obligations.
Section 9.4 Non-Reliance on Administrative Agent and Other Lenders . Each Lender and LC Issuer acknowledges that (a) it has, independently and without reliance upon Administrative Agent or any other Lender or any of their Related Parties and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement, and (b) none of Administrative Agent nor any of its respective officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any representations or warranties to it and that no act by Administrative Agent hereinafter taken, including any review of the affairs of any Restricted Person or any audit or due diligence review prepared by the internal auditor of Administrative Agent, shall be deemed to constitute any representation or warranty by Administrative Agent to any Lender or LC Issuer. Each Lender and LC Issuer also acknowledges that it will, independently and without reliance upon Administrative Agent or any other Lender or any of their Related Parties and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder. Except for notices, reports and other documents expressly required to be furnished to the Lenders by Administrative Agent hereunder or under the other Loan Documents, Administrative Agent shall have no duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of Borrower which may come into the possession of Administrative Agent or any of its officers, directors, employees, agents, attorneys in fact or Affiliates.
Section 9.5 Rights as a Lender . The Person serving as Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not Administrative Agent, and the term “Lender” or “Lenders” shall, unless otherwise expressly indicated or unless the context otherwise requires, include the Person serving as Administrative Agent hereunder in its individual capacity. Such Person and its Affiliates may accept deposits from, lend money to, own securities of, act as the financial advisor or in any other advisory capacity for, and generally engage in any kind of business with, Borrower or any Restricted Subsidiary or other Affiliate thereof as if such Person were not Administrative Agent hereunder and without any duty to account therefor to the Lenders.
Section 9.6 Investments . Whenever Administrative Agent in good faith determines that it is uncertain about how to distribute to Lender Parties any funds that it has received, or whenever Administrative Agent in good faith determines that there is any dispute among Lender Parties about how such funds should be distributed, Administrative Agent may choose to defer distribution of the funds that are the subject of such uncertainty or dispute. If Administrative Agent in good faith believes that the uncertainty or dispute will not be promptly resolved, or if
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Administrative Agent is otherwise required to invest funds pending distribution to Lender Parties, Administrative Agent shall invest such funds pending distribution; all interest on any such Investment shall be distributed upon the distribution of such Investment and in the same proportion and to the same Persons as such Investment. All moneys received by Administrative Agent for distribution to Lender Parties (other than to the Person who is Administrative Agent in its separate capacity as a Lender Party) shall be held by Administrative Agent pending such distribution solely as Administrative Agent for such Lender Parties, and Administrative Agent shall have no equitable title to any portion thereof.
Section 9.7 Resignation of Administrative Agent . Administrative Agent may at any time give notice of its resignation to the Lenders, LC Issuer and Borrower. Upon receipt of any such notice of resignation, Required Lenders shall have the right, subject, so long as no Event of Default exists, to the reasonable consent of Borrower, which shall be a bank with an office in the United States, or an Affiliate of any such bank with an office in the United States. If no such successor shall have been so appointed by Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may on behalf of the Lenders and LC Issuer and in consultation with Borrower, appoint a successor Administrative Agent meeting the qualifications set forth above provided that if Administrative Agent shall notify Borrower and the Lenders that no qualifying Person has accepted such appointment, then such resignation shall nonetheless become effective in accordance with such notice and (1) the retiring Administrative Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents (except that in the case of any Collateral held by Administrative Agent on behalf of the Lenders or LC Issuer under any of the Loan Documents, the retiring Administrative Agent shall continue to hold such Collateral until such time as a successor Administrative Agent is appointed) and (2) all payments, communications and determinations provided to be made by, to or through Administrative Agent shall instead be made by or to each Lender and LC Issuer directly, until such time as Required Lenders appoint a successor Administrative Agent as provided for above in this Section. Upon the acceptance of a successor’s appointment as Administrative Agent hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring (or retired) Administrative Agent, and the retiring Administrative Agent shall be discharged from all of its duties and obligations hereunder or under the other Loan Documents (if not already discharged therefrom as provided above in this Section). The fees payable by Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between Borrower and such successor. After the retiring Administrative Agent’s resignation hereunder and under the other Loan Documents, the provisions of this Article and Section 10.4 shall continue in effect for the benefit of such retiring Administrative Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the retiring Administrative Agent was acting as Administrative Agent.
Section 9.8 Delegation of Duties . Administrative Agent may perform any and all of its duties and exercise its rights and powers hereunder or under any other Loan Document by or through any one or more sub-agents or attorneys-in-fact appointed by Administrative Agent. Administrative Agent and any such sub-agent or attorney-in-fact may perform any and all of its duties and exercise its rights and powers by or through their respective Related Parties. Administrative Agent shall not be responsible for the negligence or misconduct of any sub-
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agents or attorneys-in-fact selected by it with reasonable care. The exculpatory provisions of this Article shall apply to any such sub-agent or attorney-in-fact and to the Related Parties of Administrative Agent and any such sub-agent or attorney-in-fact, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent.
Section 9.9 No Other Duties, etc . Anything herein to the contrary notwithstanding, none of the “Arranger,” “Syndication Agent” or “Documentation Agent” listed on the cover page hereof shall have any powers, duties or responsibilities under this Agreement or any of the other Loan Documents, except in its capacity, as applicable, as Administrative Agent, a Lender or LC Issuer hereunder.
Section 9.10 Administrative Agent May File Proofs of Claim . In case of any proceeding under Debtor Relief Law or any other judicial proceeding relative to any Restricted Person, Administrative Agent (irrespective of whether the principal of any Loan or LC Obligation shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether Administrative Agent shall have made any demand on Borrower) shall be entitled and empowered, by intervention in such proceeding or otherwise:
(a) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans, LC Obligations and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of Lenders, LC Issuer and Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of Lenders, LC Issuer and Administrative Agent and their respective agents and counsel and all other amounts due Lenders, LC Issuer and Administrative Agent under Sections 2.5 and 10.4 ) allowed in such judicial proceeding; and
(b) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender and LC Issuer to make such payments to Administrative Agent and, in the event that Administrative Agent shall consent to the making of such payments directly to Lenders and LC Issuer, to pay to Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of Administrative Agent and its agents and counsel, and any other amounts due Administrative Agent under Sections 2.5 and 10.4 . Nothing contained herein shall be deemed to authorize Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender or LC Issuer any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lender or to authorize Administrative Agent to vote in respect of the claim of any Lender in any such proceeding.
Section 9.11 Guaranty Matters . Each Lender and LC Issuer hereby irrevocably authorizes Administrative Agent, at its option and in its discretion, to release any Guarantor from its obligations under the Guaranty (i) if such Person ceases to be a Restricted Subsidiary as a result of a transaction permitted hereunder and/or (ii) Payment in Full. Upon request by
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Administrative Agent at any time, each Lender and LC Issuer will confirm in writing Administrative Agent’s authority to release any Guarantor from its obligations under the guaranty pursuant to this Section 9.11 , provided that the absence of any such confirmation for whatever reason shall not affect Administrative Agent’s rights under this Section 9.11 .
Section 9.12 Collateral Matters .
(a) Each Lender and LC Issuer hereby irrevocably authorizes and directs Administrative Agent to enter into the Security Documents for the benefit of such Lender and LC Issuer. Each Lender and LC Issuer hereby agrees, and each holder of any Note by the acceptance thereof will be deemed to agree, that, except as otherwise set forth in Section 10.1 , any action taken by the Required Lenders, in accordance with the provisions of this Agreement or the Security Documents, and the exercise by the Required Lenders of the powers set forth herein or therein, together with such other powers as are reasonably incidental thereto, shall be authorized and binding upon all of Lenders and LC Issuer. Administrative Agent is hereby authorized (but not obligated) on behalf of all of Lenders and LC Issuer, without the necessity of any notice to or further consent from any Lender or LC Issuer from time to time prior to the occurrence and continuance of an Event of Default, to take any action with respect to any Collateral or Security Documents that may be necessary to perfect and maintain perfected the Liens upon the Collateral granted pursuant to the Security Documents.
(b) Each Lender and LC Issuer hereby irrevocably authorize Administrative Agent, at its option and in its reasonable discretion,
(i) to release any Lien on any property granted to or held by Administrative Agent under any Loan Document (A) upon termination of each Lender’s Commitment and payment in full of all Obligations (other than contingent indemnification obligations) and the expiration or termination of all Letters of Credit, (B) that is sold or to be sold, or is owned by a Person that ceases to be a Guarantor as a result of a transaction permitted under any Loan Document, as part of or in connection with any transaction permitted hereunder or under any other Loan Document, (C) subject to Section 10.1 , if approved, authorized or ratified in writing by the Required Lenders, or (D) in connection with any foreclosure sale or other disposition of Collateral after the occurrence of an Event of Default; and
(ii) to subordinate any Lien on any property granted to or held by Administrative Agent under any Loan Document to the holder of any Lien on such property that is permitted by this Agreement or any other Loan Document to be senior to the Liens securing the Secured Obligations.
Upon request by Administrative Agent at any time, each Lender and LC Issuer will confirm in writing Administrative Agent’s authority to release or subordinate its interest in particular types or items of Collateral pursuant to this Section 9.12 , provided that the absence of any such confirmation for whatever reason shall not affect Administrative Agent’s rights under this Section 9.12 .
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(c) Subject to subsection (b) above, Administrative Agent shall (and is hereby irrevocably authorized by each Lender and LC Issuer to) execute such documents as may be necessary to evidence the release or subordination of the Liens granted to Administrative Agent for the benefit of Administrative Agent and Lenders and LC Issuer herein or pursuant hereto upon the applicable Collateral; provided that (i) Administrative Agent shall not be required to execute any such document on terms that, in Administrative Agent’s opinion, would expose Administrative Agent to or create any liability or entail any consequence other than the release or subordination of such Liens without recourse or warranty and (ii) such release or subordination shall not in any manner discharge, affect or impair the Obligations or any Liens upon (or obligations of Borrower or any other Restricted Person in respect of) all interests retained by Borrower or any other Restricted Person, including the proceeds of the sale, all of which shall continue to constitute part of the Collateral. In the event of any sale or transfer of Collateral, or any foreclosure with respect to any of the Collateral, Administrative Agent shall be authorized to deduct all expenses reasonably incurred by Administrative Agent from the proceeds of any such sale, transfer or foreclosure.
(d) Administrative Agent shall have no obligation whatsoever to any Lender, LC Issuer or any other Person to assure that the Collateral exists or is owned by Borrower or any other Restricted Person or is cared for, protected or insured or that the Liens granted to Administrative Agent herein or in any of the Security Documents or pursuant hereto or thereto have been properly or sufficiently or lawfully created, perfected, protected or enforced or are entitled to any particular priority, or to exercise or to continue exercising at all or in any manner or under any duty of care, disclosure or fidelity any of the rights, authorities and powers granted or available to Administrative Agent in this Section 9.12 or in any of the Security Documents, it being understood and agreed that in respect of the Collateral, or any act, omission or event related thereto, Administrative Agent may act in any manner it may deem appropriate, in its discretion, given Administrative Agent’s own interest in the Collateral as one of Lenders and that Administrative Agent shall have no duty or liability whatsoever to Lenders or LC Issuer.
(e) Each Lender and LC Issuer hereby appoints each other Lender as agent for the purpose of perfecting Lenders’ and LC Issuer’s security interest in assets that, in accordance with Article 9 of the UCC, can be perfected only by possession. Should any Lender or LC Issuer (other than Administrative Agent) obtain possession of any such Collateral, such Lender or LC Issuer shall notify Administrative Agent thereof, and, promptly upon Administrative Agent’s request therefor shall deliver such Collateral to Administrative Agent or in accordance with Administrative Agent’s instructions.
Section 9.13 Agreement to Assignment of ISDA Master Agreement . Each Lender hereby agrees (on behalf of itself and any of its Affiliates party to any Hedging Contract with any Restricted Person) that the rights of the Restricted Persons under Hedging Contracts with such Lender (or, if applicable, its Affiliate) may be included in the Collateral.
Section 9.14 Notice of Default . Administrative Agent shall be deemed to have no knowledge or notice of the occurrence of any Default or Event of Default hereunder unless Administrative Agent has received written notice from a Lender or Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a “notice of default.” In the event that Administrative Agent receives such a notice, Administrative Agent
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shall give notice thereof to the Lenders. Administrative Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders; provided that unless and until Administrative Agent shall have received such directions, Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders.
Section 9.15 Lender Hedging Obligations and Cash Management Obligations . Except as otherwise expressly set forth herein or in any Loan Document, no Lender Counterparty or Cash Management Lender that obtains the benefits of Section 8.3 or any Loan Document by virtue of the provisions hereof or thereof shall have any right to notice of any action or to consent to, direct or object to any action hereunder or under any other Loan Document or otherwise in respect of the Collateral (including the release or impairment of any Collateral) other than in its capacity as a Lender and, in such case, only to the extent expressly provided in the Loan Documents. Notwithstanding any other provision of this Article IX to the contrary, Administrative Agent shall not be required to verify the payment of, or that other satisfactory arrangements have been made with respect to, Obligations arising under Lender Hedging Obligations and Cash Management Obligations unless Administrative Agent has received written notice of such Obligations, together with such supporting documentation as Administrative Agent may request, from the applicable Lender Counterparty or Cash Management Lender, as the case may be.
Section 9.16 Credit Bidding . The Secured Parties hereby irrevocably authorize Administrative Agent, at the direction of the Required Lenders (provided that for this Section only Required Lenders shall require the consent of not less than two (2) Lenders holding in the aggregate at least 85% of the Facility Usage (with the aggregate amount of each Lender’s risk participation and funded participation in LC Obligations being deemed “held” by such Lender for purposes of this definition), in this Section called “Supermajority Lenders”), to credit bid all or any portion of the Secured Obligations (including by accepting some or all of the Collateral in satisfaction of some or all of the Secured Obligations pursuant to a deed in lieu of foreclosure or otherwise) and in such manner purchase (either directly or through one or more acquisition vehicles) all or any portion of the Collateral (a) at any sale thereof conducted under the provisions of the Bankruptcy Code, including under Sections 363, 1123 or 1129 of the Bankruptcy Code, or any similar laws in any other jurisdictions to which a Restricted Person is subject, or (b) at any other sale, foreclosure or acceptance of collateral in lieu of debt conducted by (or with the consent or at the direction of) Administrative Agent (whether by judicial action or otherwise) in accordance with any applicable law. In connection with any such credit bid and purchase, the Secured Obligations owed to the Secured Parties shall be credit bid by Administrative Agent at the direction of the Supermajority Lenders on a ratable basis (with Secured Obligations with respect to contingent or unliquidated claims receiving contingent interests in the acquired assets on a ratable basis that shall vest upon the liquidation of such claims in an amount proportional to the liquidated portion of the contingent claim amount used in allocating the contingent interests) for the asset or assets so purchased (or for the Equity or debt instruments of the acquisition vehicle or vehicles that are issued in connection with such purchase). In connection with any such bid Administrative Agent shall be authorized to form one or more acquisition vehicles and to assign any successful credit bid to such acquisition vehicle or vehicles in such manner as shall be approved by Supermajority Lenders. Each
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Secured Party agrees to execute such documents and provide such information regarding the Secured Party (and/or any designee of the Secured Party which will receive interests in or debt instruments issued by such acquisition vehicle) as Administrative Agent may reasonably request in connection with the formation of any acquisition vehicle, the formulation or submission of any credit bid or the consummation of the transactions contemplated by such credit bid.
ARTICLE X - MISCELLANEOUS
Section 10.1 Waivers and Amendments; Acknowledgments .
(a) Waivers and Amendments . No failure or delay (whether by course of conduct or otherwise) by any Lender in exercising any right, power or remedy that such Lender Party 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 any Lender Party 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 signed as provided below in this section, 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 Restricted Person shall in any case of itself entitle any Restricted Person to any other or further notice or demand in similar or other circumstances. This Agreement and the other Loan Documents set forth the entire understanding between the parties hereto with respect to the transactions contemplated herein and therein and supersede all prior discussions and understandings with respect to the subject matter hereof and thereof, and no waiver, consent, release, modification or amendment of or supplement to this Agreement or the other Loan Documents shall be valid or effective against any party hereto unless the same is in writing and signed by (i) if such party is Borrower, by Borrower, (ii) if such party is Administrative Agent or LC Issuer, by such party, and (iii) if such party is a Lender, by such Lender or by Administrative Agent on behalf of Lenders with the written consent of Required Lenders. Notwithstanding the foregoing or anything to the contrary herein, Administrative Agent shall not, without the prior consent of each individual Lender affected thereby, execute and deliver on behalf of such Lender any waiver or amendment that would: (1) waive any of the conditions specified in Article IV (provided that Administrative Agent may in its discretion withdraw any request it has made under Section 4.2(f) ), (2) increase the maximum amount that such Lender is committed hereunder to lend, (3) reduce any fees payable to such Lender hereunder, or the principal of, or interest on, such Lender’s Loans, (4) extend the Maturity Date, waive the provisions of Section 2.9(c) , or postpone any date fixed for any payment of any such fees, principal or interest, (5) amend the definition herein of “Required Lenders” or otherwise change the aggregate amount of Applicable Percentages that is required for Administrative Agent, Lenders or any of them to take any particular action under the Loan Documents, (6) release Borrower from its obligation to pay such Lender’s Obligations or any Guarantor from its guaranty of such payment (except pursuant to Section 9.11), (7) release all or substantially all of the Collateral, except for such releases relating to sales or dispositions of property permitted by the Loan Documents, (8) amend the pro-rata sharing provisions in Section 2.13 or 8.3 , or (9) amend this Section 10.1(a) .
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Notwithstanding anything to the contrary herein, no Defaulting Lender shall have any right to approve or disapprove any amendment, waiver or consent hereunder (and any amendment, waiver or consent that by its terms requires the consent of all Lenders or each affected Lender may be effected with the consent of the applicable Lenders other than Defaulting Lenders), except that (x) the Commitment of any Defaulting Lender may not be increased or extended, and the principal amount of Loans of any Defaulting Lender may not be decreased, without the consent of such Lender and (y) any waiver, amendment or modification requiring the consent of all Lenders or each affected Lender that by its terms affects any Defaulting Lender more adversely than other affected Lenders shall require the consent of such Defaulting Lender.
Notwithstanding anything to the contrary herein, neither Administrative Agent nor Required Lenders shall, without the prior consent of each individual Lender affected thereby (or, as applicable, an Affiliate of such Lender), execute and deliver any waiver or amendment to any Loan Document that would (i) cause an obligation under any outstanding Hedging Contract owing to such Lender (or its Affiliate) that, prior to such waiver or amendment, constituted a “Lender Hedging Obligation” to cease to be a “Lender Hedging Obligation” or (ii) cause the priority of the Lien securing such obligation or the priority of payment with respect to such obligation in connection with the exercise of remedies under such Loan Document to be subordinate in any manner to the Obligations (other than expense reimbursements, expenses of enforcement, and other similar obligations owing under the Loan Documents or to the extent provided in Section 8.3 on the date of this Agreement).
Notwithstanding anything to the contrary herein, no amendment, waiver or consent under any Loan Document shall amend, modify or otherwise affect the rights or duties of Administrative Agent, any other Agent, or the Issuing Bank hereunder or under any other Loan Document without the prior written consent of Administrative Agent, such other Agent or the Issuing Bank, as the case may be.
(b) Acknowledgments and Admissions . Borrower hereby represents, warrants, acknowledges and admits that (i) it has been advised by counsel in the negotiation, execution and delivery of the Loan Documents to which it is a party, (ii) it has made an independent decision to enter into this Agreement and the other Loan Documents to which it is a party, without reliance on any representation, warranty, covenant or undertaking by Administrative Agent or any Lender Party, whether written, oral or implicit, other than as expressly set out in this Agreement or in another Loan Document delivered on or after the date hereof, (iii) there are no representations, warranties, covenants, undertakings or agreements by any Lender Party as to the Loan Documents except as expressly set out in this Agreement or in another Loan Document delivered on or after the date hereof, (iv) no Lender Party has any fiduciary obligation toward Borrower with respect to any Loan Document or the transactions contemplated thereby, (v) the relationship pursuant to the Loan Documents between Borrower and the other Restricted Persons, on one hand, and each Lender Party, on the other hand, is and shall be solely that of debtor and creditor, respectively, provided that, solely for purposes of Section 10.5(c) Administrative Agent shall act as agent of Borrower in maintaining the Register as set forth therein, (vi) no partnership or joint venture exists with respect to the Loan Documents between any Restricted Person and any Lender Party, (vii) Administrative Agent is not Borrower’s Administrative Agent, but Administrative Agent for Lender Parties, provided that, solely for purposes of Section 10.5(c) Administrative Agent shall act as agent of Borrower in maintaining the Register as set forth therein, (viii) should an Event of Default or Default occur or exist, each Lender Party will determine in its discretion and for its own reasons what remedies
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and actions it will or will not exercise or take at that time, (ix) without limiting any of the foregoing, Borrower is not relying upon any representation or covenant by any Lender Party, or any representative thereof, and no such representation or covenant has been made, that any Lender Party will, at the time of an Event of Default or Default, or at any other time, waive, negotiate, discuss, or take or refrain from taking any action permitted under the Loan Documents with respect to any such Event of Default or Default or any other provision of the Loan Documents, and (x) all Lender Parties have relied upon the truthfulness of the acknowledgments in this section in deciding to execute and deliver this Agreement and to become obligated hereunder.
(c) Joint Acknowledgment . T HIS WRITTEN A GREEMENT AND THE OTHER L OAN D OCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR , CONTEMPORANEOUS , OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES .
T HERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES .
Section 10.2 Survival of Agreements; Cumulative Nature . All of Restricted 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 the making or granting of the Loans and the delivery of the Notes and the other Loan Documents, and shall further survive until all of the Obligations are paid in full to each Lender Party and all of Lender Parties’ obligations to Borrower are terminated. Notwithstanding the foregoing or anything herein to the contrary, any waivers or admissions made by any Restricted Person in any Loan Document, any Obligations under Sections 3.2 through 3.6 , and any obligations that any Person may have to indemnify or compensate any Lender Party shall survive any termination of this Agreement or any other Loan Document. In addition, Articles VIII and IX shall survive until all of the Security Documents have been terminated. All statements and agreements contained in any certificate or other instrument delivered by any Restricted Person to any Lender Party under any Loan Document shall be deemed representations and warranties by Borrower or agreements and covenants of Borrower under this Agreement. The representations, warranties, indemnities, and covenants made by Restricted Persons in the Loan Documents, and the rights, powers, and privileges granted to Lender Parties in the Loan Documents, are cumulative, and, except for expressly specified waivers and consents, no Loan Document shall be construed in the context of another to diminish, nullify, or otherwise reduce the benefit to any Lender Party of any such representation, warranty, indemnity, covenant, right, power or privilege. In particular and without limitation, no exception set out in this Agreement to any representation, warranty, indemnity, or covenant herein contained shall apply to any similar representation, warranty, indemnity, or covenant contained in any other Loan Document, and each such similar representation, warranty, indemnity, or covenant shall be subject only to those exceptions that are expressly made applicable to it by the terms of the various Loan Documents.
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Section 10.3 Notices; Effectiveness; Electronic Communication .
(a) Notices Generally . Except in the case of notices and other communications expressly permitted to be given by telephone (and except as provided in subsection (b) below), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by facsimile as follows and all notices and other communications expressly permitted hereunder to be given by telephone shall be made to the applicable telephone number, as follows:
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If to Borrower or any other Restricted Person: |
Kingfisher Midstream, LLC 20329 State Highway 249, Suite 450 Houston, Texas 77070 Attention: Michael Christopher Telephone: (281) 655-3200 Email: Michael.Christopher@armenergy.com |
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|
If to Administrative or LC Issuer: |
ABN AMRO Capital USA, LLC 100 Park Avenue, 17 th Floor New York, New York 10017 Attention: Wudasse Zaudou Telephone: (917) 284-6915 Email: wudasse.zaudou@abnamro.com
With copies to:
Address:
100 Park Avenue, 17 th Floor New York, NY 10017 Attention: Elsy Garcia Telephone: (917) 284-6921 Email: elsa.garcia@abnamro.com |
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|
If to any other Lender Party: |
Its address, facsimile number, or telephone number as specified in its Administrative Questionnaire | |
Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices sent by facsimile shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next business day for the recipient). Notices delivered through electronic communications, to the extent provided in subsection (b) below, shall be effective as provided in said subsection (b).
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(b) Electronic Communications . Notices and other communications to the Lenders and LC Issuer hereunder may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved by Administrative Agent, provided that the foregoing shall not apply to notices to any Lender or LC Issuer pursuant to Article II if such Lender or LC Issuer, as applicable, has notified Administrative Agent that it is incapable of receiving notices under such Article by electronic communication. Administrative Agent or Borrower or any other Restricted Person may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it, provided that approval of such procedures may be limited to particular notices or communications.
Unless Administrative Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement), and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient, at its e-mail address as described in the foregoing clause (i), of notification that such notice or communication is available and identifying the website address therefor; provided that, for both clauses (i) and (ii) above, if such notice, email or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next business day for the recipient.
(c) Change of Address, Etc . Any party hereto may change its address or facsimile number for notices and other communications hereunder by notice to the other parties hereto.
(d) Platform .
(i) Borrower (and each Restricted Person by signing its Guaranty) agrees that Administrative Agent may, but shall not be obligated to, make the Communications (as defined below) available to LC Issuer and the other Lenders by posting the Communications on Debt Domain, Intralinks, Syndtrak or a substantially similar electronic transmission system (the “ Platform ”).
(ii) The Platform is provided “as is” and “as available.” The Agent Parties (as defined below) do not warrant the adequacy of the Platform and expressly disclaim liability for errors or omissions in the Communications. No warranty of any kind, express, implied or statutory, including, without limitation, any warranty of merchantability, fitness for a particular purpose, non-infringement of third-party rights or freedom from viruses or other code defects, is made by any Agent Party in connection with the Communications or the Platform. In no event shall Administrative Agent or any of its Related Parties (collectively, the “ Agent Parties ”) have any liability to Borrower or the other Restricted Persons, any Lender or any other Person or entity for damages of any kind, including, without limitation, direct or indirect, special, incidental or consequential damages, losses or expenses (whether in tort, contract or otherwise)
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arising out of Borrower’s, any Restricted Person’s or Administrative Agent’s transmission of communications through the Platform. “ Communications ” means, collectively, any notice, demand, communication, information, document or other material provided by or on behalf of any Restricted Person pursuant to any Loan Document or the transactions contemplated therein which is distributed to Administrative Agent, any Lender or LC Issuer by means of electronic communications pursuant to this Section, including through the Platform.
Section 10.4 Expenses; Indemnity; Damage Waiver .
(a) Costs and Expenses . Borrower shall promptly pay (i) all transfer, stamp, mortgage, documentary or other similar taxes, assessments or charges levied by any governmental or revenue authority in respect of this Agreement or any of the other Loan Documents or any other document or transaction referred to herein or therein, (ii) all reasonable out-of-pocket costs and expenses incurred by or on behalf of Administrative Agent and its Affiliates (including fees and expenses of attorneys, consultants, reserve engineers, accountants, and other advisors, travel costs, expenses related to the Platform and in connection with the issuance of CUSIP numbers, and other miscellaneous expenses) in connection with (1) the syndication of the credit facilities provided for herein, (2) the preparation, negotiation, execution, delivery and administration of this Agreement and the other Loan Documents, or any amendments, modifications, consents or waivers or other documents or instruments related thereto (whether or not the transactions contemplated hereby or thereby shall be consummated), (3) the filing, recording, refiling and re-recording of any Loan 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, (4) any action reasonably required in the course of administration hereof, or (5) monitoring or confirming (or preparation or negotiation of any document related to) any Restricted Person’s compliance with any covenants or conditions contained in this Agreement or in any Loan Document, (iii) all reasonable out-of-pocket expenses incurred by LC Issuer in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder, and (iv) all out-of-pocket costs and expenses incurred by or on behalf of any Lender Party (including the reasonable fees and expenses of attorneys, consultants, reserve engineers, accountants, and other advisors, travel costs, court costs, and miscellaneous expenses) (A) in connection with the preservation of any rights under the Loan Documents, the exercise or enforcement of any rights or remedies under the Loan Documents (including this Section), or the defense of any such exercise or enforcement, or (B) in connection with the enforcement or protections of its right in connection with the Loans made or Letters of Credit issued hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of Credit.
(b) Indemnification . Borrower shall indemnify Administrative Agent (and any sub-agent thereof), each Lender and LC Issuer, and each Related Party of any of the foregoing Persons (each such Person being called an “ Indemnitee ”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, penalties, liabilities and related expenses (including the reasonable fees, charges and disbursements of any counsel for any Indemnitee), incurred by any Indemnitee or asserted against any Indemnitee by any third party or by Borrower or any other Restricted Person arising out of, in connection with, or as a result of (i)
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the execution or delivery of this Agreement, any other Loan Document or any agreement or instrument contemplated hereby or thereby, the performance by the parties hereto of their respective obligations hereunder or thereunder or the consummation of the transactions contemplated hereby or thereby, (ii) any Loan or Letter of Credit or the use or proposed use of the proceeds therefrom (including any refusal by LC Issuer to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) any actual or alleged presence or release of Hazardous Materials on or from any property owned or operated by Borrower or any of its Subsidiaries, or any environmental liability related in any way to Borrower or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by Borrower or any other Restricted Person, and regardless of whether any Indemnitee is a party thereto. T HE FOREGOING INDEMNIFICATION WILL APPLY WHETHER OR NOT SUCH LIABILITIES AND COSTS ARE IN ANY WAY OR TO ANY EXTENT OWED , IN WHOLE OR IN PART , UNDER ANY CLAIM OR THEORY OF STRICT LIABILITY OR CAUSED , IN WHOLE OR IN PART , BY ANY NEGLIGENT ACT OR OMISSION OF ANY KIND BY ANY I NDEMNITEE , provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses (x) are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee or (y) result from a claim brought by Borrower or any other Restricted Person against an Indemnitee for breach in bad faith of such Indemnitee’s obligations hereunder or under any other Loan Document, if Borrower or such Restricted Person has obtained a final and nonappealable judgment in its favor on such claim as determined by a court of competent jurisdiction.
(c) Reimbursement by Lenders . To the extent that any Restricted Person for any reason fails to indefeasibly pay any amount required under subsection (a) or (b) of this Section to be paid by it to Administrative Agent (or any sub-agent thereof), LC Issuer, or any Related Party of any of the foregoing, each Lender severally agrees to pay to Administrative Agent (or any such sub-agent), LC Issuer, or such Related Party, as the case may be, such Lender’s Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount, provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against Administrative Agent (or any such sub-agent) or LC Issuer in its capacity as such, or against any Related Party of any of the foregoing acting for Administrative Agent (or any such sub-agent) or LC Issuer in connection with such capacity. The obligations of the Lenders under this subsection (c) are subject to the provisions of Section 2.15 .
(d) Waiver of Consequential Damages, Etc. To the fullest extent permitted by applicable Law, Borrower shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby, the transactions contemplated hereby or thereby, any Loan or Letter of Credit, or the use of the proceeds thereof.
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No Indemnitee referred to in subsection (b) above shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby.
(e) Payments . All amounts due under this Section shall be payable not later than 10 days after demand therefor.
(f) Survival . Each party’s obligations under this Section shall survive the termination of the Loan Documents and payment of the Obligations hereunder.
Section 10.5 Successors and Assigns; Joint and Several Liability .
(a) Successors and Assigns Generally . The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that neither Borrower nor any other Restricted Person may assign or otherwise transfer any of its rights or obligations under any Loan Document without the prior written consent of Administrative Agent and each Lender and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an Eligible Assignee in accordance with the provisions of subsection (b) of this Section, (ii) by way of participation in accordance with the provisions of subsection (d) of this Section, or (iii) by way of pledge or assignment of a security interest subject to the restrictions of subsection (f) of this Section (and any other attempted assignment or transfer by any party hereto shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in subsection (d) of this Section and, to the extent expressly contemplated hereby, the Related Parties of each of Administrative Agent and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.
(b) Assignments by Lenders . Any Lender may at any time assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Agreement and the other Loan Documents (including all or a portion of its Commitment and the Loans at the time owing to it); provided that
(i) except in the case of an assignment of the entire remaining amount of the assigning Lender’s Commitment and the Loans at the time owing to it or in the case of an assignment to a Lender or an Affiliate of a Lender or an Approved Fund with respect to a Lender, the aggregate amount of the Commitment (which for this purpose includes Loans outstanding thereunder) or, if the applicable Commitment is not then in effect, the principal outstanding balance of the Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to Administrative Agent or, if “Trade Date” is specified in the Assignment and Assumption, as of the Trade Date) shall not be less than $5,000,000, unless each of Administrative Agent and, so long as no Default has occurred and is continuing, Borrower otherwise consents (each such consent not to be unreasonably withheld or delayed);
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(ii) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement with respect to the Loan or the Commitment assigned;
(iii) any assignment of a Commitment must be approved by:
(A) by Administrative Agent, unless the Person that is the proposed assignee is itself a Lender with a Commitment (whether or not the proposed assignee would otherwise qualify as an Eligible Assignee);
(B) by LC Issuer; and
(C) by Borrower (such consent not to be unreasonably withheld or delayed) unless (x) an Event of Default shall have occurred and be continuing, or (y) the Person that is the proposed assignee is itself a Lender with a Commitment or any Affiliate of such Lender (whether or not the proposed assignee would otherwise qualify as an Eligible Assignee);
(iv) the parties to each assignment shall execute and deliver to Administrative Agent an Assignment and Assumption, together with the Note (if requested) subject to such assignment and a processing and recordation fee of $4,000, and the Eligible Assignee, if it shall not be a Lender, shall deliver to Administrative Agent an Administrative Questionnaire in form satisfactory to Administrative Agent; and
(v) no such assignment shall be made (x) to Borrower, any Pledgor, or any of their respective Affiliates or Subsidiaries, or (y) to any Defaulting Lender or any of its Subsidiaries, or any Person who, upon becoming a Lender hereunder, would constitute any of the foregoing Persons described in this clause (y), or (z) to a natural person (or a holding company, investment vehicle or trust for, or owned and operated for the primary benefit of, a natural person).
Subject to acceptance and recording thereof by Administrative Agent pursuant to subsection (c) of this Section, from and after the effective date specified in each Assignment and Assumption, the Eligible Assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto) but shall continue to be entitled to the benefits, and subject to the requirements of, of Sections 3.2 , 3.4 , 3.5, 10.4, and 10.14 with respect to facts and circumstances occurring prior to the effective date of such assignment; provided, that except to the extent otherwise expressly agreed by the affected parties, no assignment by a Defaulting Lender will constitute a waiver or release of any claim of any party hereunder arising from that Lender’s having been a Defaulting Lender. Notwithstanding any provision of this Section 10.5, (i) the consent of Borrower and its
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execution of an Assignment and Assumption shall not be required, and, unless requested by the Eligible Assignee and/or the assigning Lender, new Notes shall not be required to be executed and delivered by Borrower, for any assignment which occurs at any time when any Default or Event of Default shall have occurred and be continuing and (ii) Borrower shall not unreasonably withhold or delay in providing any consent or executing any Assignment and Assumption otherwise required under this Section 10.5. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this subsection shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with subsection (d) of this Section.
(c) Register . Administrative Agent, acting solely for this purpose as an agent of Borrower, shall maintain at one of its offices in New York City a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders and the Commitments of, and principal amounts (and stated interest) of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the “ Register ”). The entries in the Register shall be conclusive absent manifest error, and Borrower and each Lender Party shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement. Any assignment of any Loan or other Obligation hereunder, whether or not evidenced by a Note, shall be effective only upon appropriate entries with respect thereto being made in the Register. In addition, Administrative Agent shall maintain on the Register information regarding the designation, and revocation of designation, of any Lender as a Defaulting Lender. The Register shall be available for inspection by Borrower or any Lender Party, at any reasonable time and from time to time upon reasonable prior notice.
(d) Participations . Any Lender may at any time, without the consent of, or notice to, Borrower or Administrative Agent, sell participations to any Person (other than a natural person, a Defaulting Lender or Borrower or any of Borrower’s Affiliates or Subsidiaries ) (or a holding company, investment vehicle or trust for, or owned and operated for the primary benefit of, a natural Person, the Borrower or any of the Borrower’s Subsidiaries or Affiliates)) (each, a “ Participant ”) in all or a portion of such Lender’s rights and/or obligations under this Agreement (including all or a portion of its Commitment and/or the Loans owing to it); provided that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) Borrower, Administrative Agent, LC Issuer, and the Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement. For the avoidance of doubt, each Lender shall be responsible for the indemnity under Section 3.5(e) with respect to any payments made by such Lender to its Participant(s).
Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the fifth sentence of Section 10.1(a) that affects such Participant. Borrower agrees that each Participant shall be entitled to the benefits of Sections 3.2, 3.4, and 3.5 (subject to the requirements and limitations
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therein, including the requirements under Section 3.5(g) (it being understood that the documentation required under Section 3.5(g) shall be delivered to the participating Lender)) to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section; provided that such Participant (A) agrees to be subject to the provisions of Section 3.7 as if it were an assignee under subsection (b) of this Section; and (B) shall not be entitled to receive any greater payment under Sections 3.2 or 3.5, with respect to any participation, than its participating Lender would have been entitled to receive, except to the extent such entitlement to receive a greater payment results from a Change in Law that occurs after the Participant acquired the applicable participation. Each Lender that sells a participation agrees, at Borrower’s request and expense, to use reasonable efforts to cooperate with Borrower to effectuate the provisions of Section 3.7 with respect to any Participant. To the extent permitted by Law, each Participant also shall be entitled to the benefits of Section 10.14 as though it were a Lender; provided that such Participant agrees to be subject to Section 2.14 as though it were a Lender. Each Lender that sells a participation shall, acting solely for this purpose as an agent of Borrower, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participant’s interest in the Loans or other obligations under the Loan Documents (the “ Participant Register ”). The Participant Register shall be available for inspection by Administrative Agent or Borrower at any reasonable time and from time to time upon reasonable prior notice; provided that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant’s interest in any commitments, loans, letters of credit or its other obligations under any Loan Document) to any Person except to the extent that such disclosure is necessary to establish that such commitment, loan, letter of credit or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, Administrative Agent (in its capacity as Administrative Agent) shall have no responsibility for maintaining a Participant Register.
(e) Certain Pledges . Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.
(f) Joint and Several Liability . All Obligations that are incurred by two or more Restricted Persons shall be their joint and several obligations and liabilities.
Section 10.6 Confidentiality . Each of Administrative Agent, the Lenders and LC Issuer agree to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its Affiliates and to its Related Parties (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential); (b) to the extent required or requested by any regulatory authority purporting to have jurisdiction over such Person or its Related Parties (including any self-regulatory authority, such as the National Association of
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Insurance Commissioners); (c) to the extent required by applicable Laws or regulations or by any subpoena or similar legal process; (d) to any other party hereto; (e) in connection with the exercise of any remedies hereunder or under any other Loan Document or any action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder; (f) subject to an agreement containing provisions substantially the same as those of this Section, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights and obligations under this Agreement, or (ii) any actual or prospective party (or its Related Parties) to any swap, derivative or other transaction under which payments are to be made by reference to Borrower and its obligations, this Agreement or payments hereunder; (g) on a confidential basis to (i) any rating agency in connection with rating Borrower or its Subsidiaries or the credit facilities provided by this Agreement, or (ii) the CUSIP Service Bureau or any similar agency in connection with the issuance and monitoring of CUSIP numbers with respect to such credit facilities; (h) with the consent of Borrower; or (i) to the extent such Information (x) becomes publicly available other than as a result of a breach of this Section, or (y) becomes available to Administrative Agent, any Lender, LC Issuer or any of their respective Affiliates on a nonconfidential basis from a source other than a Restricted Person. Notwithstanding the preceding provisions of this Section 10.6 to the contrary, Administrative Agent may disclose the existence of this Agreement and information about this Agreement, as amended from time to time, to the “Gold Sheets” and other market data collectors and trade publications and in “tombstone” advertisements, such information to consist of deal terms and other information customarily found in such publications, services and advertisements.
For purposes of this Section, “ Information ” means all information received from Borrower or any of its Subsidiaries relating to Borrower or any of its Subsidiaries or any of their respective businesses, other than any such information that is available to Administrative Agent, any Lender or LC Issuer on a nonconfidential basis prior to disclosure by Borrower or any of its Subsidiaries, provided that, in the case of information received from Borrower or any of its Subsidiaries after the date hereof, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.
Section 10.7 Governing Law; Submission to Process .
(a) G OVERNING L AW . T HIS A GREEMENT AND THE OTHER L OAN D OCUMENTS AND ANY CLAIMS , CONTROVERSY , DISPUTE OR CAUSE OF ACTION ( WHETHER IN CONTRACT OR TORT OR OTHERWISE ) BASED UPON , ARISING OUT OF OR RELATING TO THIS A GREEMENT OR ANY OTHER L OAN D OCUMENT ( EXCEPT , AS TO ANY OTHER L OAN D OCUMENT , AS EXPRESSLY SET FORTH THEREIN ) AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY SHALL BE GOVERNED BY , AND CONSTRUED IN ACCORDANCE WITH , THE LAW OF THE S TATE OF N EW Y ORK .
(b) S UBMISSION TO J URISDICTION . B ORROWER AND EACH OTHER R ESTRICTED P ERSON IRREVOCABLY AND UNCONDITIONALLY AGREES THAT IT WILL NOT COMMENCE ANY ACTION , LITIGATION OR PROCEEDING OF ANY KIND OR DESCRIPTION , WHETHER IN LAW OR EQUITY , WHETHER IN CONTRACT OR IN TORT OR OTHERWISE , AGAINST
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A DMINISTRATIVE A GENT , ANY L ENDER , LC I SSUER , OR ANY R ELATED P ARTY OF THE FOREGOING IN ANY WAY RELATING TO THIS A GREEMENT OR ANY OTHER L OAN D OCUMENT OR THE TRANSACTIONS RELATING HERETO OR THERETO , IN ANY FORUM OTHER THAN THE COURTS OF THE S TATE OF N EW Y ORK SITTING IN N EW Y ORK C OUNTY , AND OF THE U NITED S TATES D ISTRICT C OURT OF THE S OUTHERN D ISTRICT OF N EW Y ORK , AND ANY APPELLATE COURT FROM ANY THEREOF , AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE JURISDICTION OF SUCH COURTS AND AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION , LITIGATION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH N EW Y ORK COURT OR , TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW , IN SUCH FEDERAL COURT . E ACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION , LITIGATION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW . N OTHING IN THIS A GREEMENT OR IN ANY OTHER L OAN D OCUMENT SHALL AFFECT ANY RIGHT THAT A DMINISTRATIVE A GENT , ANY L ENDER OR LC I SSUER MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS A GREEMENT OR ANY OTHER L OAN D OCUMENT AGAINST B ORROWER OR ANY OTHER R ESTRICTED P ERSON OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION .
(c) W AIVER OF V ENUE . B ORROWER AND EACH OTHER R ESTRICTED P ERSON IRREVOCABLY AND UNCONDITIONALLY WAIVES , TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW , ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS A GREEMENT OR ANY OTHER L OAN D OCUMENT IN ANY COURT REFERRED TO IN SUBSECTION ( B ) OF THIS S ECTION . E ACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES , TO THE FULLEST EXTENT PERMITTED BY APPLICABLE L AW , THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT .
(d) S ERVICE OF P ROCESS . E ACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN S ECTION 10.3. N OTHING IN THIS A GREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE L AW .
Section 10.8 Limitation on Interest . Lender Parties, Restricted Persons and the other parties to the Loan Documents 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 Restricted 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 contracted for, charged, or received 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 that may be in conflict or apparent conflict herewith.
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Section 10.9 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. Without limiting the foregoing provisions of this Section 10.9, if and to the extent that the enforceability of any provisions in this Agreement relating to Defaulting Lenders shall be limited by Debtor Relief Laws, as determined in good faith by Administrative Agent or LC Issuer, as applicable, then such provisions shall be deemed to be in effect only to the extent not so limited.
Section 10.10 Counterparts; Integration; Effectiveness . This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement and the other Loan Documents, and any separate letter agreements with respect to fees payable to Administrative Agent, constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 4.1, this Agreement shall become effective when it shall have been executed by Administrative Agent and when Administrative Agent shall have received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto. Delivery of an executed counterpart of a signature page of this Agreement by facsimile or in electronic (i.e., “pdf” or “tif”) format shall be effective as delivery of a manually executed counterpart of this Agreement.
Section 10.11 Waiver of Jury Trial, Punitive Damages, etc . E ACH PARTY HERETO HEREBY IRREVOCABLY WAIVES , TO THE FULLEST EXTENT PERMITTED BY APPLICABLE L AW , ( A ) ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS A GREEMENT OR ANY OTHER L OAN D OCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY ( WHETHER BASED ON CONTRACT , TORT , OR ANY OTHER THEORY ), AND ( B ) ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LEGAL PROCEEDING ANY “S PECIAL D AMAGES ”, AS DEFINED BELOW . E ACH PARTY HERETO ( A ) CERTIFIES THAT NO REPRESENTATIVE , AGENT , OR ATTORNEY OF ANY OTHER P ERSON HAS REPRESENTED , EXPRESSLY OR OTHERWISE , THAT SUCH OTHER P ERSON WOULD NOT , IN THE EVENT OF LITIGATION , SEEK TO ENFORCE THE FOREGOING WAIVER AND ( B ) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY , AMONG OTHER THINGS , THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS S ECTION . A S USED IN THIS S ECTION , “ S PECIAL D AMAGES ” INCLUDES ALL SPECIAL , CONSEQUENTIAL , EXEMPLARY , OR PUNITIVE DAMAGES ( REGARDLESS OF HOW NAMED ), BUT DOES NOT INCLUDE ANY PAYMENTS OR FUNDS THAT ANY PARTY HERETO AS EXPRESSLY PROMISED TO PAY OR DELIVER TO ANY OTHER PARTY HERETO .
Section 10.12 No Advisory or Fiduciary Responsibility . In connection with all aspects of each transaction contemplated by this Agreement, Borrower and each other Restricted Person acknowledges and agrees, and acknowledges its Affiliates’ understanding, that: (i) the credit facilities provided for hereunder and any related services in connection therewith (including in connection with any amendment, waiver or other modification hereof or of any other Loan Document) are an arm’s-length commercial transaction between Borrower, each other Restricted Person and their respective Affiliates, on the one hand, and Administrative Agent and Lenders, on the other hand, and Borrower and each other Restricted Person is capable of evaluating and
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understanding and understands and accepts the terms, risks and conditions of the transactions contemplated hereby and by the other Loan Documents (including any amendment, waiver or other modification hereof or thereof); (ii) in connection with the process leading to such transaction, Administrative Agent and each Lender are and have been acting solely as principals and are not the financial advisors, agents or fiduciaries, for Borrower, any other Restricted Person or any of their respective Affiliates, stockholders, creditors or employees or any other Person; (iii) Administrative Agent and Lenders have neither assumed nor will they assume any advisory, agency or fiduciary responsibility in favor of Borrower or any other Restricted Person with respect to any of the transactions contemplated hereby or the process leading thereto, including with respect to any amendment, waiver or other modification hereof or of any other Loan Document (irrespective of whether Administrative Agent or any Lender has advised or is currently advising Borrower, any other Restricted Person or any of their respective Affiliates on other matters) and Administrative Agent and Lenders have no obligation to Borrower, any other Restricted Person or any of their respective Affiliates with respect to the transactions contemplated hereby except those obligations expressly set forth herein and in the other Loan Documents; (iv) Administrative Agent, each Lender, and their respective Affiliates may be engaged in a broad range of transactions that involve interests that differ from those of Borrower, the other Restricted Persons and their respective Affiliates, and neither Administrative Agent nor any Lender has any obligation to disclose any of such interests by virtue of any advisory, agency or fiduciary relationship; and (v) neither Administrative Agent nor any Lender will provide any legal, accounting, regulatory or tax advice with respect to any of the transactions contemplated hereby (including any amendment, waiver or other modification hereof or of any other Loan Document) and each of Borrower and the other Restricted Persons has consulted its own legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate. Each of Borrower and the other Restricted Persons hereby waives and releases, to the fullest extent permitted by Law, any claims that it may have against Administrative Agent or any Lender with respect to any breach or alleged breach of agency or fiduciary duty.
Section 10.13 USA PATRIOT Act Notice . Each Lender that is subject to the Patriot Act and Administrative Agent (for itself and not on behalf of any Lender) hereby notifies Borrower and each other Restricted Person that, pursuant to the requirements of the Patriot Act, it is required to obtain, verify and record information that identifies Borrower and each other Restricted Person, which information includes the name and address of Borrower and each other Restricted Person and other information that will allow such Lender or Administrative Agent, as applicable, to identify Borrower and each other Restricted Person in accordance with the Act.
Section 10.14 Right of Setoff . If an Event of Default shall have occurred and be continuing, each Lender, LC Issuer and each of their respective Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by applicable Law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) at any time held, and other obligations (in whatever currency) at any time owing, by such Lender, LC Issuer or any such Affiliate, to or for the credit or the account of Borrower or any other Restricted Person against any and all of the obligations of Borrower or such Restricted Person now or hereafter existing under this Agreement or any other Loan Document to such Lender or LC Issuer or their respective Affiliates, irrespective of whether or not such Lender, LC Issuer, or Affiliate shall have made any demand under this Agreement or any other Loan Document and although such obligations of Borrower or such Restricted Person may be
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contingent or unmatured or are owed to a branch, office, or Affiliate of such Lender or LC Issuer different from the branch, office, or Affiliate holding such deposit or obligated on such indebtedness; provided that in the event that any Defaulting Lender shall exercise any such right of setoff, (x) all amounts so set off shall be paid over immediately to Administrative Agent for further application in accordance with the provisions of Section 2.16 and, pending such payment, shall be segregated by such Defaulting Lender from its other funds and deemed held in trust for the benefit of Administrative Agent, LC Issuer, and the Lenders, and (y) the Defaulting Lender shall provide promptly to Administrative Agent a statement describing in reasonable detail the Obligations owing to such Defaulting Lender as to which it exercised such right of setoff. The rights of each Lender, LC Issuer and their respective Affiliates under this Section are in addition to other rights and remedies (including other rights of setoff) that such Lender, LC Issuer or their respective Affiliates may have. Each Lender and LC Issuer agrees to notify Borrower and Administrative Agent promptly after any such setoff and application; provided that the failure to give such notice shall not affect the validity of such setoff and application.
Section 10.15 Payments Set Aside . To the extent that any payment by or on behalf of Borrower is made to Administrative Agent, LC Issuer or any Lender, or the Administrative Agent, LC Issuer or any Lender exercises its right of setoff, and such payment or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by Administrative Agent, LC Issuer or such Lender in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any Debtor Relief Law or otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such setoff had not occurred, and (b) each Lender and LC Issuer severally agrees to pay to the Administrative Agent upon demand its applicable share (without duplication) of any amount so recovered from or repaid by the Administrative Agent, plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the Federal Funds Rate from time to time in effect. The obligations of the Lenders and LC Issuer under clause (b) of the preceding sentence shall survive the payment in full of the Obligations and the termination of this Agreement.
Section 10.16 Acknowledgment and Consent to Bail-In of EEA Financial Institutions . Notwithstanding anything to the contrary in any Loan Document or in any other agreement, arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any EEA Financial Institution arising under any Loan Document, to the extent such liability is unsecured, may be subject to the Write-Down and Conversion Powers of an EEA Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:
(a) the application of any Write-Down and Conversion Powers by an EEA Resolution Authority to any such liabilities arising hereunder which may be payable to it by any party hereto that is an EEA Financial Institution; and
(b) the effects of any Bail-In Action on any such liability, including, if applicable:
(i) a reduction in full or in part or cancellation of any such liability;
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(ii) a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such EEA Financial Institution, its parent undertaking, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such liability under this Agreement or any other Loan Document; or
(iii) the variation of the terms of such liability in connection with the exercise of the Write-Down and Conversion Powers of any EEA Resolution Authority.
[T HE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK ]
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IN WITNESS WHEREOF, this Agreement is executed as of the date first written above.
| KINGFISHER MIDSTREAM, LLC , | ||
| Borrower | ||
| By: |
/s/ Michael S. Christopher |
|
| Name: Michael S. Christopher | ||
| Title: Chief Financial Officer | ||
SIGNATURE PAGE FOR KINGFISHER MIDSTREAM, LLC CREDIT AGREEMENT
| ABN AMRO CAPITAL USA LLC , | ||
| Administrative Agent, LC Issuer and a Lender | ||
| By: |
/s/ Darrell Holley |
|
| Name: Darrell Holley | ||
| Title: Managing Director | ||
| By: |
/s/ Casey Lowary |
|
| Name: Casey Lowary | ||
| Title: Managing Director | ||
SIGNATURE PAGE FOR KINGFISHER MIDSTREAM, LLC CREDIT AGREEMENT
| EAST WEST BANK , | ||
| as Lender | ||
| By: |
/s/ Patrick Leznicki |
|
| Name: Patrick Leznicki | ||
| Title: Senior Vice President | ||
SIGNATURE PAGE FOR KINGFISHER MIDSTREAM, LLC CREDIT AGREEMENT
| WELLS FARGO BANK, N.A. , | ||
| as Lender | ||
| By: |
/s/ Brandon Kast |
|
| Name: Brandon Kast | ||
| Title: Vice President | ||
SIGNATURE PAGE FOR KINGFISHER MIDSTREAM, LLC CREDIT AGREEMENT
| CADENCE BANK, N.A. , | ||
| as Lender | ||
| By: |
/s/ William W. Brown |
|
| Name: William W. Brown | ||
| Title: Executive Vice President | ||
SIGNATURE PAGE FOR KINGFISHER MIDSTREAM, LLC CREDIT AGREEMENT
| IBERIABANK , | ||
| as Lender | ||
| By: |
/s/ Moni Collins |
|
| Name: Moni Collins | ||
| Title: Senior Vice President | ||
SIGNATURE PAGE FOR KINGFISHER MIDSTREAM, LLC CREDIT AGREEMENT
| ZB, N.A. DBA AMEGY BANK , | ||
| as Lender | ||
| By: |
/s/ Mark A. Serice |
|
| Name: Mark A. Serice | ||
| Title: Senior Vice President | ||
SIGNATURE PAGE FOR KINGFISHER MIDSTREAM, LLC CREDIT AGREEMENT
| FIRST TENNESSEE BANK NATIONAL ASSOCIATION , | ||
| as Lender | ||
| By: |
/s/ Kevin Dunlap |
|
| Name: Kevin Dunlap | ||
| Title: Vice President | ||
SIGNATURE PAGE FOR KINGFISHER MIDSTREAM, LLC CREDIT AGREEMENT
Exhibit 10.3
EXECUTION
FIRST AMENDMENT TO CREDIT AGREEMENT
AND LIMITED CONSENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT AND LIMITED CONSENT (this “ Amendment ”) is made as of February 9, 2018, but effective as of the First Amendment Effective Date set forth herein, by and among Kingfisher Midstream, LLC, a Delaware limited liability company (“ Borrower ”), ABN AMRO Capital USA LLC, as Administrative Agent and LC Issuer, and the Required Lenders party hereto.
W I T N E S S E T H:
WHEREAS, Borrower, Administrative Agent, LC Issuer and Lenders entered into that certain Credit Agreement dated as of August 8, 2017 (as amended, supplemented, or otherwise modified to the date hereof, the “ Original Agreement ”), for the purpose and consideration therein expressed, whereby Lenders became obligated to make loans to Borrower as therein provided; and
WHEREAS, Borrower, Administrative Agent and Required Lenders desire to amend the Original Agreement as set forth herein and to provide for the consent as set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein and in the Original Agreement, in consideration of the loans which may hereafter be made by Lenders to Borrower, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I.
DEFINITIONS AND REFERENCES
Section 1.1. Terms Defined in the Original Agreement . Unless the context otherwise requires or unless otherwise expressly defined herein, the terms defined in the Original Agreement shall have the same meanings whenever used in this Amendment.
Section 1.2. Other Defined Terms . Unless the context otherwise requires, the terms defined in Sections 2.1 and 2.2 of this Amendment shall have the same meanings whenever used in this Amendment, and the following terms when used in this Amendment shall have the meanings assigned to them in this Section 1.2:
“ Amendment ” means this First Amendment to Credit Agreement.
“ Amendment Documents ” means this Amendment, and all other Loan Documents executed and delivered in connection herewith.
“ Borrower’s Limited Liability Company Agreement ” means the amendment to the Third Amended and Restated Limited Liability Company Agreement of Borrower or the Fourth Amended and Restated Limited Liability Company Agreement of Borrower, in each case in effect immediately after giving effect to Pledgor becoming the owner of 100% of the equity interests of Borrower.
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“ Credit Agreement ” means the Original Agreement as amended hereby.
“ Original Pledge Agreement ” means the Pledge Agreement dated August 8, 2017 by Original Pledgor, as Grantor, in favor of Administrative Agent, as Secured Party.
“ Original Pledgor ” means KFM Holdco, LLC, a Delaware limited liability company.
ARTICLE II.
AMENDMENTS
Section 2.1. Defined Terms . The following defined terms in Section 1.1 of the Original Agreement are hereby amended and restated in their entirety to read as follows:
“ Change of Control ” means (a) any Person or “group” (as such term is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934) other than a Permitted Holder, becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, or acquires beneficial control except that a person or group shall be deemed to have “beneficial ownership” of all securities that such person or group has the right to acquire, whether such right is exercisable immediately or only after the passage of time (such right, an “option right”)), directly or indirectly, of the Equity representing more than 35% of the aggregate ordinary voting power represented by the issued and outstanding Equity of Pledgor or Borrower, as applicable, (b) the occupation of a majority of the seats (other than vacant seats) on the board of managers of Pledgor by Persons who were neither (i) nominated, appointed or approved for consideration by members for election by the board of managers of Pledgor or (ii) appointed by managers so nominated, appointed or approved, or (c) the failure of Pledgor to directly or indirectly own 100% of the Equity in Borrower.
“ Pledge Agreement ” means the Amended and Restated Pledge Agreement dated as of the First Amendment Effective Date by Pledgor, as Grantor, in favor of Administrative Agent, as Secured Party.
“ Pledgor ” means SRII OpCo, LP, a Delaware limited partnership.
Section 2.2. Additional Defined Terms . Section 1.1 of the Original Agreement is hereby amended to add the following definitions in the appropriate alphabetical order:
“ Contribution Agreement ” means that certain Contribution Agreement dated as of August 16, 2017 among Borrower, Pledgor, KFM Holdco, LLC and the other parties thereto, pursuant to which Pledgor became the owner of 100% of the Equity of Borrower.
“ First Amendment Effective Date ” means the date of the consummation of the transactions contemplated by the Contribution Agreement.
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“ Permitted Holder ” means each of (i) Riverstone Investment Group LLC (the “ Riverstone Manager ”), and Riverstone Global Energy and Power Fund VI, L.P., together with the parallel investment entities and alternative investment entities of the foregoing, and any future investment fund or co-investment fund managed by the Riverstone Manager or any of its Affiliates, and any Affiliates of one or more of the foregoing and (ii) High Mesa Holdings, L.P. (“ High Mesa ”), so long as no Person shall Control High Mesa other than one or more of the Persons Controlling High Mesa on the First Amendment Effective Date, together with any limited liability companies managed by or whose managing member or investment manager is or is directly or indirectly Controlled by, or any limited partnerships whose general partner is or directly or indirectly controlled by, or any other Person managed or directly or indirectly Controlled by such Persons; provided that in no event will any portfolio company of any of the foregoing under clause (i) or (ii) be included in the definition of “Permitted Holder”.
Section 2.3. Deleted Defined Terms . Section 1.1 of the Original Agreement is hereby amended to delete the following defined terms:
“ HPS Notes ”
“ Note Purchase Agreements ”
“ Tranche D Notes ”
Section 2.4. Use of Proceeds . The first sentence of Section 2.4 shall be amended and restated in its entirety to read as follows:
“Borrower shall use all Loans to (a) pay fees and expenses payable in connection with the closing of this Agreement and the funding of the initial Loans hereunder, (b) for acquisitions permitted by Section 7.17, (c) to finance capital expenditures, (d) to refinance from time to time Matured LC Obligations, and (e) to provide working capital for its operations.”
Section 2.5. Dividends and Distributions . Section 7.6 of the Original Agreement is hereby amended to remove each of subsections (c) and (d) therein in their entirety, and to re-letter subsections (e) and (f), as (c) and (d), respectively.
Section 2.6. Transactions with Affiliates . Section 7.9 of the Original Agreement is hereby amended to remove the word “and” immediately preceding clause (h) in the second sentence therein, to re-letter clause (h) as clause (g), and to add the following clause immediately following such clause (g), which clause shall read as follows:
“, and (h) the transactions contemplated by the Contribution Agreement.”
Section 2.7. Security Schedule . Schedule 3 to the Original Agreement is hereby amended and restated in its entirety to read as set forth as Schedule 1 hereto.
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ARTICLE III.
LIMITED CONSENT
Section 3.1. Contribution Agreement . In reliance on the representations, warranties, covenants, and agreements contained in this Amendment, and subject to the terms and conditions set forth in Section 4.1, the Lender Parties party hereto representing Required Lenders hereby (i) consent to the consummation of the transactions contemplated by the Contribution Agreement and waive the Event of Default under Section 8.1(l) of the Original Credit Agreement in respect of the “Change of Control” resulting from the consummation of such transactions, (ii) consent to the release of the Liens granted by the Original Pledgor on the Equity of Borrower pursuant to the Original Pledge Agreement in exchange for the grant by Pledgor, on a substantially contemporaneous basis with such release, of the Liens on the Equity of Borrower pursuant to the Pledge Agreement, (iii) consent to the filing by or on behalf of the Original Pledgor of a termination statement under the Uniform Commercial Code with respect to the financing statement naming Original Pledgor as debtor filed in respect of the collateral granted under the Original Pledge Agreement, (iv) consent to the termination of the Original Pledge Agreement contemporaneously with the release of the Lien referred to in clause (ii) except as to those provisions of the Original Pledge Agreement that expressly survive such termination, and (v) consent to the adoption of the Borrower’s Limited Liability Company Agreement and waive the Event of Default, if any, under Section 7.12 of the Original Credit Agreement in respect of such adoption. The Original Pledgor is an express third party beneficiary of the consents set forth in clauses (ii), (iii) and (iv) of this Section 3.1, but not otherwise. Notwithstanding anything to the contrary contained in this Amendment, the consents granted and the agreements set forth herein are limited solely to the foregoing, and nothing contained in this Amendment shall be deemed a consent to, or waiver of, any other action or inaction of Borrower or any other Person that constitutes (or would constitute) a Default or an Event of Default. Neither the Lender Parties nor the Administrative Agent shall be obligated to grant any future waivers, consents, or amendments with respect to any other provision of the Original Credit Agreement or any other Loan Document.
ARTICLE IV.
CONDITIONS OF EFFECTIVENESS
Section 4.1. First Amendment Effective Date . The amendments to the Original Agreement set forth the Sections 2.1 through 2.7 of the Amendment shall become effective immediately after the consummation of the transactions contemplated by the Contribution Agreement and the consents given in Section 3.1 of this Amendment shall become effective immediately prior to consummation of the transactions contemplated by the Contribution Agreement, in each case subject to the satisfaction of the following conditions prior to, or on a substantially contemporaneous basis with, the consummation of the transactions contemplated by the Contribution Agreement:
(a) Amendment Documents . Administrative Agent shall have received duly executed and delivered counterparts of this Amendment from Borrower and the Required Lenders in such numbers as Administrative Agent or its counsel may reasonably request.
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| TO K INGFISHER M IDSTREAM C REDIT A GREEMENT ] |
(b) Pledge Agreement . Administrative Agent shall have received duly executed and delivered counterparts of the Pledge Agreement from Pledgor dated as of the First Amendment Effective Date in form and substance satisfactory to Administrative Agent.
(c) Borrower’s Limited Liability Company Agreement . Administrative Agent shall have received duly executed and delivered counterparts of Borrower’s Limited Liability Company Agreement, which shall be in form and substance reasonably satisfactory to Administrative Agent.
(d) Borrower Officer’s Certificate . Administrative Agent shall have received a certificate of the secretary, assistant secretary, or other Responsible Officer of Borrower certifying as of the First Amendment Effective Date (i) to attached copies of Borrower’s Organizational Documents, certified, to the extent applicable, as of a recent date by the appropriate government official, (ii) the resolutions of Borrower approving this Amendment, the other Amendment Documents and the related transactions (which certification may, if applicable, be by reference to previously adopted resolutions), and (iii) the signature and incumbency certificates of the officers of Borrower (which certification may, if applicable, be by reference to previously delivered incumbency certificates).
(e) Pledgor Officer’s Certificate . Administrative Agent shall have received a certificate of the secretary, assistant secretary, or other Responsible Officer of Pledgor certifying as of the First Amendment Effective Date (i) to attached copies of Pledgor’s Organizational Documents, certified, to the extent applicable, as of a recent date by the appropriate government official, (ii) the resolutions of Pledgor approving the execution and delivery of the Pledge Agreement, and the transactions related thereto, and (iii) the signature and incumbency certificates of the officers of Pledgor, and (iv) such other documents as Administrative Agent shall reasonably request.
(f) Existence and Good Standing Certificates . Administrative Agent shall have received an existence and good standing certificate from the applicable Governmental Authority of each of Borrower’s and Pledgor’s jurisdiction of formation, dated a recent date on or prior to the First Amendment Effective Date.
(g) Opinions of Counsel . Administrative Agent shall have received a written opinion of counsel to Pledgor opining as to such matters related to Pledgor and the Pledge Agreement as Administrative Agent may reasonably request, dated as of the First Amendment Effective Date, and in form and substance reasonably satisfactory to Administrative Agent.
(h) Fees . Borrower shall have paid, in connection with such Loan Documents, all fees and reimbursements to be paid to Administrative Agent pursuant to any Loan Documents, or otherwise due Administrative Agent and including fees and disbursements of Administrative Agent’s attorneys.
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(i) Other Documentation . Administrative Agent shall have received all documents and instruments that Administrative Agent has then reasonably requested prior to the First Amendment Effective Date, in addition to those described in this Section 3.1. All such additional documents and instruments shall be reasonably satisfactory to Administrative Agent in form, substance and date.
(j) No Default . Immediately prior to and after giving effect to the effectiveness of this Amendment, no Default has occurred or is continuing or shall result from the effectiveness of this Amendment.
(k) Representations and Warranties . All representations and warranties made by any Restricted Person in any Loan Document shall be true and correct in all material respects (except where qualified by materiality, in which case, true and correct in all respects) on and as of the time of the effectiveness hereof as if such representations and warranties had been made as of the time of the effectiveness hereof except to the extent that such representation or warranty was made as of a specific date, in which case such representation or warranty shall be true and correct in all material respects (except where qualified by materiality, in which case, true and correct in all respects) as of such specific date and except that the representations and warranties contained in subsection (a) of Section 5.6 of the Credit Agreement shall be deemed to refer to the most recent statements furnished pursuant to subsections (a) and (b), respectively, of Section 6.2 of the Credit Agreement.
(l) Closing Certificate . Administrative Agent shall have received a closing certificate of a Responsible Officer of Borrower in the form of Exhibit A and dated as of the First Amendment Effective Date.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES
Section 5.1. Representations and Warranties of Borrower . In order to induce the Required Lenders to enter into this Amendment, Borrower represents and warrants to the Required Lenders that:
(a) All representations and warranties made by any Restricted Person in any Loan Document are true and correct in all material respects (except where qualified by materiality, in which case, true and correct in all respects) on and as of time of the effectiveness hereof as if such representations and warranties had been made as of the time of the effectiveness hereof (except to the extent that such representation or warranty was made as of a specific date, in which case such representation or warranty shall be true and correct in all material respects (except where qualified by materiality, in which case, true and correct in all respects) as of such specific date and except that the representations and warranties contained in subsection (a) of Section 5.6 of the Credit Agreement shall be deemed to refer to the most recent statements furnished pursuant to subsections (a) and (b), respectively, of Section 6.2 of the Credit Agreement.
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| TO K INGFISHER M IDSTREAM C REDIT A GREEMENT ] |
(b) Each Restricted Person has duly taken all action necessary to authorize the execution and delivery by it of the Amendment Documents to which it is a party and to authorize the consummation of the transactions contemplated thereby and the performance of its obligations thereunder.
(c) The execution and delivery by the various Restricted Persons of the Amendment Documents to which each is a party, the performance by each of its obligations under such Amendment Documents, and the consummation of the transactions contemplated by the various Amendment Documents, do not and will not (a) conflict with, violate or result in a breach of any provision of (i) any Law, (ii) the Organizational Documents of any Restricted Person, or (iii) any material judgment, license, order or permit applicable to or binding upon any Restricted Person, (b) result in the acceleration of any Indebtedness owed by any Restricted Person, or (c) result in or require the creation of any Lien upon any assets or properties of any Restricted Person except as expressly contemplated or permitted in the Loan Documents. Except (i) as expressly contemplated in the Loan Documents and (ii) such as have been obtained or made and are in full force and effect, no permit, consent, approval, authorization or order of, and no notice to or filing with, any Governmental Authority or third party is required on the part of or in respect of a Restricted Person in connection with the execution, delivery or performance by any Restricted Person of any Amendment Document to which it is a party or to consummate any transactions contemplated thereby.
(d) This Amendment is, and the other Amendment Documents when duly executed and delivered will be, legal, valid and binding obligations of each Restricted Person that is a party hereto or thereto, enforceable against such Restricted Person in accordance with their terms except as such enforcement may be limited by bankruptcy, insolvency or similar Laws of general application relating to the enforcement of creditors’ rights and by general principles of equity.
ARTICLE VI.
MISCELLANEOUS
Section 6.1. Ratification of Agreements . The Original Agreement as hereby amended is hereby ratified and confirmed in all respects. The Loan Documents, as they may be amended or affected by the various Amendment Documents, are hereby ratified and confirmed in all respects. Unless the context requires otherwise, any reference to the Credit Agreement in any Loan Document will be deemed to be a reference to the Original Agreement as hereby amended. The execution, delivery and effectiveness of this Amendment and the other Amendment Documents shall not, except as expressly provided herein or therein, operate as a waiver of any right, power or remedy of Lenders under the Credit Agreement, the Notes, or any other Loan Document nor constitute a waiver of any provision of the Credit Agreement, the Notes or any other Loan Document.
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Section 6.2. Survival of Agreements . All of each Restricted Person’s various representations, warranties, covenants and agreements in the Amendment Documents shall survive the execution and delivery thereof and the performance thereof, including the making or granting of the Loans and the delivery of the Amendment Documents, and shall further survive until all of the Obligations are paid in full to each Lender Party and all of Lender Parties’ obligations to Borrower are terminated. All statements and agreements contained in any certificate or instrument delivered by any Restricted Person hereunder to any Lender Party shall be deemed to constitute representations and warranties by, and/or agreements and covenants of, Borrower under this Amendment and under the Credit Agreement.
Section 6.3. Loan Documents . The Amendment Documents are each a Loan Document, and all provisions in the Credit Agreement pertaining to Loan Documents apply thereto.
Section 6.4. Governing Law . THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
Section 6.5. Interpretive Provisions . Section 1.3 of the Credit Agreement is incorporated herein by reference herein as if fully set forth.
Section 6.6. Counterparts; Fax . This Amendment may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. Delivery of an executed counterpart of a signature page of this Amendment by facsimile or in electronic (i.e., “pdf” or “tif”) format shall be effective as delivery of a manually executed counterpart of this Amendment.
THIS AMENDMENT AND THE OTHER AMENDMENT DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES HERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN OR AMONG THE PARTIES HERETO.
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IN WITNESS WHEREOF, this Amendment is executed as of the date first above written.
|
KINGFISHER MIDSTREAM, LLC, Borrower |
||
| By: |
/s/ Michael S. Christopher |
|
| Name: Michael S. Christopher | ||
| Title: Chief Financial Officer | ||
| [S IGNATURE P AGE TO F IRST A MENDMENT | ||||
| TO K INGFISHER M IDSTREAM C REDIT A GREEMENT ] |
|
ABN AMRO CAPITAL USA LLC , |
||
|
Administrative Agent, LC Issuer and a Lender |
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|
By: |
/s/ Darrell Holley Darrell Holley Email: darrell.holley@abnamro.com |
|
|
By: |
/s/ Casey Lowary Casey Lowary Email: casey.lowary@abnamro.com |
|
| [S IGNATURE P AGE TO F IRST A MENDMENT | ||||
| TO K INGFISHER M IDSTREAM C REDIT A GREEMENT ] |
|
EAST WEST BANK , as Lender |
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| By: |
/s/ Patrick Leznicki |
|
| Name: Patrick Leznicki | ||
| Title: Senior Vice President | ||
| [S IGNATURE P AGE TO F IRST A MENDMENT | ||||
| TO K INGFISHER M IDSTREAM C REDIT A GREEMENT ] |
|
WELLS FARGO BANK, N.A. , as Lender |
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|
By: |
/s/ Brandon Kast |
|
|
Name: Brandon Kast |
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|
Title: Director |
||
| [S IGNATURE P AGE TO F IRST A MENDMENT | ||||
| TO K INGFISHER M IDSTREAM C REDIT A GREEMENT ] |
|
CADENCE BANK, N.A. , as Lender |
||
| By: |
/s/ William W. Brown |
|
| Name: William W. Brown | ||
| Title: Executive Vice President | ||
| [S IGNATURE P AGE TO F IRST A MENDMENT | ||||
| TO K INGFISHER M IDSTREAM C REDIT A GREEMENT ] |
|
IBERIABANK , as Lender |
||
| By: |
/s/ Moni Collins |
|
| Name: Moni Collins | ||
| Title: Senior Vice President, Energy Lending | ||
| [S IGNATURE P AGE TO F IRST A MENDMENT | ||||
| TO K INGFISHER M IDSTREAM C REDIT A GREEMENT ] |
|
ZB, N.A. DBA AMEGY BANK , as Lender |
||
| By: |
/s/ Mark A. Serice |
|
| Name: Mark A. Serice | ||
| Title: Senior Vice President | ||
| [S IGNATURE P AGE TO F IRST A MENDMENT | ||||
| TO K INGFISHER M IDSTREAM C REDIT A GREEMENT ] |
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FIRST TENNESSEE BANK NATIONAL ASSOCIATION , as Lender |
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| By: |
/s/ John B. Lane |
|
| Name: John B. Lane | ||
| Title: Executive Vice President | ||
| [S IGNATURE P AGE TO F IRST A MENDMENT | ||||
| TO K INGFISHER M IDSTREAM C REDIT A GREEMENT ] |
EXHIBIT A
CLOSING CERTIFICATE
January , 2018
Reference is made to that certain Credit Agreement dated as of August 8, 2017 (as amended or supplemented, the “ Credit Agreement ”), by and among Kingfisher Midstream, LLC, a Delaware limited liability company (“ Borrower ”), ABN AMRO Capital USA LLC, as Administrative Agent (in such capacity “ Agent ”) and as LC Issuer, and the Lenders party thereto. Terms which are defined in the Credit Agreement are used herein with the meanings given them in the Credit Agreement. The undersigned, Michael Christopher, solely in his capacity as Chief Financial Officer of Borrower, does hereby certify that he has made a thorough inquiry into all matters certified herein and, based upon such inquiry, experience, and the advice of counsel, does hereby further certify that:
| 1. | He is the duly elected, qualified, and acting Chief Financial Officer of Borrower. |
| 2. | All representations and warranties made by any Restricted Person in any Loan Document are true and correct in all material respects (except where qualified by materiality, in which case, true and correct in all respects) on and as of the date hereof as if such representations and warranties had been made as of the date hereof except to the extent that such representation or warranty was made as of a specific date, in which case such representation or warranty is true and correct in all material respects (except where qualified by materiality, in which case, true and correct in all respects) as of such specific date and except that the representations and warranties contained in subsection (a) of Section 5.6 of the Credit Agreement shall be deemed to refer to the most recent statements furnished pursuant to subsections (a) and (b), respectively, of Section 6.2 of the Credit Agreement. |
| 3. | Immediately prior to and after giving effect to the effectiveness of that certain First Amendment, dated as of January , 2018 (the “ Amendment ”), by and among Borrower, Agent and the Lenders party thereto, no Default has occurred or is continuing or shall result from the effectiveness of the Amendment. |
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| [C LOSING C ERTIFICATE ] | ||||
IN WITNESS WHEREOF, the foregoing certifications are made and delivered as of the date first referenced above.
| By: |
|
| Name: |
Michael Christopher |
|
| Title: |
Chief Financial Officer |
| [S IGNATURE P AGE TO C LOSING C ERTIFICATE ] | ||||
S CHEDULE 1
Schedule 3 to Credit Agreement
SECURITY SCHEDULE
| 1. | Mortgage, Assignment, Security Agreement, Fixture Filing and Financing Statement of even date herewith from Borrower to Administrative Agent, for the benefit of the Secured Parties, covering of the fee-owned tract containing Borrower’s cryogenics processing plant and storage tanks. |
| 2. | Mortgage, Assignment, Security Agreement, Fixture Filing and Financing Statement of even date herewith from Borrower to Administrative Agent, for the benefit of the Secured Parties, covering all of Borrower’s other real property interests and related personal property. |
| 3. | Security Agreement of even date herewith from each Restricted Person in favor of Administrative Agent covering each Restricted Person’s personal property, other than certain excluded property described therein. |
| 4. | The Pledge Agreement from SRII OpCo, LP, a Delaware limited partnership (“ Pledgor ”) in favor of the Administrative Agent covering all Equity of Borrower dated as of effective date of that certain First Amendment to Credit Agreement and Limited Consent. |
| 5. | UCC-1 Financing Statements relating to the above-described Security Documents. |
| 6. | Deposit Account Control Agreements covering all accounts of each Restricted Person. |
Exhibit 10.4
Execution Version
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
SRII OPCO, LP
Dated as of February 9, 2018
THE UNITS REPRESENTED BY THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY OTHER APPLICABLE SECURITIES LAWS. SUCH UNITS MAY NOT BE SOLD, ASSIGNED, PLEDGED OR OTHERWISE DISPOSED OF AT ANY TIME WITHOUT EFFECTIVE REGISTRATION UNDER SUCH ACT AND LAWS OR EXEMPTION THEREFROM, AND COMPLIANCE WITH THE OTHER SUBSTANTIAL RESTRICTIONS ON TRANSFERABILITY SET FORTH HEREIN.
TABLE OF CONTENTS
| Page | ||||||
|
Article I. |
||||||
|
DEFINITIONS |
2 | |||||
|
Article II. |
||||||
|
ORGANIZATIONAL MATTERS |
14 | |||||
|
Section 2.01 |
Formation of Partnership | 14 | ||||
|
Section 2.02 |
Amended and Restated Limited Partnership Agreement | 14 | ||||
|
Section 2.03 |
Name | 15 | ||||
|
Section 2.04 |
Purpose | 15 | ||||
|
Section 2.05 |
Principal Office; Registered Office | 15 | ||||
|
Section 2.06 |
Term | 15 | ||||
|
Section 2.07 |
No Joint Venture | 15 | ||||
|
Article III. |
||||||
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PARTNERS; UNITS; CAPITALIZATION |
15 | |||||
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Section 3.01 |
Partners | 15 | ||||
|
Section 3.02 |
Units | 16 | ||||
|
Section 3.03 |
New Limited Partner Contributions; Warrants; the Corporation’s Capital Contribution; the Corporation’s Purchase of Common Units | 16 | ||||
|
Section 3.04 |
Authorization and Issuance of Additional Units | 17 | ||||
|
Section 3.05 |
Repurchases or Redemptions | 18 | ||||
|
Section 3.06 |
Certificates Representing Units; Lost, Stolen or Destroyed Certificates; Registration and Transfer of Units | 19 | ||||
|
Section 3.07 |
Negative Capital Accounts | 19 | ||||
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Section 3.08 |
No Withdrawal | 19 | ||||
|
Section 3.09 |
Loans From Partners | 20 | ||||
|
Section 3.10 |
Tax Treatment of Corporate Stock Option Plans and Equity Plans | 20 | ||||
|
Section 3.11 |
Dividend Reinvestment Plan, Cash Option Purchase Plan, Stock Incentive Plan or Other Plan | 21 | ||||
|
Article IV. |
||||||
|
DISTRIBUTIONS |
22 | |||||
|
Section 4.01 |
Distributions | 22 | ||||
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Section 4.02 |
Restricted Distributions | 23 | ||||
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Article V. |
||||||
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CAPITAL ACCOUNTS; ALLOCATIONS; TAX MATTERS |
23 | |||||
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Section 5.01 |
Capital Accounts | 23 | ||||
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Section 5.02 |
Allocations | 24 | ||||
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Section 5.03 |
Regulatory and Special Allocations | 25 | ||||
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Section 5.04 |
Tax Allocations |
|
26
|
|
||
|
Section 5.05 |
Withholding; Indemnification and Reimbursement for Payments on Behalf of a Partner | 28 | ||||
ii
|
Section 5.06 |
Tax Treatment | 29 | ||||
|
Article VI. |
||||||
|
MANAGEMENT |
29 | |||||
|
Section 6.01 |
Authority of General Partner | 29 | ||||
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Section 6.02 |
Actions of the General Partner | 30 | ||||
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Section 6.03 |
Transfer and Withdrawal of General Partner | 30 | ||||
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Section 6.04 |
Transactions Between Partnership and General Partner | 31 | ||||
|
Section 6.05 |
Reimbursement for Expenses | 31 | ||||
|
Section 6.06 |
Delegation of Authority | 32 | ||||
|
Section 6.07 |
Limitation of Liability of the General Partner. | 32 | ||||
|
Section 6.08 |
Investment Company Act | 33 | ||||
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Section 6.09 |
Outside Activities of the Corporation and the General Partner | 33 | ||||
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Section 6.10 |
Standard of Care | 33 | ||||
|
Article VII. |
||||||
|
RIGHTS AND OBLIGATIONS OF PARTNERS |
34 | |||||
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Section 7.01 |
Limitation of Liability and Duties of Partners; Investment Opportunities | 34 | ||||
|
Section 7.02 |
Lack of Authority | 35 | ||||
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Section 7.03 |
No Right of Partition | 35 | ||||
|
Section 7.04 |
Indemnification | 35 | ||||
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Section 7.05 |
Limited Partners’ Right to Act | 36 | ||||
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Section 7.06 |
Inspection Rights | 37 | ||||
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Article VIII. |
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BOOKS, RECORDS, ACCOUNTING AND REPORTS |
38 | |||||
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Section 8.01 |
Records and Accounting | 38 | ||||
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Section 8.02 |
Fiscal Year | 38 | ||||
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Section 8.03 |
Reports | 38 | ||||
|
Article IX. |
||||||
|
TAX MATTERS |
38 | |||||
|
Section 9.01 |
Preparation of Tax Returns | 38 | ||||
|
Section 9.02 |
Tax Elections | 39 | ||||
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Section 9.03 |
Tax Controversies | 39 | ||||
|
Article X. |
||||||
|
RESTRICTIONS ON TRANSFER OF UNITS |
40 | |||||
|
Section 10.01 |
Transfers by Partners | 40 | ||||
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Section 10.02 |
Permitted Transfers | 40 | ||||
|
Section 10.03 |
Restricted Units Legend | 41 | ||||
|
Section 10.04 |
Transfer | 41 | ||||
|
Section 10.05 |
Assignee’s Rights | 41 | ||||
|
Section 10.06 |
Assignor’s Rights and Obligations | 42 | ||||
|
Section 10.07 |
Overriding Provisions | 42 | ||||
iii
|
Article XI. |
||||||
|
REDEMPTION AND EXCHANGE RIGHTS |
43 | |||||
|
Section 11.01 |
Redemption Right of a Limited Partner | 43 | ||||
|
Section 11.02 |
Contribution of the Corporation | 47 | ||||
|
Section 11.03 |
Exchange Right of the Corporation | 47 | ||||
|
Section 11.04 |
Reservation of Shares of Class A Common Stock; Listing; Certificate of the Corporation | 48 | ||||
|
Section 11.05 |
Effect of Exercise of Redemption or Exchange Right | 48 | ||||
|
Section 11.06 |
Tax Treatment | 49 | ||||
|
Article XII. |
||||||
|
ADMISSION OF LIMITED PARTNERS |
49 | |||||
|
Section 12.01 |
Substituted Limited Partners | 49 | ||||
|
Section 12.02 |
Additional Limited Partners | 49 | ||||
|
Article XIII. |
||||||
|
WITHDRAWAL AND RESIGNATION; TERMINATION OF RIGHTS |
49 | |||||
|
Section 13.01 |
Withdrawal and Resignation of Limited Partners | 49 | ||||
|
Article XIV. |
||||||
|
DISSOLUTION AND LIQUIDATION |
50 | |||||
|
Section 14.01 |
Dissolution | 50 | ||||
|
Section 14.02 |
Liquidation and Termination | 50 | ||||
|
Section 14.03 |
Deferment; Distribution in Kind | 51 | ||||
|
Section 14.04 |
Cancellation of Certificate | 51 | ||||
|
Section 14.05 |
Reasonable Time for Winding Up | 51 | ||||
|
Section 14.06 |
Return of Capital | 51 | ||||
|
Article XV. |
||||||
|
VALUATION |
52 | |||||
|
Section 15.01 |
Determination | 52 | ||||
|
Section 15.02 |
Dispute Resolution | 52 | ||||
|
Article XVI. |
||||||
|
GENERAL PROVISIONS |
52 | |||||
|
Section 16.01 |
Power of Attorney | 52 | ||||
|
Section 16.02 |
Confidentiality | 53 | ||||
|
Section 16.03 |
Amendments | 54 | ||||
|
Section 16.04 |
Title to Partnership Assets | 54 | ||||
|
Section 16.05 |
Addresses and Notices | 54 | ||||
|
Section 16.06 |
Binding Effect; Intended Beneficiaries | 55 | ||||
|
Section 16.07 |
Creditors | 55 | ||||
|
Section 16.08 |
Waiver | 55 | ||||
|
Section 16.09 |
Counterparts | 55 | ||||
|
Section 16.10 |
Applicable Law | 55 | ||||
|
Section 16.11 |
Severability | 55 | ||||
|
Section 16.12 |
Further Action | 55 | ||||
iv
|
Section 16.13 |
Delivery by Electronic Transmission | 56 | ||||
|
Section 16.14 |
Right of Offset | 56 | ||||
|
Section 16.15 |
Effectiveness | 56 | ||||
|
Section 16.16 |
Entire Agreement | 56 | ||||
|
Section 16.17 |
Remedies | 56 | ||||
|
Section 16.18 |
Descriptive Headings; Interpretation | 56 |
| Schedules | ||||
| Schedule 1 | – | Initial Schedule of Limited Partners | ||
| Exhibits | ||||
| Exhibit A | – | Form of Joinder Agreement | ||
v
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF SRII OPCO, LP
This AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP (this “ Agreement ”) of SRII Opco, LP, a Delaware limited partnership (the “ Partnership ”), dated as of February 9, 2018, is adopted, executed and agreed to by and among SRII Opco GP, LLC, a Delaware limited liability company, as the sole general partner of the Partnership, and each of the Limited Partners (as defined herein) set forth on the signature pages hereto.
WHEREAS, the Partnership was formed as a limited partnership pursuant to and in accordance with the Delaware Act (as defined herein) by filing a Certificate of Limited Partnership of the Partnership (the “ Certificate ”) with the Secretary of State of the State of Delaware on July 18, 2017;
WHEREAS, the General Partner, as the sole general partner of the Partnership, entered into an Agreement of Limited Partnership of the Partnership, dated as of July 18, 2017 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time to but excluding the date hereof, together with all schedules, exhibits and annexes thereto, the “ Initial Limited Partnership Agreement ”), with Alta Mesa Resources, Inc. (f/k/a Silver Run Acquisition Corporation II), a Delaware corporation (the “ Corporation ”), as the sole limited partner of the Partnership;
WHEREAS, immediately prior to the Effective Time (as defined herein), the Corporation was the sole limited partner of the Partnership and holder of all of the issued and outstanding Common Units (as defined below); and
WHEREAS, the parties are entering into this Agreement to amend and restate the Initial Limited Partnership Agreement as of the Effective Time to reflect (a) the Unit Purchase (as defined herein), (b) the Kingfisher Contribution (as defined herein) and the consummation of the transactions contemplated by the Kingfisher Contribution Agreement (as defined herein) and the admission of the Kingfisher Contributor (as defined herein) as a Limited Partner, (c) the Alta Mesa Contribution (as defined herein) and the consummation of the transactions contemplated by the Alta Mesa Contribution Agreement (as defined herein) and the admission of HMH (as defined herein) as a Limited Partner, (d) the Riverstone Contribution (as defined herein) and the consummation of the transactions contemplated by the Riverstone Contribution Agreement (as defined herein) and the admission of the Riverstone Contributor (as defined herein) as a Limited Partner and (e) the rights and obligations of the Partners that are enumerated and agreed upon in the terms of this Agreement effective as of the Effective Time, at which time the Initial Limited Partnership Agreement shall be superseded entirely by this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants, rights and obligations set forth herein and other good and valuable consideration, the receipt and sufficiency of which each Partner (as defined herein) hereby acknowledges and confesses, the parties hereto hereby agree as follows:
1
ARTICLE I.
DEFINITIONS
The following definitions shall be applied to the terms used in this Agreement for all purposes, unless otherwise clearly indicated to the contrary.
“ Additional Limited Partner ” has the meaning set forth in Section 12.02 .
“ Adjusted Capital Account Deficit ” means, with respect to the Capital Account of any Partner as of the end of any Taxable Year, the amount by which the balance in such Capital Account is less than zero. For this purpose, such Partner’s Capital Account balance shall be:
| (a) | reduced for any items described in Treasury Regulations Section 1.704- 1(b)(2)(ii)(d)(4), (5), and (6); and |
| (b) | increased for any amount such Partner is obligated to contribute or is treated as being obligated to contribute to the Partnership pursuant to Treasury Regulations Section 1.704-1(b)(2)(ii)(c) (relating to partner liabilities to a partnership) or 1.704-2(g)(1) and 1.704-2(i) (relating to minimum gain). |
“ Admission Date ” has the meaning set forth in Section 10.06 .
“ Affiliate ” (and, with a correlative meaning, “ Affiliated ”) means, with respect to a specified Person, each other Person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the Person specified. As used in this definition and the definition of Majority Partners, “control” (including with correlative meanings, “controlled by” and “under common control with”) means possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of voting securities or by contract or other agreement).
“ Agreement ” has the meaning set forth in the preamble to this Agreement.
“ Alta Mesa Contributed Interests ” means the Contributed Interests (as defined in the Alta Mesa Contribution Agreement).
“ Alta Mesa Contribution ” has the meaning set forth in Section 3.03(a) .
“ Alta Mesa Contribution Agreement ” means that certain Contribution Agreement, dated as of August 16, 2017, by and among the Corporation, the Alta Mesa Contributors, Alta Mesa Holdings, LP, a Texas limited partnership, Alta Mesa Holdings GP, LLC, a Texas limited liability company, and, for limited purposes set forth therein, the equity holders of the Alta Mesa Contributors named therein (as may be amended or supplemented from time to time).
“ Alta Mesa Contributors ” means HMH and High Mesa Holdings GP, LLC, a Texas limited liability company.
“ Appraisers ” has the meaning set forth in Section 15.02 .
2
“ Assignee ” means a Person to whom a Limited Partner Interest has been transferred but who has not become a Limited Partner pursuant to Article XII .
“ Assumed Tax Liability ” means, with respect to any Partner at any Tax Advance Date, an amount equal to the cumulative amount of federal, state and local income taxes (including any applicable estimated taxes), determined taking into account the character of income and loss allocated as it affects the Assumed Tax Rate, that the General Partner estimates would be due from such Partner as of the relevant Tax Advance Date, (i) assuming such Partner were an individual who earned solely the items of income, gain, deduction, loss, and/or credit allocated to such Partner pursuant to Article V , (ii) taking into account items determined at the Partner level with respect to Depletable Properties owned by the Partnership, as if such items were allocated at the Partnership level and using the cost depletion method, (iii) after taking proper account of loss carryforwards available to individual taxpayers resulting from losses allocated to the Partners by the Partnership, to the extent not taken into account in prior periods, and (iv) assuming that such Partner is subject to tax at the Assumed Tax Rate. The General Partner shall reasonably determine the Assumed Tax Liability for each Partner based on such assumptions as the General Partner deems necessary.
“ Assumed Tax Rate ” means, for any taxable year, the sum of the highest marginal rate of federal, state, and local income tax applicable to any direct, or in the case of ownership through an entity classified as a partnership or disregarded entity for federal income tax purposes, indirect owner of a Partner (other than the Corporation) (including any tax rate imposed under Section 1411 of the Code) determined by applying the rates applicable to ordinary income (in cases where taxes are being determined on ordinary income allocated to a Partner) and capital gains (in cases where taxes are being determined on capital gains allocated to a Partner), and including any deduction of state and local income taxes in computing a Partner’s liability for federal income tax. The General Partner shall consult in good faith with each other Partner to determine the Assumed Tax Rate for such Partner for any taxable year.
“ Base Rate ” means, on any date, a variable rate per annum equal to the rate of interest most recently published by The Wall Street Journal as the “prime rate” at large U.S. money center banks.
“ Black-Out Period ” means any “black-out” or similar period under the Corporation’s policies covering trading in the Corporation’s securities to which the applicable Redeemed Partner is subject, which period restricts the ability of such Redeemed Partner to immediately resell shares of Class A Common Stock to be delivered to such Redeemed Partner in connection with a Share Settlement.
“ Book Value ” means, with respect to any Partnership property, the Partnership’s adjusted basis for U.S. federal income tax purposes, adjusted from time to time to reflect the adjustments required or permitted by Treasury Regulations Sections 1.704-1(b)(2)(iv)(d)-(g) and 1.704-1(b)(2)(iv)(s); provided , that if any noncompensatory options (including the Warrants) are outstanding upon the occurrence of any adjustment described herein, the Partnership shall adjust the Book Values of its properties in accordance with Treasury Regulations Sections 1.704-1(b)(2)(iv)(f)(1) and 1.704-1(b)(2)(iv)(h)(2).
3
“ Business Day ” means any day other than a Saturday or a Sunday or a day on which banks located in New York City, New York generally are authorized or required by Law to close.
“ Capital Account ” means the capital account maintained for a Partner in accordance with Section 5.01 .
“ Capital Contribution ” means, with respect to any Partner, the amount of any cash, cash equivalents, promissory obligations or the Fair Market Value of other property that such Partner contributes (or is deemed to contribute) to the Partnership pursuant to Article III hereof.
“ Cash Settlement ” means immediately available funds in U.S. dollars in an amount equal to the product of (a) the Share Settlement and (b) the Common Unit Redemption Price.
“ Certificate ” has the meaning set forth in the recitals to this Agreement.
“ Change of Control Transaction ” means (a) a sale of all or substantially all of the Partnership’s assets determined on a consolidated basis, (b) a sale of a majority of the Partnership’s outstanding Units (other than (i) to the Corporation or (ii) in connection with a Redemption or Direct Exchange in accordance with Article XI ) or (c) a sale of a majority of the outstanding voting securities of any Material Subsidiary of the Partnership; in any such case, whether by merger, recapitalization, consolidation, reorganization, combination or otherwise; provided, however , that neither (w) a transaction solely between the Partnership or any of its wholly-owned Subsidiaries, on the one hand, and the Partnership or any of its wholly-owned Subsidiaries, on the other hand, nor (x) a transaction solely for the purpose of changing the jurisdiction of domicile of the Partnership, nor (y) a transaction solely for the purpose of changing the form of entity of the Partnership, nor (z) a sale of a majority of the outstanding shares of Class A Common Stock, whether by merger, recapitalization, consolidation, reorganization, combination or otherwise, shall in each case of clauses (w), (x), (y) and (z) constitute a Change of Control Transaction.
“ Class A Common Stock ” means the Class A Common Stock, par value $0.0001 per share, of the Corporation.
“ Class C Common Stock ” means the Class C Common Stock, par value $0.0001 per share, of the Corporation.
“ Code ” means the United States Internal Revenue Code of 1986, as amended.
“ Common Stock ” means all classes and series of common stock of the Corporation, including the Class A Common Stock and the Class C Common Stock.
“ Common Unit ” means a Unit representing a fractional part of the Limited Partner Interests of the Limited Partners and having the rights and obligations specified with respect to the Common Units in this Agreement.
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“ Common Unit Redemption Price ” means the average of the volume-weighted closing price for a share of Class A Common Stock on the principal U.S. securities exchange or automated or electronic quotation system on which the Class A Common Stock trades, as reported by Bloomberg, L.P., or its successor, for each of the five (5) consecutive full Trading Days ending on and including the last full Trading Day immediately prior to the Redemption Notice Date, subject to appropriate and equitable adjustment for any stock splits, reverse splits, stock dividends or similar events affecting the Class A Common Stock. If the Class A Common Stock no longer trades on a securities exchange or automated or electronic quotation system, then the Common Unit Redemption Price shall be the fair market value of one share of Class A Common Stock, as determined by a majority of the Independent Directors in good faith, that would be obtained in an arms-length transaction between an informed and willing buyer and an informed and willing seller, with neither party having any compulsion to buy or sell, and without regard to the particular circumstances of the buyer or seller.
“ Contribution Agreements ” means the Alta Mesa Contribution Agreement, the Kingfisher Contribution Agreement and the Riverstone Contribution Agreement.
“ Contribution Closing ” means the “Closing” as defined in Section 1.1 of each of the Contribution Agreements.
“ Corporate Board ” means the Board of Directors of the Corporation.
“ Corporation ” has the meaning set forth in the recitals to this Agreement, together with its successors and assigns.
“ Credit Agreement ” means any senior credit facility or obligation of the Partnership or any of its Subsidiaries, as borrower, as may be subsequently amended, restated, supplemented or otherwise modified from time to time and including any one or more refinancings or replacements thereof, in whole or in part, with any other debt facility or debt obligation).
“ Delaware Act ” means the Delaware Revised Uniform Limited Partnership Act, 6 Del.L. § 17-101, et seq. , as it may be amended from time to time, and any successor thereto.
“ Depletable Property ” means each separate oil and gas property as defined in Code Section 614.
“ Depreciation ” means, for each Taxable Year or other Fiscal Period, an amount equal to the depreciation, amortization or other cost recovery deduction (excluding depletion) allowable for U.S. federal income tax purposes with respect to property for such Taxable Year or other Fiscal Period, except that (a) with respect to any such property the Book Value of which differs from its adjusted tax basis for U.S. federal income tax purposes and which difference is being eliminated by use of the “remedial method” pursuant to Treasury Regulations Section 1.704-3(d), Depreciation for such Taxable Year or other Fiscal Period shall be the amount of book basis recovered for such Taxable Year or other Fiscal Period under the rules prescribed by Treasury Regulations Section 1.704-3(d)(2), and (b) with respect to any other such property, the Book Value of which differs from its adjusted tax basis at the beginning of such Taxable Year or other Fiscal Period, Depreciation shall be an amount which bears the same ratio to such beginning Book Value as the U.S. federal income tax depreciation, amortization, or other cost recovery deduction for such Taxable Year or other Fiscal Period bears to such beginning adjusted tax basis; provided , however , that if the adjusted tax basis of any property at the beginning of such Taxable Year or other Fiscal Period is zero dollars ($0.00), Depreciation with respect to such property shall be determined with reference to such beginning Book Value using any reasonable method selected by the General Partner.
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“ Direct Exchange ” has the meaning set forth in Section 11.03(a) .
“ Discount ” has the meaning set forth in Section 6.05 .
“ Distributable Cash ” shall mean, as of any relevant date on which a determination is being made by the General Partner regarding a potential distribution pursuant to Section 4.01(a) , the amount of cash that could be distributed by the Partnership for such purposes in accordance with the Credit Agreement (and without otherwise violating any applicable provisions of the Credit Agreement or any other debt financing of the Partnership or its Subsidiaries).
“ Distribution ” (and, with a correlative meaning, “ Distribute ”) means each distribution made by the Partnership to a Limited Partner with respect to such Limited Partner’s Units, whether in cash, property or securities of the Partnership and whether by liquidating distribution or otherwise; provided, however , that none of the following shall be a Distribution: (a) any recapitalization that does not result in the distribution of cash or property to Limited Partners or any exchange of securities of the Partnership, and any subdivision (by Unit split or otherwise) or any combination (by reverse Unit split or otherwise) of any outstanding Units, (b) any other payment made by the Partnership to a Limited Partner in redemption of all or a portion of such Limited Partner’s Units or (c) any amounts payable pursuant to Section 6.05 .
“ Effective Time ” has the meaning set forth in Section 16.15 .
“ Equity Plan ” means any stock or equity purchase plan, restricted stock or equity plan or other similar equity compensation plan now or hereafter adopted by the Partnership or the Corporation.
“ Equity Securities ” means (i) with respect to the Partnership or any of its Subsidiaries, (a) Units or other equity interests in the Partnership or any Subsidiary of the Partnership (including other classes or groups thereof having such relative rights, powers and duties as may from time to time be established by the General Partner pursuant to the provisions of this Agreement, including rights, powers and/or duties senior to existing classes and groups of Units and other equity interests in the Partnership or any Subsidiary of the Partnership), (b) obligations, evidences of indebtedness or other securities or interests convertible or exchangeable into Units or other equity interests in the Partnership or any Subsidiary of the Partnership, and (c) warrants, options or other rights to purchase or otherwise acquire Units or other equity interests in the Partnership or any Subsidiary of the Partnership and (ii) with respect to the Corporation, any and all shares, interests, participation or other equivalents (however designated) of corporate stock, including all common stock and preferred stock, or warrants, options or other rights to acquire any of the foregoing, including any debt instrument convertible or exchangeable into any of the foregoing.
“ Event of Withdrawal ” means the expulsion, bankruptcy or dissolution of a Partner or the occurrence of any other event that terminates the continued partnership of a Partner in the Partnership. “Event of Withdrawal” shall not include an event that does not terminate the existence of such Partner under applicable state law (or, in the case of a trust that is a Partner, does not terminate the trusteeship of the fiduciaries under such trust with respect to all the Limited Partner Interests of such trust that is a Limited Partner).
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“ Exchange Act ” means the Securities Exchange Act of 1934, as amended.
“ Exchange Election Notice ” has the meaning set forth in Section 11.03(b) .
“ Fair Market Value ” means, with respect to any asset, its fair market value determined according to Article XV .
“ Fiscal Period ” means any interim accounting period within a Taxable Year established by the Partnership and which is permitted or required by Section 706 of the Code.
“ Fiscal Year ” means the Partnership’s annual accounting period established pursuant to Section 8.02 .
“ General Partner ” means SRII Opco GP, LLC, a Delaware limited liability company, and its successors and permitted assigns as general partner of the Partnership. The General Partner, in its capacity as such, has no obligation to make Capital Contributions or right to receive Distributions under this Agreement.
“ General Partner Change of Control ” shall be deemed to have occurred if or upon:
| (a) | both the stockholders of the Corporation and the Corporate Board approve, in accordance with the Corporation’s certificate of incorporation and applicable law, the sale, lease or transfer, in one or a series of related transactions, of all or substantially all of the Corporation’s assets (determined on a consolidated basis), including a sale of all of the equity interests in the Partnership, to any Person or group (as such term is used in Section 13(d)(3) of the Exchange Act), other than to any directly or indirectly wholly owned Subsidiary of the Corporation, and such sale, lease or transfer is consummated; |
| (b) | both the stockholders of the Corporation and the Corporate Board approve, in accordance with the Corporation’s certificate of incorporation and applicable law, a merger or consolidation of the Corporation with any other Person, other than a merger or consolidation which would result in the Voting Securities of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least 50.01% of the total voting power represented by the Voting Securities of the Corporation or such surviving entity outstanding immediately after such merger or consolidation, and such merger or consolidation is consummated; or |
| (c) |
the acquisition, directly or indirectly, by any Person or group (as such term is used in Section 13(d)(3) of the Exchange Act) (other than (a) a trustee or other fiduciary holding securities under an employee benefit plan of the Corporation, or (b) a corporation or other entity owned, directly or indirectly, by all of the |
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| stockholders of the Corporation in substantially the same proportions as their ownership of stock of the Corporation) of beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) of at least 50.01% of the aggregate voting power of the Voting Securities of the Corporation; provided , that the Corporate Board recommends or otherwise approves or determines that such acquisition is in the best interests of the Corporation and its stockholders. |
“ General Partner Interest ” means the non-economic management interest of the General Partner in the Partnership (in its capacity as a general partner without reference to any Limited Partner Interest held by it) and includes any and all rights, powers and benefits to which the General Partner is entitled as provided in this Agreement, together with all obligations of the General Partner to comply with the terms and provisions of this Agreement. The General Partner Interest does not include any rights to Profits or Losses or any rights to receive Distributions from operations or upon the liquidation or winding-up of the Partnership.
“ Governmental Entity ” means (a) the United States of America, (b) any other sovereign nation, (c) any state, province, district, territory or other political subdivision of (a) or (b) of this definition, including any county, municipal or other local subdivision of the foregoing, or (d) any entity exercising executive, legislative, judicial, regulatory or administrative functions of government on behalf of (a), (b) or (c) of this definition.
“ HMH ” means High Mesa Holdings, L.P., a Delaware limited partnership.
“ Indemnified Person ” has the meaning set forth in Section 7.04(a) .
“ Independent Directors ” means the members of the Corporate Board who are “independent” under the standards set forth in Rule 10A-3 promulgated under the Securities Act and the corresponding rules of the applicable exchange on which the Class A Common Stock is traded or quoted.
“ Initial Limited Partnership Agreement ” has the meaning set forth in the recitals to this Agreement.
“ Investment Company Act ” means the U.S. Investment Company Act of 1940, as amended from time to time.
“ Joinder ” means a joinder to this Agreement, in form and substance substantially similar to Exhibit A to this Agreement.
“ Kingfisher Contributed Interests ” means the Contributed Interests (as defined in the Kingfisher Contribution Agreement).
“ Kingfisher Contribution ” has the meaning set forth in Section 3.03(a) .
“ Kingfisher Contribution Agreement ” means that certain Contribution Agreement, dated as of August 16, 2017, by and among the Corporation, the Kingfisher Contributor, Kingfisher Midstream, LLC, a Delaware limited liability company, and, for limited purposes set forth therein, the equity holders of the Kingfisher Contributor named therein (as may be amended or supplemented from time to time).
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“ Kingfisher Contributor ” means KFM Holdco, LLC, a Delaware limited liability company.
“ Law ” means all laws, statutes, ordinances, rules and regulations of any Governmental Entity, any foreign country and each state, commonwealth, city, county, municipality, regulatory body, agency or other political subdivision thereof.
“ Limited Partner ” means, as of any date of determination, (a) each of the partners named on the Schedule of Limited Partners and (b) any Person admitted to the Partnership as a Substituted Limited Partner or Additional Limited Partner in accordance with Article XII , but in each case only so long as such Person is shown on the Partnership’s books and records as the owner of one or more Units.
“ Limited Partner Interest ” means the interest of a Partner in Profits, Losses and Distributions.
“ Losses ” means items of Partnership loss or deduction determined according to Section 5.01(b) .
“ Majority Partners ” means the Limited Partners (which may include the General Partner if it is also a Limited Partner) holding a majority of the Units then outstanding; provided that, if as of any date of determination, a majority of the Units are then held by the General Partner or any of its Affiliates controlled by the Corporation, then “Majority Partners” shall mean the General Partner together with Partners holding a majority of the Units (excluding Units held by the General Partner and its controlled Affiliates) then outstanding.
“ Market Price ” means, with respect to a share of Class A Common Stock as of a specified date, the last sale price per share of Class A Common Stock, regular way, or if no such sale took place on such day, the average of the closing bid and asked prices per share of Class A Common Stock, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the Stock Exchange or, if the Class A Common Stock is not listed or admitted to trading on the Stock Exchange, as reported on the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Class A Common Stock is listed or admitted to trading or, if the Class A Common Stock is not listed or admitted to trading on any national securities exchange, the last quoted price, or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System or, if such system is no longer in use, the principal other automated quotation system that may then be in use or, if the Class A Common Stock is not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Class A Common Stock selected by the Corporate Board or, in the event that no trading price is available for the shares of Class A Common Stock, the fair market value of a share of Class A Common Stock, as determined in good faith by the Corporate Board.
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“ Material Subsidiary ” means any direct or indirect Subsidiary of the Partnership that, as of any date of determination, represents more than (a) 50% of the consolidated net tangible assets of the Partnership or (b) 50% of the consolidated net income of the Partnership before interest, taxes, depreciation and amortization.
“ Officer ” has the meaning set forth in Section 6.01(b) .
“ Optionee ” means a Person to whom a stock option is granted under any Stock Option Plan.
“ Other Agreements ” has the meaning set forth in Section 10.04 .
“ Partner ” means the General Partner or any Limited Partner.
“
Partner Minimum Gain
” means “partner nonrecourse debt minimum gain” as defined in Treasury Regulations
Section
1.704-2(i)(3).
“ Partnership ” has the meaning set forth in the preamble to this Agreement.
“ Partnership Employee ” means an employee of, or other service provider to, the Partnership or any Subsidiary, in each case acting in such capacity.
“
Partnership
Minimum Gain
” means “partnership minimum gain”
determined pursuant to Treasury Regulations Section
1.704-2(d).
“ Partnership Representative ” has the meaning set forth in Section 9.03(b) .
“ Percentage Interest ” means, with respect to a Partner at a particular time, such Partner’s percentage interest in the Partnership determined by dividing such Partner’s Units by the total Units of all Partners at such time. The Percentage Interest of each Partner shall be calculated to the 4 th decimal place, and the Percentage Interest with respect to the General Partner Interest shall at all times be zero.
“ Permitted Transfer ” has the meaning set forth in Section 10.02 .
“ Person ” means an individual or any corporation, partnership, limited liability company, trust, unincorporated organization, association, joint venture or any other organization or entity, whether or not a legal entity.
“ Pro rata ,” “ proportional ,” “ in proportion to ,” and other similar terms, means, with respect to the holder of Units, pro rata based upon the number of such Units held by such holder as compared to the total number of Units outstanding.
“ Profits ” means items of Partnership income and gain determined according to Section 5.01(b) .
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“ Reclassification Event ” means any of the following: (i) any reclassification or recapitalization of Common Stock (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination or any transaction subject to Section 3.04 ), (ii) any merger, consolidation or other combination involving the Corporation, or (iii) any sale, conveyance, lease, or other disposal of all or substantially all the properties and assets of the Corporation to any other Person, in each of clauses (i), (ii) or (iii), as a result of which holders of Common Stock shall be entitled to receive cash, securities or other property for their shares of Common Stock.
“ Redeemed Partner ” has the meaning set forth in Section 11.01(a) .
“ Redeemed Units ” has the meaning set forth in Section 11.01(a) .
“ Redeeming Persons ” has the meaning set forth in Section 11.01(g) .
“ Redemption ” has the meaning set forth in Section 11.01(a) .
“ Redemption Date ” has the meaning set forth in Section 11.01(a) .
“ Redemption Notice ” has the meaning set forth in Section 11.01(a) .
“ Redemption Notice Date ” has the meaning set forth in Section 11.01(a) .
“ Redemption Right ” has the meaning set forth in Section 11.01(a) .
“ Registration Rights Agreement ” means that certain Registration Rights Agreement, dated as of the date hereof, by and among the Corporation, HMH, the Kingfisher Contributor and the Riverstone Contributor (together with any joinder thereto from time to time by any successor or assign to any party to such Agreement).
“ Related Person ” has the meaning set forth in Section 7.01(c) .
“ Relative ” means, with respect to any natural person: (a) such natural person’s spouse; (b) any lineal descendant, parent, grandparent, great grandparent or sibling or any lineal descendant of such sibling (in each case whether by blood or legal adoption); and (c) the spouse of a natural person described in clause (b) of this definition.
“ Retraction Notice ” has the meaning set forth in Section 11.01(b) .
“ Revised Partnership Audit Provisions ” shall mean Section 1101 of Title XI (Revenue Provisions Related to Tax Compliance) of the Bipartisan Budget Act of 2015, H.R. 1314, Public Law Number 114-74.
“ Riverstone Contributed Interests ” means the Contributed Interests (as defined in the Riverstone Contribution Agreement).
“ Riverstone Contribution ” has the meaning set forth in Section 3.03(a) .
“ Riverstone Contribution Agreement ” means that certain Contribution Agreement, dated as of August 16, 2017, by and among the Corporation and the Riverstone Contributor (as may be amended or supplemented from time to time).
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“ Riverstone Contributor ” means Riverstone VI Alta Mesa Holdings, L.P., a Delaware limited partnership.
“ Schedule of Limited Partners ” has the meaning set forth in Section 3.01(b) .
“ SEC ” means the U.S. Securities and Exchange Commission, including any governmental body or agency succeeding to the functions thereof.
“ Securities Act ” means the U.S. Securities Act of 1933, as amended, and applicable rules and regulations thereunder, and any successor to such statute, rules or regulations. Any reference herein to a specific section, rule or regulation of the Securities Act shall be deemed to include any corresponding provisions of future Law.
“ Settlement Method Notice ” has the meaning set forth in Section 11.01(b) .
“ Share Settlement ” means a number of shares of Class A Common Stock equal to the number of Redeemed Units.
“ Simulated Basis ” means, with respect to each Depletable Property, the Book Value of such property. For purposes of such computation, the Simulated Basis of each Depletable Property (including any additions to such Simulated Basis resulting from expenditures required to be capitalized in such Simulated Basis) shall be allocated to each Partner in accordance with such Partner’s relative Percentage Interest as of the time such Depletable Property (or such addition to such Simulated Basis resulting from expenditures required to be capitalized in such Simulated Basis) is acquired (or expended) by the Partnership, and shall be reallocated among the Partners in accordance with the Partners’ Percentage Interests as determined immediately following the occurrence of an event giving rise to an adjustment to the Book Value of the Partnership’s Depletable Properties pursuant to the definition of Book Value. Upon a transfer by a Partner of any Units, a portion of the Simulated Basis allocated to such Partner shall be reallocated to the transferee in accordance with the relative Percentage Interest transferred.
“ Simulated Depletion ” means, with respect to each Depletable Property, a depletion allowance computed in accordance with U.S. federal income tax principles and in a manner specified in Treasury Regulations Section 1.704-1(b)(2)(iv)(k)(2). For purposes of computing Simulated Depletion with respect to any Depletable Property, in no event shall such allowance, in the aggregate, exceed the Simulated Basis of such Depletable Property. If the Book Value of a Depletable Property is adjusted pursuant to the definition of Book Value during a Taxable Year or other Fiscal Period, following such adjustment Simulated Depletion shall thereafter be calculated under the foregoing provisions based upon such adjusted Book Value.
“ Simulated Gain ” means the excess, if any, of the amount realized from the sale or other disposition of a Depletable Property over the Book Value of such Depletable Property and determined pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(k)(2).
“ Simulated Loss ” means the excess, if any, of the Book Value of a Depletable Property over the amount realized from the sale or other disposition of such Depletable Property and determined pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(k)(2).
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“ Sponsor Person ” has the meaning set forth in Section 7.04(d) .
“ Stock Exchange ” means the NASDAQ Capital Market.
“ Stock Option Plan ” means any stock option plan now or hereafter adopted by the Partnership or by the Corporation.
“ Subsidiary ” means, with respect to any Person, any corporation, limited liability company, partnership, association or business entity of which (a) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (b) if a limited liability company, partnership, association or other business entity (other than a corporation), a majority of the voting interests thereof are at the time owned or controlled, directly or indirectly, by any Person or one or more Subsidiaries of that Person or a combination thereof. For purposes hereof, references to a “Subsidiary” of the Partnership shall be given effect only at such times that the Partnership has one or more Subsidiaries, and, unless otherwise indicated, the term “Subsidiary” refers to a Subsidiary of the Partnership.
“ Substituted Limited Partner ” means a Person that is admitted as a Limited Partner to the Partnership pursuant to Section 12.01 with all of the rights of a Limited Partner and who is shown as a Limited Partner on the books and records of the Partnership.
“ Tax Advance ” has the meaning set forth in Section 4.01(b)(ii) .
“ Tax Advance Date ” means any date that is two Business Days prior to the date on which estimated federal income tax payments are required to be made by corporate taxpayers and the due date for federal income tax returns of corporate taxpayers (without regard to extensions).
“ Tax Matters Partner ” has the meaning set forth in Section 9.03(a) .
“ Tax Receivable Agreement ” means the Tax Receivable Agreement dated as of the date hereof, by and among the Corporation, the Riverstone Contributor, the Partnership and HMH (as may be amended or supplemented from time to time).
“ Taxable Year ” means the Partnership’s accounting period for U.S. federal income tax purposes determined pursuant to Section 9.02 .
“ Trading Day ” means a day on which the Stock Exchange or such other principal United States securities exchange on which the Class A Common Stock is listed or admitted to trading is open for the transaction of business (unless such trading shall have been suspended for the entire day).
“ Transfer ” (and, with a correlative meaning, “ Transferring ”) means any sale, transfer, assignment, pledge, encumbrance or other disposition of (whether directly or indirectly, whether with or without consideration and whether voluntarily or involuntarily or by operation of Law) (a) any interest (legal or beneficial) in any Equity Securities of the Partnership or (b) any equity or other interest (legal or beneficial) in any Partner if substantially all of the assets of such Partner consist solely of Units.
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“ Treasury Regulations ” means the regulations promulgated under the Code and any corresponding provisions of succeeding regulations.
“ Unit ” means a Limited Partner Interest of a Limited Partner or a permitted Assignee in the Partnership and shall include Common Units, but shall not include the General Partner Interest.
“ Unit Purchase ” has the meaning set forth in Section 3.03(b) .
“ Unvested Corporate Shares ” means shares of Class A Common Stock issued pursuant to an Equity Plan that are not vested pursuant to the terms thereof or any award or similar agreement relating thereto.
“ Value ” means (a) for any Stock Option Plan, the Market Price for the trading day immediately preceding the date of exercise of a stock option under such Stock Option Plan and (b) for any Equity Plan other than a Stock Option Plan, the Market Price for the trading day immediately preceding the Vesting Date.
“ Vesting Date ” has the meaning set forth in Section 3.10(c) .
“ Voting Securities ” means any Equity Securities of the Corporation that are entitled to vote generally in matters submitted for a vote of the Corporation’s stockholders or generally in the election of the Corporate Board.
“ Warrants ” has the meaning set forth in Section 3.03(b) .
ARTICLE II.
ORGANIZATIONAL MATTERS
Section 2.01 Formation of Partnership . The Partnership was formed on July 18, 2017 pursuant to the provisions of the Delaware Act.
Section 2.02 Amended and Restated Limited Partnership Agreement . The Partners hereby execute this Agreement for the purpose of continuing the affairs of the Partnership and the conduct of its business in accordance with the provisions of the Delaware Act. The Partners hereby agree that during the term of the Partnership set forth in Section 2.06 , the rights and obligations of the Partners with respect to the Partnership will be determined in accordance with the terms and conditions of this Agreement and the Delaware Act. On any matter upon which this Agreement is silent, the Delaware Act shall control. No provision of this Agreement shall be in violation of the Delaware Act and, to the extent any provision of this Agreement is in violation of the Delaware Act, such provision shall be void and of no effect to the extent of such violation without affecting the validity of the other provisions of this Agreement; provided, however , that where the Delaware Act provides that a provision of the Delaware Act shall apply “unless otherwise provided in a limited partnership agreement” or words of similar effect, the provisions of this Agreement shall in each instance control; provided further , that notwithstanding the foregoing, Section 15-120 of the Delaware Act shall not apply or be incorporated into this Agreement.
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Section 2.03 Name . The name of the Partnership shall be “SRII Opco, LP”. The General Partner in its sole discretion may change the name of the Partnership at any time and from time to time. Notification of any such change shall be given to all of the Partners and, to the extent practicable, to all of the holders of any Equity Securities then outstanding. The Partnership’s business may be conducted under its name and/or any other name or names deemed advisable by the General Partner.
Section 2.04 Purpose . The primary business and purpose of the Partnership shall be to engage in such activities as are permitted under the Delaware Act and determined from time to time by the General Partner in accordance with the terms and conditions of this Agreement.
Section 2.05 Principal Office; Registered Office . The principal office of the Partnership shall be at 15021 Katy Freeway, Suite 400, Houston, Texas, or such other place as the General Partner may from time to time designate. The address of the registered office of the Partnership in the State of Delaware shall be 1209 Orange Street, Wilmington, County of New Castle, DE 19801, and the registered agent for service of process on the Partnership in the State of Delaware at such registered office shall be The Corporation Trust Company. The General Partner may from time to time change the Partnership’s registered agent and registered office in the State of Delaware.
Section 2.06 Term . The term of the Partnership commenced upon the filing of the Certificate in accordance with the Delaware Act and shall continue in existence until termination and dissolution of the Partnership in accordance with the provisions of Article XIV .
Section 2.07 No Joint Venture . The Partners intend that the Partnership not be a joint venture, and that no Partner be a joint venturer of any other Partner by virtue of this Agreement, and neither this Agreement nor any other document entered into by the Partnership or any Partner relating to the subject matter hereof shall be construed to suggest otherwise.
ARTICLE III.
PARTNERS; UNITS; CAPITALIZATION
Section 3.01 Partners .
(a) The Corporation previously was admitted as a Limited Partner and shall remain a Limited Partner of the Partnership and the General Partner previously was admitted as the sole general partner of the Partnership and shall remain the sole general partner of the Partnership, in each case, upon the Effective Time. At the Effective Time and concurrently with the Alta Mesa Contribution, the Kingfisher Contribution and the Riverstone Contribution, respectively, HMH, the Kingfisher Contributor and the Riverstone Contributor shall be admitted to the Partnership as Limited Partners.
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(b) The Partnership shall maintain a schedule setting forth: (i) the name and address of each Limited Partner; (ii) the aggregate number of outstanding Units and the number and class of Units held by each Limited Partner; (iii) the aggregate amount of cash Capital Contributions that have been made by the Limited Partners with respect to their Units; and (iv) the Fair Market Value of any property other than cash contributed by the Limited Partners with respect to their Units (including, if applicable, a description and the amount of any liability assumed by the Partnership or to which contributed property is subject) (such schedule, the “ Schedule of Limited Partners ”). The applicable Schedule of Limited Partners in effect as of the Effective Time (after giving effect to the Alta Mesa Contribution, the Kingfisher Contribution, the Riverstone Contribution and the Unit Purchase) is set forth as Schedule 1 to this Agreement. The Schedule of Limited Partners shall be the definitive record of ownership of each Unit of the Partnership and all relevant information with respect to each Limited Partner. The Partnership shall be entitled to recognize the exclusive right of a Person registered on its records as the owner of Units for all purposes and shall not be bound to recognize any equitable or other claim to or interest in Units on the part of any other Person, whether or not it shall have express or other notice thereof, except as otherwise provided by the Delaware Act.
(c) No Limited Partner shall be required or, except as approved by the General Partner pursuant to Section 6.01 and in accordance with the other provisions of this Agreement, permitted to loan any money or property to the Partnership or borrow any money or property from the Partnership.
Section 3.02 Units . Interests in the Partnership shall be represented by Units, or such other securities of the Partnership, in each case as the General Partner may establish in its discretion in accordance with the terms and subject to the restrictions hereof. Immediately after the Effective Time, the Units will be comprised of a single class of Common Units. Without limiting the foregoing, to the extent required pursuant to Section 3.04(a) , the General Partner may create one or more classes or series of Common Units or preferred Units solely to the extent they are in the aggregate substantially equivalent to a class of common stock of the Corporation or class or series of preferred stock of the Corporation.
Section 3.03 New Limited Partner Contributions; Warrants; the Corporation ’ s Capital Contribution; the Corporation ’ s Purchase of Common Units .
(a) New Limited Partner Contributions . Pursuant to the Contribution Agreements, at the Contribution Closing, (i) HMH contributed to the Partnership the Alta Mesa Contributed Interests and received in exchange therefor a cash distribution from the Partnership and was issued the number of Common Units set forth next to HMH’s name on Schedule 1 , which are hereby issued and outstanding as of the Effective Time (the “ Alta Mesa Contribution ”), (ii) the Kingfisher Contributor contributed to the Partnership the Kingfisher Contributed Interests and received in exchange therefor a cash distribution from the Partnership and was issued the number of Common Units set forth next to the Kingfisher Contributor’s name on Schedule 1 , which are hereby issued and outstanding as of the Effective Time (the “ Kingfisher Contribution ”), and (iii) the Riverstone Contributor contributed to the Partnership the Riverstone Contributed Interests and was issued the number of Common Units set forth next to the Riverstone Contributor’s name on Schedule 1 , which are hereby issued and outstanding as of the Effective Time (the “ Riverstone Contribution ”).
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(b) The Corporation ’ s Unit Purchase . Pursuant to the Contribution Agreements, at the Contribution Closing and prior to giving effect to Section 3.04 , the Corporation contributed to the Partnership cash in the aggregate amount of $1,406,484,518 in exchange for (i) 169,371,730 Common Units and (ii) warrants (the “ Warrants ”) exercisable for a number of Common Units equal to the number of shares of Class A Common Stock underlying the warrants of the Corporation outstanding immediately prior to such issuance of Warrants pursuant to this Section 3.03(b) (collectively, the “ Unit Purchase ”). For the avoidance of doubt, each Warrant shall be treated as a “noncompensatory option” within the meaning of Treasury Regulations Sections 1.721-2(f) and 1.761-3(b)(2) and not be treated as a partnership interest pursuant to Treasury Regulations Section 1.761-3(a).
Section 3.04 Authorization and Issuance of Additional Units .
(a) If at any time the Corporation issues a share of its Class A Common Stock or any other Equity Security of the Corporation, (i) the Partnership shall issue to the Corporation one Common Unit (if the Corporation issues a share of Class A Common Stock), or such other Equity Security of the Partnership (if the Corporation issues Equity Securities other than Class A Common Stock) corresponding to the Equity Securities issued by the Corporation, and with substantially the same rights to dividends and distributions (including distributions upon liquidation) and other economic rights as those of such Equity Securities of the Corporation and (ii) the net proceeds received by the Corporation with respect to the corresponding share of Class A Common Stock or other Equity Security, if any, shall be concurrently contributed by the Corporation to the Partnership as a Capital Contribution; provided , that if the Corporation issues any shares of Class A Common Stock in order to directly purchase from another Limited Partner (other than the Corporation) a number of Common Units pursuant to Section 11.03(a) (and a corresponding number of shares of Class C Common Stock), then the Partnership shall not issue any new Common Units in connection therewith and the Corporation shall not be required to transfer such net proceeds to the Partnership (it being understood that such net proceeds shall instead be transferred to such other Limited Partner as consideration for such purchase). Notwithstanding the foregoing, this Section 3.04(a) shall not apply to (i) (A) the issuance and distribution to holders of shares of Class A Common Stock of rights to purchase Equity Securities of the Corporation under a “poison pill” or similar shareholders rights plan or (B) the issuance under the Corporation’s Equity Plans or Stock Option Plans of any warrants, options, other rights to acquire Equity Securities of the Corporation or rights or property that may be converted into or settled in Equity Securities of the Corporation, but shall in each of the foregoing cases apply to the issuance of Equity Securities of the Corporation in connection with the exercise or settlement of such rights, warrants, options or other rights or property or (ii) the issuance of Equity Securities pursuant to any Equity Plan (other than a Stock Option Plan) that are restricted, subject to forfeiture or otherwise unvested upon issuance, but shall apply on the applicable Vesting Date with respect to such Equity Securities. Except pursuant to Article XI , (x) the Partnership may not issue any additional Common Units to the Corporation or any of its Subsidiaries unless substantially simultaneously the Corporation or such Subsidiary issues or sells an equal number of shares of the Corporation’s Class A Common Stock to another Person, and (y) the Partnership may not issue any other Equity Securities of the Partnership to the Corporation or any of its Subsidiaries (other than the issuance of Warrants pursuant to Section 3.03(b) ) unless substantially simultaneously the Corporation or such Subsidiary issues or sells, to another Person, an equal number of shares of a new class or series of Equity Securities of the Corporation or such Subsidiary with substantially the same rights to dividends and distributions (including distributions upon liquidation) and other economic rights as those of such Equity Securities of the Partnership.
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(b) The Partnership shall only be permitted to issue additional Units or other Equity Securities in the Partnership to the Persons and on the terms and conditions provided for in Section 3.02 , this Section 3.04 and Section 3.11 .
(c) The Partnership shall not in any manner effect any subdivision (by equity split, equity distribution, reclassification, recapitalization or otherwise) or combination (by reverse equity split, reclassification, recapitalization or otherwise) of the outstanding Common Units unless accompanied by an identical subdivision or combination, as applicable, of the outstanding Common Stock, with corresponding changes made with respect to any other exchangeable or convertible securities. The Corporation shall not in any manner effect any subdivision (by stock split, stock dividend, reclassification, recapitalization or otherwise) or combination (by reverse stock split, reclassification, recapitalization or otherwise) of the outstanding Common Stock unless accompanied by an identical subdivision or combination, as applicable, of the outstanding Common Units, with corresponding changes made with respect to any other exchangeable or convertible securities. The Partnership shall not in any manner effect any subdivision (by equity split, equity distribution, reclassification, recapitalization or otherwise) or combination (by reverse equity split, reclassification, recapitalization or otherwise) of any outstanding Equity Securities of the Partnership (other than the Common Units) unless accompanied by an identical subdivision or combination, as applicable, of the corresponding Equity Securities of the Corporation, with corresponding changes made with respect to any other exchangeable or convertible securities. The Corporation shall not in any manner effect any subdivision (by stock split, stock dividend, reclassification, recapitalization or otherwise) or combination (by reverse stock split, reclassification, recapitalization or otherwise) of any outstanding Equity Securities of the Corporation (other than the Common Stock) unless accompanied by an identical subdivision or combination, as applicable, of the corresponding Equity Securities of the Partnership, with corresponding changes made with respect to any other exchangeable or convertible securities.
Section 3.05 Repurchases or Redemptions . The Corporation or any of its Subsidiaries may not redeem, repurchase or otherwise acquire (i) any shares of Class A Common Stock unless substantially simultaneously the Partnership redeems, repurchases or otherwise acquires from the Corporation an equal number of Common Units for the same price per security or (ii) any other Equity Securities of the Corporation unless substantially simultaneously the Partnership redeems, repurchases or otherwise acquires from the Corporation an equal number of Equity Securities of the Partnership of a corresponding class or series with substantially the same rights to dividends and distributions (including distributions upon liquidation) and other economic rights as those of such Equity Securities of the Corporation for the same price per security. The Partnership may not redeem, repurchase or otherwise acquire (A) any Common Units from the Corporation or any of its Subsidiaries unless substantially simultaneously the Corporation or such Subsidiary redeems, repurchases or otherwise acquires an equal number of shares of Class A Common Stock for the same price per security from holders thereof, or (B) any other Equity Securities of the Partnership from the Corporation or any of its Subsidiaries unless substantially simultaneously the Corporation or such Subsidiary redeems, repurchases or otherwise acquires for the same price per security an equal number of Equity Securities of the Corporation of a corresponding class or series with substantially the same rights to dividends and
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distributions (including distribution upon liquidation) and other economic rights as those of such Equity Securities of the Corporation. Notwithstanding the foregoing, to the extent that any consideration payable by the Corporation in connection with the redemption or repurchase of any shares of Class A Common Stock or other Equity Securities of the Corporation or any of its Subsidiaries consists (in whole or in part) of shares of Class A Common Stock or such other Equity Securities (including, for the avoidance of doubt, in connection with the cashless exercise of an option or warrant), then the redemption or repurchase of the corresponding Common Units or other Equity Securities of the Partnership shall be effectuated in an equivalent manner.
Section 3.06 Certificates Representing Units; Lost, Stolen or Destroyed Certificates; Registration and Transfer of Units .
(a) Units shall not be certificated unless otherwise determined by the General Partner. If the General Partner determines that one or more Units shall be certificated, each such certificate shall be signed by or in the name of the Partnership, by the Chief Executive Officer and any other officer designated by the General Partner, representing the number of Units held by such holder. Such certificate shall be in such form (and shall contain such legends) as the General Partner may determine. Any or all of such signatures on any certificate representing one or more Units may be a facsimile, engraved or printed, to the extent permitted by applicable Law. The General Partner agrees that it shall not elect to treat any Unit as a “security” within the meaning of Article 8 of the Uniform Commercial Code unless thereafter all Units then outstanding are represented by one or more certificates.
(b) If Units are certificated, the General Partner may direct that a new certificate representing one or more Units be issued in place of any certificate theretofore issued by the Partnership alleged to have been lost, stolen or destroyed, upon delivery to the General Partner of an affidavit of the owner or owners of such certificate, setting forth such allegation. The General Partner may require the owner of such lost, stolen or destroyed certificate, or such owner’s legal representative, to give the Partnership a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of any such new certificate.
(c) Upon surrender to the Partnership or the transfer agent of the Partnership, if any, of a certificate for one or more Units, duly endorsed or accompanied by appropriate evidence of succession, assignment or authority to transfer, in compliance with the provisions hereof, the Partnership shall issue a new certificate representing one or more Units to the Person entitled thereto, cancel the old certificate and record the transaction upon its books. Subject to the provisions of this Agreement, the General Partner may prescribe such additional rules and regulations as it may deem appropriate relating to the issue, Transfer and registration of Units.
Section 3.07 Negative Capital Accounts . No Partner shall be required to pay to any other Partner or the Partnership any deficit or negative balance which may exist from time to time in such Partner’s Capital Account (including upon and after dissolution of the Partnership).
Section 3.08 No Withdrawal . No Person shall be entitled to withdraw any part of such Person’s Capital Contribution or Capital Account or to receive any Distribution from the Partnership, except as expressly provided in this Agreement.
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Section 3.09 Loans From Partners . Loans by Partners to the Partnership shall not be considered Capital Contributions. Subject to the provisions of Section 3.01(c) , the amount of any such advances shall be a debt of the Partnership to such Partner and shall be payable or collectible in accordance with the terms and conditions upon which such advances are made.
Section 3.10 Tax Treatment of Corporate Stock Option Plans and Equity Plans .
(a) Options Granted to Persons other than Partnership Employees . If at any time or from time to time, in connection with any Stock Option Plan, a stock option granted over shares of Class A Common Stock to a Person other than a Partnership Employee is duly exercised, notwithstanding the amount of the Capital Contribution actually made pursuant to Section 3.04(a) , solely for U.S. federal (and applicable state and local) income tax purposes, the Corporation shall be deemed to have contributed to the Partnership as a Capital Contribution, in lieu of the Capital Contribution actually made and in consideration of additional Common Units, an amount equal to the Value of a share of Class A Common Stock as of the date of such exercise multiplied by the number of shares of Class A Common Stock then being issued by the Corporation in connection with the exercise of such stock option.
(b) Options Granted to Partnership Employees . If at any time or from time to time, in connection with any Stock Option Plan, a stock option granted over shares of Class A Common Stock to a Partnership Employee is duly exercised, solely for U.S. federal (and applicable state and local) income tax purposes, the following transactions shall be deemed to have occurred:
(i) The Corporation shall sell to the Optionee, and the Optionee shall purchase from the Corporation, the number of shares of Class A Common Stock equal to the number of shares of Class A Common Stock as to which such stock option is being exercised multiplied by the following: (x) the exercise price payable by the Optionee in connection with the exercise of such stock option divided by (y) the Value of a share of Class A Common Stock at the time of such exercise.
(ii) The Corporation shall sell to the Partnership (or, if the Optionee is an employee of, or other service provider to, a Subsidiary, the Corporation shall sell to such Subsidiary), and the Partnership (or such Subsidiary, as applicable) shall purchase from the Corporation, a number of shares of Class A Common Stock equal to the excess of (x) the number of shares of Class A Common Stock as to which such stock option is being exercised over (y) the number of shares of Class A Common Stock sold pursuant to Section 3.10(b)(i) hereof. The purchase price per share of Class A Common Stock for such sale of shares of Class A Common Stock to the Partnership (or such Subsidiary) shall be the Value of a share of Class A Common Stock as of the date of exercise of such stock option.
(iii) The Partnership shall transfer to the Optionee (or, if the Optionee is an employee of, or other service provider to, a Subsidiary, the Subsidiary shall transfer to the Optionee) at no additional cost to such Partnership Employee and as additional compensation to such Partnership Employee, the number of shares of Class A Common Stock described in Section 3.10(b)(ii) .
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(iv) The Corporation shall be deemed to have contributed any amounts received by the Corporation pursuant to Section 3.10(b)(i) and any amount deemed to be received by the Partnership pursuant to Section 3.10(b)(ii) in connection with the exercise of such stock option.
The transactions described in this Section 3.10(b) are intended to comply with the provisions of Treasury Regulations Section 1.1032-3 and shall be interpreted consistently therewith.
(c) Restricted Stock Granted to Partnership Employees . If at any time or from time to time, in connection with any Equity Plan (other than a Stock Option Plan), any shares of Class A Common Stock are issued to a Partnership Employee (including any shares of Class A Common Stock that are subject to forfeiture in the event such Partnership Employee terminates his or her employment with the Partnership or any Subsidiary) in consideration for services performed for the Partnership or any Subsidiary, on the date (such date, the “ Vesting Date ”) that the Value of such shares is includible in taxable income of such Partnership Employee, the following events will be deemed to have occurred solely for U.S. federal (and applicable state and local) income tax purposes: (a) the Corporation shall be deemed to have sold such shares of Class A Common Stock to the Partnership (or, if such Partnership Employee is an employee of, or other service provider to, a Subsidiary, to such Subsidiary) for a purchase price equal to the Value of such shares of Class A Common Stock, (b) the Partnership (or such Subsidiary) shall be deemed to have delivered such shares of Class A Common Stock to such Partnership Employee, (c) the Corporation shall be deemed to have contributed the purchase price for such shares of Class A Common Stock to the Partnership as a Capital Contribution, and (d) in the case where such Partnership Employee is an employee of a Subsidiary, the Partnership shall be deemed to have contributed such amount to the capital of the Subsidiary.
(d) Future Stock Incentive Plans . Nothing in this Agreement shall be construed or applied to preclude or restrain the Corporation from adopting, modifying or terminating stock incentive plans for the benefit of employees, directors or other business associates of the Corporation, the Partnership or any of their respective Affiliates. The Partners acknowledge and agree that, in the event that any such plan is adopted, modified or terminated by the Corporation, amendments to this Section 3.10 may become necessary or advisable and that any approval or consent to any such amendments requested by the Corporation shall be deemed granted by the General Partner without the requirement of any further consent or acknowledgement of any other Partner.
(e) Anti-dilution adjustments. For all purposes of this Section 3.10 , the number of shares of Class A Common Stock and the corresponding number of Common Units shall be determined after giving effect to all anti-dilution or similar adjustments that are applicable, as of the date of exercise or vesting, to the option, warrant, restricted stock or other equity interest that is being exercised or becomes vested under the applicable Stock Option Plan or other Equity Plan and applicable award or grant documentation.
Section 3.11 Dividend Reinvestment Plan, Cash Option Purchase Plan, Stock Incentive Plan or Other Plan . Except as may otherwise be provided in this Article III , all amounts received or deemed received by the Corporation in respect of any dividend reinvestment plan, cash option purchase plan, stock incentive or other stock or subscription plan or agreement, either (a) shall be
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utilized by the Corporation to effect open market purchases of shares of Class A Common Stock, or (b) if the Corporation elects instead to issue new shares of Class A Common Stock with respect to such amounts, shall be contributed by the Corporation to the Partnership in exchange for additional Units. Upon such contribution, the Partnership will issue to the Corporation a number of Units equal to the number of new shares of Class A Common Stock so issued.
ARTICLE IV.
DISTRIBUTIONS
Section 4.01 Distributions .
(a) Distributable Cash; Other Distributions . To the extent permitted by applicable Law and hereunder, Distributions to Limited Partners may be declared by the General Partner out of Distributable Cash or other funds or property legally available therefor in such amounts and on such terms (including the payment dates of such Distributions) as the General Partner shall determine using such record date as the General Partner may designate; such Distributions (except, for the avoidance of doubt, for the Distributions described in Section 3.03(a) pursuant to the Contribution Agreements) shall be made to the Limited Partners as of the close of business on such record date on a pro rata basis in accordance with each Limited Partner’s Percentage Interest as of the close of business on such record date; provided, however , that the General Partner shall have the obligation to make Distributions as set forth in Section 4.01(b) and Section 14.02 ; and provided further that, notwithstanding any other provision herein to the contrary, no Distributions shall be made to any Limited Partner to the extent such Distribution would violate Section 15-309 of the Delaware Act. Promptly following the designation of a record date and the declaration of a Distribution pursuant to this Section 4.01(a) , the General Partner shall give notice to each Limited Partner of the record date, the amount and the terms of the Distribution and the payment date thereof. In furtherance of the foregoing, it is intended that the General Partner shall, to the extent permitted by applicable Law and hereunder, have the right in its sole discretion to make Distributions to the Limited Partners pursuant to this Section 4.01(a) in such amounts as shall enable the Corporation to pay dividends or to meet its obligations (to the extent such obligations are not otherwise able to be satisfied as a result of the Distributions required to be made pursuant to Section 4.01(b) or reimbursements required to be made pursuant to Section 6.05 ).
(b) Tax Distributions . With respect to any tax period (or the portion thereof) ending after the date hereof:
(i) The Partnership shall make distributions to all Limited Partners pro rata, in accordance with each Limited Partner’s Percentage Interest, on a quarterly basis and in such amounts as necessary to enable the Corporation to timely (x) satisfy all of its U.S. federal, state and local and non-U.S. tax liabilities, and (y) meet its obligations pursuant to the Tax Receivable Agreement.
(ii) If a Partner (other than the Corporation) has an Assumed Tax Liability at a Tax Advance Date in excess of the sum of the cumulative amount of distributions under Section 4.01(b)(i) , Section 4.01(a) and any Tax Advances (as defined below) made to such Partner through such date, the Partnership shall, to the extent permitted by
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applicable Law, and subject to the availability of funds and any restrictions contained in any agreement to which the Partnership or any of its Subsidiaries is bound, make advances to such Partner in an amount equal to such excess (a “ Tax Advance ”). Any such Tax Advance shall be treated as an advance against and, thus, shall reduce (without duplication), any future distributions that would otherwise be made to such Partner pursuant to Sections 4.01(a) and 14.02(d) . If there is a Tax Advance outstanding with respect to a Partner who (i) elects to participate in a Redemption (including, for the avoidance of doubt, any Direct Exchange at the option of the Corporation pursuant to Section 11.03 ), or (ii) Transfers Units pursuant to the provisions of Article X , then in each case such Partner shall indemnify and hold harmless the Partnership against such Tax Advance, and shall be required to promptly pay to the Partnership (but in all events within fifteen (15) days after the Redemption Date or Transfer Date, as the case may be) an amount of cash equal to the proportionate share of such Tax Advance relating to its Common Units subject to the Redemption or Transfer (determined at the time of the Redemption or Transfer based on the number of Common Units subject to the Redemption or Transfer as compared to the total number of Common Units held by such Partner), provided that, in the case of a Transfer described in clause (ii) , such Partner shall not be required to pay such amount of cash equal to the proportionate share of such Tax Advance relating to its Common Units subject to the Transfer, if the transferee agrees to assume the Partner’s obligation to repay to the Partnership such amount equal to the proportionate share of the Partner’s existing Tax Advance relating to such Common Units subject to the Transfer, and such Partner shall be relieved from any liabilities associated with and the obligation to repay its existing Tax Advance relating to such Common Units subject to the Transfer. The obligations of each Partner pursuant to the preceding sentence shall survive the withdrawal of any Partner or the transfer of any Partner’s Units in the Partnership and shall apply to any current or former Partner. For the avoidance of doubt, any repayment of a Tax Advance pursuant to the previous sentence shall not be treated as a Capital Contribution.
Section 4.02 Restricted Distributions . Notwithstanding any provision to the contrary contained in this Agreement, the Partnership shall not make any Distribution to any Partner on account of any Limited Partner Interest if such Distribution would violate any applicable Law or the terms of the Credit Agreement or other debt financing of the Partnership or its Subsidiaries.
ARTICLE V.
CAPITAL ACCOUNTS; ALLOCATIONS; TAX MATTERS
Section 5.01 Capital Accounts .
(a) The Partnership shall maintain a separate Capital Account for each Partner according to the rules of Treasury Regulations Section 1.704-1(b)(2)(iv). For this purpose, the Partnership may (in the discretion of the General Partner), upon the occurrence of the events specified in Treasury Regulations Section 1.704-1(b)(2)(iv)(f), increase or decrease the Capital Accounts in accordance with the rules of such Treasury Regulations and Treasury Regulations Section 1.704-1(b)(2)(iv)(g) to reflect a revaluation of Partnership property. The Capital Account balance of each of the Partners as of the date hereof, as adjusted in accordance with Treasury Regulations Section 1.704-1(b)(2)(iv)(f), is its respective “Contribution Closing Capital Account Balance” set forth on the Schedule of Limited Partners.
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(b) For purposes of computing the amount of any item of Partnership income, gain, loss or deduction to be allocated pursuant to this Article V and to be reflected in the Capital Accounts of the Partners, the determination, recognition and classification of any such item shall be the same as its determination, recognition and classification for U.S. federal income tax purposes (including any method of depreciation, cost recovery or amortization used for this purpose); provided, however , that:
(i) The computation of all items of income, gain, loss and deduction shall include those items described in Code Section 705(a)(l)(B) or Code Section 705(a)(2)(B) and Treasury Regulations Section 1.704-1(b)(2)(iv)(i), without regard to the fact that such items are not includable in gross income or are not deductible for U.S. federal income tax purposes.
(ii) If the Book Value of any Partnership property is adjusted pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(e) or (f), the amount of such adjustment shall be taken into account as gain or loss from the disposition of such property.
(iii) Items of income, gain, loss or deduction attributable to the disposition of Partnership property having a Book Value that differs from its adjusted basis for tax purposes shall be computed by reference to the Book Value of such property.
(iv) In lieu of the depreciation, amortization and other cost recovery deductions taken into account in computing Profits or Losses (excluding depletion with respect to a Depletable Property), there shall be taken into account Depreciation for such Taxable Year or other Fiscal Period.
(v) To the extent an adjustment to the adjusted tax basis of any Partnership asset pursuant to Code Sections 732(d), 734(b) or 743(b) is required, pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital Accounts, the amount of such adjustment to the Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis).
(vi) Simulated Gains with respect to Depletable Properties shall be taken into account in computing Profits and Losses in lieu of actual gains on such Depletable Properties.
(vii) Items specifically allocated under Section 5.03 shall be excluded from the computation of Profits and Losses.
Section 5.02 Allocations . After giving effect to the allocations under Section 5.03 , and subject to Section 5.04 , Profits and Losses (or items thereof) for any Taxable Year or other Fiscal Period shall be allocated among the Capital Accounts of the Partners pro rata in such a manner that, after adjusting for all Capital Contributions and distributions through the end of such Taxable Year or other Fiscal Period, the Capital Account balance of each Partner, immediately
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after making such allocation, is as nearly as possible equal to (a) the amount such Partner would receive pursuant to Section 14.02(d) if all of the assets of the Partnership on hand at the end of such Taxable Year or other Fiscal Period were sold for cash equal to their Book Values, all liabilities of the Partnership were satisfied in cash in accordance with their terms (limited with respect to each nonrecourse liability to the Book Value of the assets securing such liability), and all remaining or resulting cash were distributed, in accordance with Section 14.02(d) , to the Partners, minus (b) such Partner’s share of the Partnership Minimum Gain and Partner Minimum Gain, computed immediately prior to the hypothetical sale of assets, and the amount any such Partner is treated as obligated to contribute to the Partnership, computed immediately after the hypothetical sale of assets. Notwithstanding any contrary provision in this Agreement, the General Partner shall make appropriate adjustments to allocations of Profits and Losses to (or, if necessary, allocate items of gross income, gain, loss or deduction of the Partnership among) the Partners such that, to the maximum extent possible, the Capital Accounts of the Partners are proportionate to their Percentage Interests. In each case, such adjustments or allocations shall occur, to the maximum extent possible, in the Taxable Year or other Fiscal Period of the event requiring such adjustments or allocations.
Section 5.03 Regulatory and Special Allocations .
(a) Partner nonrecourse deductions (as defined in Treasury Regulations Section 1.704-2(i)(2)) attributable to partner nonrecourse debt (as defined in Treasury Regulations Section 1.704-2(b)(4)) shall be allocated in the manner required by Treasury Regulations Section 1.704-2(i). If there is a net decrease during a Taxable Year in Partner Minimum Gain, Profits for such Taxable Year (and, if necessary, for subsequent Taxable Years) shall be allocated to the Partners in the amounts and of such character as determined according to Treasury Regulations Section 1.704-2(i)(4).
(b) Nonrecourse deductions (as determined according to Treasury Regulations Section 1.704-2(b)(1)) for any Taxable Year shall be allocated pro rata among the Partners in accordance with their Percentage Interests. Except as otherwise provided in Section 5.03(a) , if there is a net decrease in the Partnership Minimum Gain during any Taxable Year, each Partner shall be allocated Profits for such Taxable Year (and, if necessary, for subsequent Taxable Years) in the amounts and of such character as determined according to Treasury Regulations Section 1.704-2(f). This Section 5.03(b) is intended to be a minimum gain chargeback provision that complies with the requirements of Treasury Regulations Section 1.704-2(f), and shall be interpreted in a manner consistent therewith.
(c) If any Partner that unexpectedly receives an adjustment, allocation or Distribution described in Treasury Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6) has an Adjusted Capital Account Deficit as of the end of any Taxable Year, computed after the application of Sections 5.03(a) and 5.03(b) but before the application of any other provision of this Article V , then Profits for such Taxable Year shall be allocated to such Partner in proportion to, and to the extent of, such Adjusted Capital Account Deficit. This Section 5.03(c) is intended to be a qualified income offset provision as described in Treasury Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted in a manner consistent therewith.
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(d) If the allocation of Losses to a Partner as provided in Section 5.02 would create or increase an Adjusted Capital Account Deficit, there shall be allocated to such Partner only that amount of Losses as will not create or increase an Adjusted Capital Account Deficit. The Losses that would, absent the application of the preceding sentence, otherwise be allocated to such Partner shall be allocated to the other Partners in accordance with their relative Percentage Interests, subject to this Section 5.03(d) .
(e) Profits and Losses described in Section 5.01(b)(v) shall be allocated in a manner consistent with the manner that the adjustments to the Capital Accounts are required to be made pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(j) and (m).
(f) Simulated Depletion for each Depletable Property and Simulated Loss upon the disposition of a Depletable Property shall be allocated among the Partners in proportion to their shares of the Simulated Basis in such property.
(g) The allocations set forth in Section 5.03(a) through and including Section 5.03(d) (the “ Regulatory Allocations ”) are intended to comply with certain requirements of Sections 1.704-1(b) and 1.704-2 of the Treasury Regulations. The Regulatory Allocations may not be consistent with the manner in which the Partners intend to allocate Profit and Loss of the Partnership or make Distributions. Accordingly, notwithstanding the other provisions of this Article V , but subject to the Regulatory Allocations, income, gain, deduction and loss shall be reallocated among the Partners so as to eliminate the effect of the Regulatory Allocations and thereby cause the respective Capital Accounts of the Partners to be in the amounts (or as close thereto as possible) they would have been if Profit and Loss (and such other items of income, gain, deduction and loss) had been allocated without reference to the Regulatory Allocations. In general, the Partners anticipate that this will be accomplished by specially allocating other Profit and Loss (and such other items of income, gain, deduction and loss) among the Partners so that the net amount of the Regulatory Allocations and such special allocations to each such Partner is zero. In addition, if in any Taxable Year or other Fiscal Period there is a decrease in Partnership Minimum Gain, or in Partner Minimum Gain, and application of the minimum gain chargeback requirements set forth in Section 5.03(a) or Section 5.03(b) would cause a distortion in the economic arrangement among the Partners, the Partners may, if they do not expect that the Partnership will have sufficient other income to correct such distortion, request the Internal Revenue Service to waive either or both of such minimum gain chargeback requirements. If such request is granted, this Agreement shall be applied in such instance as if it did not contain such minimum gain chargeback requirement.
Section 5.04 Tax Allocations .
(a) The income, gains, losses, deductions and credits of the Partnership will be allocated, for U.S. federal (and applicable state and local) income tax purposes, among the Partners in accordance with the allocation of such income, gains, losses, deductions and credits among the Partners for computing their Capital Accounts; provided , that if any such allocation is not permitted by the Code or other applicable Law, the Partnership’s subsequent income, gains, losses, deductions and credits will be allocated among the Partners so as to reflect as nearly as possible the allocation set forth herein in computing their Capital Accounts.
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(b) Cost and percentage depletion deductions with respect to each Depletable Property shall be computed separately by the Partners rather than the Partnership. For purposes of such computations, the U.S. federal income tax basis of each Depletable Property shall be allocated to each Partner in accordance with such Partner’s Percentage Interest as of the time such Depletable Property is acquired by the Partnership, and shall be reallocated among the Partners in accordance with such Partner’s Percentage Interest as determined immediately following the occurrence of an event giving rise to an adjustment to the Book Values of the Partnership’s Depletable Properties pursuant to the definition of Book Value (or at the time of any material additions to the U.S. federal income tax basis of such Depletable Property). Such allocations are intended to be applied in accordance with the “partners’ interests in partnership capital” under Section 613A(c)(7)(D) of the Code; provided that the Partners understand and agree that the General Partner may authorize special allocations of tax basis, income, gain, deduction or loss, as computed for U.S. federal income tax purposes, in order to eliminate differences between Simulated Basis and adjusted U.S. federal income tax basis with respect to Depletable Properties, in such manner as determined consistent with the principles of Section 704(c) of the Code, the Treasury Regulations thereunder and the portions of the Treasury Regulations under Section 704(b) that apply the principles of Section 704(c), using the “traditional method”, as described in Treasury Regulations Section 1.704-3(b).
(c) For purposes of the separate computation of gain or loss by each Partner on a taxable Disposition of Depletable Property, the amount realized from such Disposition shall be allocated (i) first, to the Partners in an amount equal to the Simulated Basis in such Depletable Property and in the same proportion as their shares thereof were allocated and (ii) second, any remaining amount realized shall be allocated consistent with the allocation of Simulated Gains; provided , however , that the Partners understand and agree that the General Partner may authorize special allocations of tax basis, income, gain, deduction or loss, as computed for U.S. federal income tax purposes, in order to eliminate differences between Simulated Basis and adjusted U.S. federal income tax basis with respect to Depletable Properties, in such manner as determined consistent with the principles of Section 704(c) of the Code, the Treasury Regulations thereunder and the portions of the Treasury Regulations under Section 704(b) that apply the principles of Section 704(c), using the “traditional method”, as described in Treasury Regulations Section 1.704-3(b). The provisions of this Section 5.04(c) and the other provisions of this Agreement relating to allocations under Section 613A(c)(7)(D) of the Code are intended to comply with Treasury Regulations Section 1.704-1(b)(4)(v) and shall be interpreted and applied in a manner consistent with such Treasury Regulations.
(d) Each Partner shall, in a manner consistent with this Article V , separately keep records of its share of the adjusted tax basis in each Depletable Property, adjust such share of the adjusted tax basis for any cost or percentage depletion allowable with respect to such property and use such adjusted tax basis in the computation of its cost depletion or in the computation of its gain or loss on the disposition of such property by the Partnership. Upon the request of the Partnership, each Partner may advise the Partnership of its adjusted tax basis in each Depletable Property and any depletion computed with respect thereto, both as computed in accordance with the provisions of this subsection. The Partnership may rely on such information and, if it is not provided by the Partner, may make such reasonable assumptions as it shall determine with respect thereto.
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(e) Items of Partnership taxable income, gain, loss and deduction with respect to any property contributed to the capital of the Partnership shall be allocated among the Partners in accordance with Code Section 704(c) so as to take account of any variation between the adjusted basis of such property to the Partnership for U.S. federal income tax purposes and its Book Value using the “traditional method”, as described in Treasury Regulations Section 1.704-3(b).
(f) If the Book Value of any Partnership asset is adjusted pursuant to Section 5.01(b) , subsequent allocations of items of taxable income, gain, loss and deduction with respect to such asset shall take account of any variation between the adjusted basis of such asset for U.S. federal income tax purposes and its Book Value in the same manner as under Code Section 704(c) using the “traditional method”, as described in Treasury Regulations Section 1.704-3(b).
(g) If, as a result of an exercise of a noncompensatory option (including the Warrants) to acquire an interest in the Partnership, a Capital Account reallocation is required under Treasury Regulations Section 1.704-1(b)(2)(iv)( s )(3), the Partnership shall make corrective allocations pursuant to Treasury Regulations Section 1.704-1(b)(4)(x).
(h) Allocations of tax credits, tax credit recapture, and any items related thereto shall be allocated to the Partners pro rata as determined by the General Partner taking into account the principles of Treasury Regulations Section 1.704-1(b)(4)(ii).
(i) For purposes of determining a Partner’s pro rata share of the Partnership’s “excess nonrecourse liabilities” within the meaning of Treasury Regulations Section 1.752-3(a)(3), each Partner’s interest in income and gain shall be in proportion to its Percentage Interests.
(j) Allocations pursuant to this Section 5.04 are solely for purposes of U.S. federal (and applicable state and local) income taxes and shall not affect, or in any way be taken into account in computing, any Partner’s Capital Account or share of Profits, Losses, Distributions or other Partnership items pursuant to any provision of this Agreement.
Section 5.05 Withholding; Indemnification and Reimbursement for Payments on Behalf of a Partner . The Partnership and its Subsidiaries may withhold from distributions, allocations or portions thereof if it is required to do so by any applicable Law, and each Partner hereby authorizes the Partnership and its Subsidiaries to withhold or pay on behalf of or with respect to such Partner any amount of U.S. federal, state, or local or non-U.S. taxes that the General Partner determines, in good faith, that the Partnership or any of its Subsidiaries is required to withhold or pay with respect to any amount distributable or allocable to such Partner pursuant to this Agreement. In addition, if the Partnership is obligated to pay any other amount to a Governmental Entity (or otherwise makes a payment to a Governmental Entity) that is specifically attributable to a Partner (including U.S. federal income taxes as a result of Partnership obligations pursuant to the Revised Partnership Audit Provisions with respect to items of income, gain, loss deduction or credit allocable or attributable to such Partner, state personal property taxes and state unincorporated business taxes, but excluding payments such as professional association fees and the like made voluntarily by the Partnership on behalf of any Partner based upon such Partner’s status as an employee of the Partnership), then such tax shall be treated as an amount of taxes withheld or paid with respect to such Partner pursuant to this Section 5.05 . For all purposes under this Agreement, any amounts withheld or paid with respect
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to a Partner pursuant to this Section 5.05 shall be treated as having been distributed to such Partner at the time such withholding or payment is made. Further, to the extent that the cumulative amount of such withholding or payment for any period exceeds the distributions to which such Partner is entitled for such period, such Partner shall indemnify the Partnership in full for the amount of such excess. The General Partner may offset Distributions to which a Person is otherwise entitled under this Agreement against such Person’s obligation to indemnify the Partnership under this Section 5.05 . A Partner’s obligation to indemnify the Partnership under this Section 5.05 shall survive the termination, dissolution, liquidation and winding up of the Partnership, and for purposes of this Section 5.05 , the Partnership shall be treated as continuing in existence. The Partnership may pursue and enforce all rights and remedies it may have against each Partner under this Section 5.05 , including instituting a lawsuit to collect amounts owed under such indemnity with interest accruing from the date such withholding or payment is made by the Partnership at a rate per annum equal to the sum of the Base Rate (but not in excess of the highest rate per annum permitted by Law). Any income from such indemnity (and interest) shall not be allocated to or distributed to the Partner paying such indemnity (and interest). Each Partner hereby agrees to furnish to the Partnership such information and forms as required or reasonably requested in order to comply with any laws and regulations governing withholding of tax or in order to claim any reduced rate of, or exemption from, withholding to which the Partner is legally entitled.
Section 5.06 Tax Treatment . Notwithstanding anything to the contrary, the Partnership and the parties intend the tax treatment described in Section 6.6(g) of the Alta Mesa Contribution Agreement and Section 6.7(h) of the Kingfisher Contribution Agreement.
ARTICLE VI.
MANAGEMENT
Section 6.01 Authority of General Partner .
(a) Except for situations in which the approval of any Limited Partner(s) is specifically required by this Agreement, (i) all management powers over the business and affairs of the Partnership shall be exclusively vested in the General Partner and (ii) the General Partner shall conduct, direct and exercise full control over all activities of the Partnership. Except as otherwise expressly provided for herein and subject to the other provisions of this Agreement, no Limited Partner has the right or power to participate in the management or affairs of the Partnership, nor does any Limited Partner have the power to sign for or bind the Partnership or deal with third parties on behalf of the Partnership without the consent of the General Partner.
(b) The day-to-day business and operations of the Partnership shall be overseen and implemented by officers of the Partnership (each, an “ Officer ” and collectively, the “ Officers ”), subject to the limitations imposed by the General Partner. An Officer may, but need not, be a Partner. Each Officer shall be appointed by the General Partner and shall hold office until his or her successor shall be duly designated and shall qualify or until his or her death or until he shall resign or shall have been removed in the manner hereinafter provided. Any one Person may hold more than one office. Subject to the other provisions in this Agreement (including in Section 6.06 below), the salaries or other compensation, if any, of the Officers of the Partnership shall be fixed from time to time by the General Partner. The authority and responsibility of the Officers
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shall include, but not be limited to, such duties as the General Partner may, from time to time, delegate to them and the carrying out of the Partnership’s business and affairs on a day-to-day basis. An Officer may also perform one or more roles as an officer of the General Partner. The General Partner may remove any Officer from office at any time, with or without cause. If any vacancy shall occur in any office, for any reason whatsoever, then the General Partner shall have the right to appoint a new Officer to fill the vacancy.
(c) The General Partner shall have the power and authority to effectuate the sale, lease, transfer, exchange or other disposition of any, all or substantially all of the assets of the Partnership (including the exercise or grant of any conversion, option, privilege or subscription right or any other right available in connection with any assets at any time held by the Partnership) or the merger, consolidation, reorganization or other combination of the Partnership with or into another entity.
(d) Notwithstanding any other provision of this Agreement, neither the General Partner nor any Officer authorized by the General Partner shall have the authority, on behalf of the Partnership, either directly or indirectly, without the prior approval of each Partner, to take any action that would result in the failure of the Partnership to be taxable as a partnership for purposes of federal income tax, or take any position inconsistent with treating the Partnership as a partnership for purposes of federal income tax, except as required by Law.
Section 6.02 Actions of the General Partner . The General Partner may act through any Officer or through any other Person or Persons to whom authority and duties have been delegated pursuant to Section 6.06 .
Section 6.03 Transfer and Withdrawal of General Partner .
(a) Except in connection with a General Partner Change of Control, the General Partner shall not have the right to transfer or assign the General Partner Interest, and the General Partner shall not have the right to withdraw from the Partnership; provided , that, without the consent of any of the Limited Partners, the General Partner may in good faith, at the General Partner’s expense, be reconstituted as or converted into a corporation, partnership or other form of entity (any such reconstituted or converted entity being deemed to be the General Partner for all purposes hereof) by merger, consolidation, conversion or otherwise, or transfer or assign the General Partner Interest (in whole or in part) to one of its Affiliates that is a wholly owned Subsidiary of the Corporation so long as such other entity or Affiliate shall have assumed in writing the obligations of the General Partner under this Agreement. In the event of an assignment or other transfer of all of the General Partner Interest in accordance with this Section 6.03 , such assignee or transferee shall be substituted in the General Partner’s place as general partner of the Partnership and immediately thereafter the General Partner shall withdraw as a general partner of the Partnership (but shall remain entitled to exculpation and indemnification pursuant to Section 6.07 and Section 7.04 with respect to events occurring on or prior to such date).
(b) Except as otherwise contemplated by Section 6.03(a) , no assignee or transferee shall become the general partner of the Partnership by virtue of such assignee’s or transferee’s receiving all or a portion of any interest in the Partnership from the General Partner or another assignee or transferee from the General Partner without the written consent of all of the Partners to such substitution, which consent may be given or withheld, or made subject to such conditions as each Partner deems appropriate in its sole discretion.
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Section 6.04 Transactions Between Partnership and General Partner . The General Partner may cause the Partnership to contract and deal with the General Partner, or any Affiliate of the General Partner, provided such contracts and dealings are on terms comparable to and competitive with those available to the Partnership from others dealing at arm’s length or are approved by the Partners holding a majority of the Units (excluding Units held by the General Partner and its controlled Affiliates) then outstanding and otherwise are permitted by the Credit Agreement.
Section 6.05 Reimbursement for Expenses . The Limited Partners acknowledge and agree that the General Partner is and will continue to be a wholly owned Subsidiary of the Corporation, whose Class A Common Stock is and will continue to be publicly traded, and therefore the General Partner and the Corporation will have access to the public capital markets and that such status and the services performed by the General Partner will inure to the benefit of the Partnership and all Limited Partners; therefore, the General Partner and the Corporation shall be reimbursed by the Partnership for any reasonable out-of-pocket expenses incurred on behalf of the Partnership, including all fees, expenses and costs of the Corporation being a public company (including public reporting obligations, proxy statements, stockholder meetings, stock exchange fees, transfer agent fees, SEC and FINRA filing fees and offering expenses) and maintaining its corporate existence. In the event that (i) shares of Class A Common Stock were sold to underwriters in the initial public offering of the Corporation or are sold to underwriters in any public offering after the Effective Time, in each case, at a price per share that is lower than the price per share for which such shares of Class A Common Stock are sold to the public in such public offering after taking into account underwriters’ discounts or commissions and brokers’ fees or commissions (including, for the avoidance of doubt, any deferred discounts or commissions and brokers’ fees or commissions payable in connection with or as a result of the Contribution Closing) (such difference, the “ Discount ”) and (ii) the proceeds from such public offering are used to fund the Cash Settlement for any Redeemed Units or otherwise contributed to the Partnership, the Partnership shall reimburse the Corporation for such Discount by treating such Discount as an additional Capital Contribution made by the Corporation to the Partnership, issuing Common Units in respect of such deemed Capital Contribution in accordance with Section 11.02 , and increasing the Corporation’s Capital Account by the amount of such Discount. To the extent practicable, expenses incurred by the General Partner or the Corporation on behalf of or for the benefit of the Partnership shall be billed directly to and paid by the Partnership and, if and to the extent any reimbursements to the General Partner or the Corporation or any of their respective Affiliates by the Partnership pursuant to this Section 6.05 constitute gross income to such Person (as opposed to the repayment of advances made by such Person on behalf of the Partnership), such amounts shall be treated as “guaranteed payments” within the meaning of Code Section 707(c) and shall not be treated as distributions for purposes of computing the Limited Partners’ Capital Accounts.
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Section 6.06 Delegation of Authority . The General Partner (a) may, from time to time, delegate to one or more Persons such authority and duties as the General Partner may deem advisable, and (b) may assign titles (including chief executive officer, president, chief executive officer, chief financial officers, chief operating officer, vice president, secretary, assistant secretary, treasurer or assistant treasurer) and delegate certain authority and duties to such Persons as the same may be amended, restated or otherwise modified from time to time. Any number of titles may be held by the same individual. The salaries or other compensation, if any, of such agents of the Partnership shall be fixed from time to time by the General Partner, subject to the other provisions in this Agreement.
Section 6.07 Limitation of Liability of the General Partner .
(a) Except as otherwise provided herein or in an agreement entered into by such Person and the Partnership, neither the General Partner nor any of the General Partner’s Affiliates shall be liable to the Partnership or to any Partner that is not the General Partner for any act or omission performed or omitted by the General Partner in its capacity as the general partner of the Partnership pursuant to authority granted to the General Partner by this Agreement; provided, however , that, except as otherwise provided herein, such limitation of liability shall not apply to the extent the act or omission was attributable to the General Partner’s bad faith, willful misconduct or violation of Law in which the General Partner acted with knowledge that its conduct was unlawful, or for any present or future breaches of any representations, warranties, covenants or obligations by the General Partner or its Affiliates contained herein or in the other agreements with the Partnership. The General Partner may exercise any of the powers granted to it by this Agreement and perform any of the duties imposed upon it hereunder either directly or by or through its agents, and shall not be responsible for any misconduct or negligence on the part of any such agent (so long as such agent was selected in good faith and with reasonable care). The General Partner shall be entitled to rely upon the advice of legal counsel, independent public accountants and other experts, including financial advisors, and any act of or failure to act by the General Partner in good faith reliance on such advice shall in no event subject the General Partner to liability to the Partnership or any Partner that is not the General Partner.
(b) Whenever this Agreement or any other agreement contemplated herein provides that the General Partner shall act in a manner which is, or provide terms which are, “fair and reasonable” to the Partnership or any Partner that is not the General Partner, the General Partner shall determine such appropriate action or provide such terms considering, in each case, the relative interests of each party to such agreement, transaction or situation and the benefits and burdens relating to such interests, any customary or accepted industry practices, and any applicable United States generally accepted accounting practices or principles.
(c) Whenever in this Agreement or any other agreement contemplated herein, the General Partner is permitted or required to take any action or to make a decision in its “sole discretion” with “complete discretion” or under a grant of similar authority or latitude, the General Partner shall be entitled to consider such interests and factors as it desires, including its own interests, and shall, to the fullest extent permitted by applicable Law, have no duty or obligation to give any consideration to any interest of or factors affecting the Partnership or other Partners.
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(d) Whenever in this Agreement the General Partner is permitted or required to take any action or to make a decision in its “reasonable discretion,” “good faith” or under another express standard, the General Partner shall act under such express standard and, to the fullest extent permitted by applicable Law, shall not be subject to any other or different standards imposed by this Agreement or any other agreement contemplated herein, and, notwithstanding anything contained herein to the contrary, so long as the General Partner acts in good faith, the resolution, action or terms so made, taken or provided by the General Partner shall not constitute a breach of this Agreement or any other agreement contemplated herein or impose liability upon the General Partner or any of the General Partner’s Affiliates.
Section 6.08 Investment Company Act . The General Partner shall use its best efforts to ensure that the Partnership shall not be subject to registration as an investment company pursuant to the Investment Company Act.
Section 6.09 Outside Activities of the Corporation and the General Partner . The Corporation shall not, and shall not cause or permit the General Partner to, directly or indirectly, enter into or conduct any business or operations, other than, as applicable, in connection with (a) the ownership, acquisition and disposition of Common Units, (b) the management of the business and affairs of the Partnership and its Subsidiaries, (c) the operation of the Corporation as a reporting company with a class (or classes) of securities registered under Section 12 of the Exchange Act and listed on a securities exchange, (d) the offering, sale, syndication, private placement or public offering of stock, bonds, securities or other interests, (e) financing or refinancing of any type related to the Partnership, its Subsidiaries or their assets or activities, and (f) such activities as are incidental to the foregoing; provided, however , that, except as otherwise provided herein, the net proceeds of any sale of Equity Securities of the Corporation pursuant to the preceding clauses (d) and (e) shall be made available to the Partnership as Capital Contributions and the proceeds of any other financing raised by the Corporation pursuant to the preceding clauses (d) and (e) shall be made available to the Partnership as loans or otherwise as appropriate and, provided further , that the Corporation may, in its sole and absolute discretion, from time to time hold or acquire assets in its own name or otherwise other than through the Partnership and its Subsidiaries so long as the Corporation takes all necessary measures to ensure that the economic benefits and burdens of such assets are otherwise vested in the Partnership or its Subsidiaries, through assignment, mortgage loan or otherwise. Nothing contained herein shall be deemed to prohibit the General Partner from executing any guarantee of indebtedness of the Partnership or its Subsidiaries.
Section 6.10 Standard of Care . Except to the extent otherwise expressly set forth in this Agreement, the General Partner shall, in connection with the performance of its duties in its capacity as the General Partner, have the same fiduciary duties to the Partnership and the Partners as would be owed to a Delaware corporation and its stockholders by its directors, and shall be entitled to the benefit of the same presumptions in carrying out such duties as would be afforded to a director of a Delaware corporation (as such duties and presumptions are defined, described and explained under the Laws of the State of Delaware as in effect from time to time). The provisions of this Agreement, to the extent that they restrict or eliminate the duties (including fiduciary duties) and liabilities of the General Partner otherwise existing at law or in equity, are agreed by the Partners to replace, to the fullest extent permitted by applicable Law, such other duties and liabilities of the General Partner.
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ARTICLE VII.
RIGHTS AND OBLIGATIONS OF PARTNERS
Section 7.01 Limitation of Liability and Duties of Partners; Investment Opportunities .
(a) Except as provided in this Agreement or in the Delaware Act, no Partner (including the General Partner) shall be obligated personally for any debt, obligation or liability solely by reason of being a Partner or acting as the General Partner of the Partnership; provided that, in the case of the General Partner, this sentence shall not in any manner limit the liability of the General Partner to the Partnership or any Partner (other than the General Partner) attributable to a breach by the General Partner of any obligations of the General Partner under this Agreement. Notwithstanding anything contained herein to the contrary, the failure of the Partnership to observe any formalities or requirements relating to the exercise of its powers or management of its business and affairs under this Agreement or the Delaware Act shall not be grounds for imposing personal liability on the Partners for liabilities of the Partnership.
(b) In accordance with the Delaware Act and the laws of the State of Delaware, a Partner may, under certain circumstances, be required to return amounts previously distributed to such Partner. It is the intent of the Partners that no Distribution to any Partner pursuant to Article IV shall be deemed a return of money or other property paid or distributed in violation of the Delaware Act. The payment of any such money or Distribution of any such property to a Partner shall be deemed to be a compromise within the meaning of Section 17-502(b) of the Delaware Act, and, to the fullest extent permitted by Law, any Partner receiving any such money or property shall not be required to return any such money or property to the Partnership or any other Person. However, if any court of competent jurisdiction holds that, notwithstanding the provisions of this Agreement, any Partner is obligated to make any such payment, such obligation shall be the obligation of such Partner and not of any other Partner.
(c) Notwithstanding any other provision of this Agreement (subject to Section 6.07 and except as set forth in Section 6.10 , in each case with respect to the General Partner), to the extent that, at law or in equity, any Partner (or such Partner’s Affiliate or any manager, managing member, general partner, director, officer, employee, agent, fiduciary or trustee of such Partner or of any Affiliate of such Partner (each Person described in this parenthetical, a “ Related Person ”)) has duties (including fiduciary duties) to the Partnership, to another Partner (including the General Partner), to any Person who acquires an interest in a Limited Partner Interest or to any other Person bound by this Agreement, all such duties (including fiduciary duties) are hereby eliminated, to the fullest extent permitted by law, and replaced with the duties or standards expressly set forth herein, if any. The elimination of duties (including fiduciary duties) to the Partnership, each of the Partners (including the General Partner), each other Person who acquires an interest in a Limited Partner Interest and each other Person bound by this Agreement and replacement thereof with the duties or standards expressly set forth herein, if any, are approved by the Partnership, each of the Partners (including the General Partner), each other Person who acquires an interest in a Limited Partner Interest and each other Person bound by this Agreement.
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(d) Notwithstanding any duty (including any fiduciary duty) otherwise applicable at law or in equity, the doctrine of corporate opportunity, or any analogous doctrine, will not apply to any Partner (including the General Partner) or to any Related Person of such Partner, and no Partner (or any Related Person of such Partner) that acquires knowledge of a potential transaction, agreement, arrangement or other matter that may be an opportunity for the Partnership or the Partners will have any duty to communicate or offer such opportunity to the Partnership or the Partners, or to develop any particular investment, and such Person will not be liable to the Partnership or the Partners for breach of any fiduciary or other duty by reason of the fact that such Person pursues or acquires for, or directs such opportunity to, another Person or does not communicate such investment opportunity to the Partners. Notwithstanding any duty (including any fiduciary duty) otherwise applicable at law or in equity, neither the Partnership nor any Partner has any rights or obligations by virtue of this Agreement or the relationships created hereby in or to such independent ventures or the income or profits or losses derived therefrom, and the pursuit of any such ventures outside the Partnership, even if competitive with the activities of the Partnership or the Partners, will not be deemed wrongful or improper.
Section 7.02 Lack of Authority . No Partner, other than the General Partner or a duly appointed Officer, in each case in its capacity as such, has the authority or power to act for or on behalf of the Partnership, to do any act that would be binding on the Partnership or to make any expenditure on behalf of the Partnership. The Partners hereby consent to the exercise by the General Partner of the powers conferred on them by Law and this Agreement.
Section 7.03 No Right of Partition . No Partner, other than the General Partner, shall have the right to seek or obtain partition by court decree or operation of Law of any Partnership property, or the right to own or use particular or individual assets of the Partnership.
Section 7.04 Indemnification .
(a) Subject to Section 5.05 , the Partnership hereby agrees to indemnify and hold harmless any Person (each an “ Indemnified Person ”) to the fullest extent permitted under the Delaware Act, as the same now exists or may hereafter be amended, substituted or replaced (but, in the case of any such amendment, substitution or replacement only to the extent that such amendment, substitution or replacement permits the Partnership to provide broader indemnification rights than the Partnership is providing immediately prior to such amendment), against all expenses, liabilities and losses (including attorneys’ fees, judgments, fines, excise taxes or penalties) reasonably incurred or suffered by such Person (or one or more of such Person’s Affiliates) by reason of the fact that such Person is or was a Partner or is or was serving as the General Partner, Officer, employee or other agent of the Partnership or is or was serving at the request of the Partnership as a manager, officer, director, principal, member, employee or agent of another corporation, partnership, joint venture, limited liability company, trust or other enterprise; provided, however , that no Indemnified Person shall be indemnified for any expenses, liabilities and losses suffered that are attributable to such Indemnified Person’s or its Affiliates’ bad faith, willful misconduct or violation of Law in which such Indemnified Person acted with knowledge that its conduct was unlawful, or for any present or future breaches of any representations, warranties, covenants or obligations by such Indemnified Person or its Affiliates contained herein or in the other agreements with the Partnership. Expenses, including attorneys’ fees, incurred by any such Indemnified Person in defending a proceeding shall be paid by the Partnership in advance of the final disposition of such proceeding, including any appeal therefrom, upon receipt of an undertaking by or on behalf of such Indemnified Person to repay such amount if it shall ultimately be determined that such Indemnified Person is not entitled to be indemnified by the Partnership.
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(b) The right to indemnification and the advancement of expenses conferred in this Section 7.04 shall not be exclusive of any other right which any Person may have or hereafter acquire under any statute, agreement, bylaw, action by the General Partner or otherwise.
(c) The Partnership shall maintain directors’ and officers’ liability insurance, or substantially equivalent insurance, at its expense, to protect any Indemnified Person (and the investment funds, if any, they represent) against any expense, liability or loss described in Section 7.04(a) whether or not the Partnership would have the power to indemnify such Indemnified Person against such expense, liability or loss under the provisions of this Section 7.04 . The Partnership shall use its commercially reasonable efforts to purchase and maintain property, casualty and liability insurance in types and at levels customary for companies of similar size engaged in similar lines of business, as determined in good faith by the General Partner.
(d) Notwithstanding anything contained herein to the contrary (including in this Section 7.04 ), the Partnership agrees that any indemnification and advancement of expenses available to any current or former Indemnified Person from any investment fund that is an Affiliate of the Partnership who served as a director of the Partnership or as a Partner of the Partnership by virtue of such Person’s service as a member, director, partner or employee of any such fund prior to or following the Effective Time (any such Person, a “ Sponsor Person ”) shall be secondary to the indemnification and advancement of expenses to be provided by the Partnership pursuant to this Section 7.04 which shall be provided out of and to the extent of Partnership assets only and no Partner (unless such Partner otherwise agrees in writing or is found in a final decision by a court of competent jurisdiction to have personal liability on account thereof) shall have personal liability on account thereof or shall be required to make additional Capital Contributions to help satisfy such indemnity of the Partnership and the Partnership (i) shall be the primary indemnitor of first resort for such Sponsor Person pursuant to this Section 7.04 and (ii) shall be fully responsible for the advancement of all expenses and the payment of all damages or liabilities with respect to such Sponsor Person which are addressed by this Section 7.04 .
(e) If this Section 7.04 or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Partnership shall nevertheless indemnify and hold harmless each Indemnified Person pursuant to this Section 7.04 to the fullest extent permitted by any applicable portion of this Section 7.04 that shall not have been invalidated and to the fullest extent permitted by applicable Law.
Section 7.05 Limited Partners ’ Right to Act . For matters that require the approval of the Limited Partners, the Limited Partners shall act through meetings and written consents as described in paragraphs (a) and (b) below:
(a) Except as otherwise expressly provided by this Agreement, acts by the Limited Partners holding a majority of the outstanding Units, voting together as a single class, shall be the acts of the Limited Partners. Any Limited Partner entitled to vote at a meeting of Limited
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Partners may authorize another person or persons to act for it by proxy. An electronic mail, telegram, telex, cablegram or similar transmission by the Limited Partner, or a photographic, photostatic, facsimile or similar reproduction of a writing executed by the Limited Partner shall (if stated thereon) be treated as a proxy executed in writing for purposes of this Section 7.05(a) . No proxy shall be voted or acted upon after eleven months from the date thereof, unless the proxy provides for a longer period. A proxy shall be revocable unless the proxy form conspicuously states that the proxy is irrevocable and that the proxy is coupled with an interest. Should a proxy designate two or more Persons to act as proxies, unless that instrument shall provide to the contrary, a majority of such Persons present at any meeting at which their powers thereunder are to be exercised shall have and may exercise all the powers of voting or giving consents thereby conferred, or, if only one be present, then such powers may be exercised by that one; or, if an even number attend and a majority do not agree on any particular issue, the Partnership shall not be required to recognize such proxy with respect to such issue if such proxy does not specify how the votes that are the subject of such proxy are to be voted with respect to such issue.
(b) The actions by the Limited Partners permitted hereunder may be taken at a meeting called by the General Partner or by the Limited Partners holding a majority of the Units entitled to vote on such matter on at least 48 hours’ prior written notice to the other Limited Partners entitled to vote, which notice shall state the purpose or purposes for which such meeting is being called. The actions taken by the Limited Partners entitled to vote or consent at any meeting (as opposed to by written consent), however called and noticed, shall be as valid as though taken at a meeting duly held after regular call and notice if (but not until), either before, at or after the meeting, the Limited Partners entitled to vote or consent as to whom it was improperly held signs a written waiver of notice or a consent to the holding of such meeting or an approval of the minutes thereof. The actions by the Limited Partners entitled to vote or consent may be taken by vote of the Limited Partners entitled to vote or consent at a meeting or by written consent, so long as such consent is signed by Limited Partners having not less than the minimum number of Units that would be necessary to authorize or take such action at a meeting at which all Limited Partners entitled to vote thereon were present and voted. Prompt notice of the action so taken, which shall state the purpose or purposes for which such consent is required and may be delivered via email, without a meeting shall be given to those Limited Partners entitled to vote or consent who have not consented in writing; provided, however , that the failure to give any such notice shall not affect the validity of the action taken by such written consent. Any action taken pursuant to such written consent of the Limited Partners shall have the same force and effect as if taken by the Limited Partners at a meeting thereof.
Section 7.06 Inspection Rights . The Partnership shall permit each Partner and each of its designated representatives to visit and inspect (i) the books and records of the Partnership, including its partner ledger and a list of its Partners and (ii) the books and records of its Subsidiaries. The Partners have no other inspection rights.
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ARTICLE VIII.
BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 8.01 Records and Accounting . The Partnership shall keep, or cause to be kept, appropriate books and records with respect to the Partnership’s business, including all books and records necessary to provide any information, lists and copies of documents required to be provided pursuant to Section 8.03 or pursuant to applicable Laws. All matters concerning (a) the determination of the relative amount of allocations and Distributions among the Limited Partners pursuant to Articles III and IV and (b) accounting procedures and determinations, and other determinations not specifically and expressly provided for by the terms of this Agreement, shall be determined by the General Partner, whose determination shall be final and conclusive as to all of the Limited Partners absent manifest clerical error.
Section 8.02 Fiscal Year . The Fiscal Year of the Partnership shall end on December 31 of each year or such other date as may be established by the General Partner; provided that the Partnership shall have the same Fiscal Year for accounting purposes as its Taxable Year for U.S. federal income tax purposes.
Section 8.03 Reports . The Partnership shall deliver or cause to be delivered, within ninety (90) days after the end of each Fiscal Year, to each Person who was a Partner at any time during such Fiscal Year, all information reasonably necessary for the preparation of such Person’s United States federal and applicable state income tax returns.
ARTICLE IX.
TAX MATTERS
Section 9.01 Preparation of Tax Returns . The General Partner shall arrange, at the Partnership’s expense, for the preparation and timely filing of all tax returns required to be filed by the Partnership. On or before March 15, June 15, September 15, and December 15 of each Taxable Year, the Partnership shall send to each Person who was a Partner at any time during the prior quarter, an estimate of such Partner’s state tax apportionment information and allocations to the Partners of taxable income, gains, losses, deductions and credits for the prior quarter, which estimate shall have been reviewed by the Partnership’s outside tax accountants. In addition, no later than the later of (i) March 15 following the end of the prior Taxable Year, and (ii) thirty (30) Business Days after the issuance of the final financial statement report for a Fiscal Year by the Partnership’s auditors but in no event later than April 15 following the end of the prior Taxable Year, the Partnership shall send to each Person who was a Partner at any time during such Taxable Year, a statement showing such Partner’s (A) final state tax apportionment information, (B) allocations to the Partners of taxable income, gains, losses, deductions and credits for such Taxable Year, (C) a completed IRS Schedule K-1 and (D) all other information reasonably requested and necessary for the preparation of such Partner’s U.S. federal (and applicable state and local) income tax returns, provided that if a complete IRS Schedule K-1 is not issued by March 15 following the end of the relevant Taxable Year, the General Partner shall cause the Partnership to provide each Partner a draft IRS Schedule K-1 for the relevant Taxable Year by March 15 following the end of such Taxable Year. Each Partner shall notify the Partnership, and the Partnership shall take reasonable efforts to notify each of the other Partners, upon receipt of any notice of tax examination of the Partnership by U.S. federal, state or local authorities. Subject to the terms and conditions of this Agreement, in its capacity as Tax Matters Partner or Partnership Representative (as applicable), the General Partner shall have the authority to prepare the tax returns of the Partnership using the elections set forth in Section 9.02 and such other permissible methods and elections as it determines in its reasonable discretion.
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Section 9.02 Tax Elections . The Partnership and any eligible Subsidiary shall make an election pursuant to Section 754 of the Code, shall not thereafter revoke such election and shall make a new election pursuant to Section 754 to the extent necessary following any “termination” of the Partnership or the Subsidiary under Section 708 of the Code. In addition, the Partnership (and any eligible Subsidiary) shall make the following elections on the appropriate forms or tax returns:
(a) to adopt the calendar year as the Partnership’s Taxable Year, if permitted under the Code;
(b) to adopt the accrual method of accounting for U.S. federal income tax purposes; and
(c) to elect to amortize the organizational expenses of the Partnership as permitted by Code Section 709(b).
Each Partner will upon request supply any information reasonably necessary to give proper effect to any such elections.
Section 9.03 Tax Controversies .
(a) With respect to Tax Years beginning on or before December 31, 2017, the General Partner is hereby designated the Tax Matters Partner of the Partnership, within the meaning given to such term in Section 6231 of the Code (the General Partner, in such capacity, the “ Tax Matters Partner ”) and is authorized and required to represent the Partnership (at the Partnership’s expense) in connection with all examinations of the Partnership’s affairs by tax authorities, including resulting administrative and judicial proceedings, and to expend Partnership funds for professional services reasonably incurred in connection therewith. Each Partner agrees to cooperate with the Partnership and to do or refrain from doing any or all things reasonably requested by the Partnership with respect to the conduct of such proceedings. The Tax Matters Partner shall keep all Partners fully advised on a current basis of any contacts by or discussions with the tax authorities.
(b) With respect to Tax Years beginning after December 31, 2017, pursuant to the Revised Partnership Audit Provisions, the General Partner shall be designated and may, on behalf of the Partnership, at any time, and without further notice to or consent from any Partner, act as the “partnership representative” of the Partnership, within the meaning given to such term in Section 6223 of the Code (the General Partner, in such capacity, the “ Partnership Representative ”) for purposes of the Code. The Partnership Representative shall have the right and obligation to take all actions authorized and required, respectively, by the Code for the Partnership Representative, and is authorized and required to represent the Partnership (at the Partnership’s expense) in connection with all examinations of the Partnership’s affairs by tax authorities, including resulting administrative and judicial proceedings, and to expend Partnership funds for professional services reasonably incurred in connection therewith. Without the consent of the Limited Partners, the Partnership Representative shall not make any election apply the “alternative to payment of imputed underpayment by partnership” under Section 6226 of the Revised Partnership Audit Provisions (or any corresponding or similar provisions of any
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amendments thereto) to pass the underpayment adjustment of the Partnership to any partners of the reviewed year. Each Partner agrees to cooperate with the Partnership and to do or refrain from doing any or all things reasonably requested by the Partnership with respect to the conduct of such proceedings. The Partnership Representative shall keep all Partners fully advised on a current basis of any contacts by or discussions with the tax authorities.
ARTICLE X.
RESTRICTIONS ON TRANSFER OF UNITS
Section 10.01 Transfers by Partners . No holder of Units may Transfer any interest in any Units, except Transfers (a) pursuant to and in accordance with Section 10.02 or (b) approved in writing by the General Partner. Notwithstanding the foregoing, “Transfer” shall not include an event that does not terminate the existence of such Limited Partner under applicable state law (or, in the case of a trust that is a Limited Partner, does not terminate the trusteeship of the fiduciaries under such trust with respect to all the Limited Partner Interests of such trust that is a Limited Partner). Notwithstanding the foregoing, this Article X shall not apply to any Redemption pursuant to Section 11.01 or exchange pursuant to Section 11.03 .
Section 10.02 Permitted Transfers . The restrictions contained in Section 10.01 shall not apply to any Transfer (each, a “ Permitted Transfer ”) (i) by a Limited Partner to an Affiliate of such Limited Partner, (ii) by HMH, the Kingfisher Contributor or the Riverstone Contributor to the direct or indirect holders of equity interests in HMH, the Kingfisher Contributor or the Riverstone Contributor, respectively, (iii) by any transferee pursuant to clause (ii) of this sentence to any Affiliate of such transferee or any trust, family partnership or family limited liability company, the sole beneficiaries, partners or members of which are such transferee or Relatives of such transferee, or (iv) pursuant to a Redemption or Direct Exchange in accordance with Article XI hereof; provided, however , that (A) the restrictions contained in this Agreement will continue to apply to Units after any Permitted Transfer of such Units, (B) neither HMH nor the Kingfisher Contributor shall transfer any interest in any Units in violation of the Alta Mesa Contribution Agreement or Kingfisher Contribution Agreement, respectively, and (C) in the case of the foregoing clauses (i), (ii) and (iii), the transferees of the Units so Transferred shall agree in writing to be bound by the provisions of this Agreement, and the transferor will deliver a written notice to the Partnership and the Partners, which notice will disclose in reasonable detail the identity of the proposed transferee. In the case of a Permitted Transfer (other than a Redemption or Direct Exchange) by any Limited Partner (other than the Corporation) of Common Units to a transferee in accordance with this Section 10.02 , such Limited Partner (or any subsequent transferee of such Limited Partner) shall be required to also transfer a number of shares of Class C Common Stock corresponding to the number of such Limited Partner’s (or subsequent transferee’s) Common Units that were transferred in the transaction to such transferee; and, in the case of a Redemption or Direct Exchange, a number of shares of Class C Common Stock corresponding to the number of such Limited Partner’s Common Units that were transferred in such Redemption or Direct Exchange shall be cancelled. All Permitted Transfers are subject to the additional limitations set forth in Section 10.07(b) .
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Section 10.03 Restricted Units Legend . The Units have not been registered under the Securities Act and, therefore, in addition to the other restrictions on Transfer contained in this Agreement, cannot be sold unless subsequently registered under the Securities Act or an exemption from such registration is then available. To the extent such Units have been certificated, each certificate evidencing Units and each certificate issued in exchange for or upon the Transfer of any Units (if such securities remain Units as defined herein after such Transfer) shall be stamped or otherwise imprinted with a legend in substantially the following form:
“THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED ON FEBRUARY 9, 2018, AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ ACT ”), AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER SPECIFIED IN THE AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF SRII OPCO, LP, AS MAY BE AMENDED AND MODIFIED FROM TIME TO TIME, AND SRII OPCO, LP RESERVES THE RIGHT TO REFUSE THE TRANSFER OF SUCH SECURITIES UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED WITH RESPECT TO ANY TRANSFER. A COPY OF SUCH CONDITIONS SHALL BE FURNISHED BY SRII OPCO, LP TO THE HOLDER HEREOF UPON WRITTEN REQUEST AND WITHOUT CHARGE.”
The Partnership shall imprint such legend on certificates (if any) evidencing Units. The legend set forth above shall be removed from the certificates (if any) evidencing any units which cease to be Units in accordance with the definition thereof.
Section 10.04 Transfer . Prior to Transferring any Units (other than (i) in connection with a Redemption or Direct Exchange in accordance with Article XI or (ii) pursuant to a Change of Control Transaction), the Transferring holder of Units shall cause the prospective transferee to be bound by this Agreement and any other agreements executed by the holders of Units and relating to such Units in the aggregate (collectively, the “ Other Agreements ”), and shall cause the prospective transferee to execute and deliver to the Partnership and the other holders of Units a Joinder (or other counterpart to this Agreement acceptable to the General Partner) and counterparts of any applicable Other Agreements. Any Transfer or attempted Transfer of any Units in violation of any provision of this Agreement (including any prohibited indirect Transfers) (a) shall be void, and (b) the Partnership shall not record such Transfer on its books or treat any purported transferee of such Units as the owner of such securities for any purpose.
Section 10.05 Assignee ’ s Rights .
(a) The Transfer of a Limited Partner Interest in accordance with this Agreement shall be effective as of the date of its assignment (assuming compliance with all of the conditions to such Transfer set forth herein), and such Transfer shall be shown on the books and records of the Partnership. Profits, Losses and other Partnership items shall be allocated between the transferor and the Assignee according to Code Section 706, using any permissible method as determined in the reasonable discretion of the General Partner. Distributions made before the effective date of such Transfer shall be paid to the transferor, and Distributions made after such date shall be paid to the Assignee.
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(b) Unless and until an Assignee becomes a Limited Partner pursuant to Article XII , the Assignee shall not be entitled to any of the rights granted to a Limited Partner hereunder or under applicable Law, other than the rights granted specifically to Assignees pursuant to this Agreement; provided, however , that, without relieving the transferring Limited Partner from any such limitations or obligations as more fully described in Section 10.06 , such Assignee shall be bound by any limitations and obligations of a Limited Partner contained herein that a Limited Partner would be bound on account of the Assignee’s Limited Partner Interest (including the obligation to make Capital Contributions on account of such Limited Partner Interest).
Section 10.06 Assignor ’ s Rights and Obligations . Any Limited Partner who shall Transfer any Limited Partner Interest in a manner in accordance with this Agreement shall cease to be a Limited Partner with respect to such Units or other interest and shall no longer have any rights or privileges, or, except as set forth in this Section 10.06 , duties, liabilities or obligations, of a Limited Partner with respect to such Units or other interest (it being understood, however, that the applicable provisions of Section 6.07 , Section 7.01 and Section 7.04 shall continue to inure to such Person’s benefit), except that unless and until the Assignee (if not already a Limited Partner) is admitted as a Substituted Limited Partner in accordance with the provisions of Article XII (the “ Admission Date ”), (i) such assigning Limited Partner shall retain all of the duties, liabilities and obligations of a Limited Partner with respect to such Units or other interest, and (ii) the General Partner may, in its sole discretion, reinstate all or any portion of the rights and privileges of such Limited Partner with respect to such Units or other interest for any period of time prior to the Admission Date. Nothing contained herein shall relieve any Limited Partner who Transfers any Units or other interest in the Partnership from any liability of such Limited Partner to the Partnership with respect to such Limited Partner Interest that may exist on the Admission Date or that is otherwise specified in the Delaware Act and incorporated into this Agreement or for any liability to the Partnership or any other Person for any materially false statement made by such Limited Partner (in its capacity as such) or for any present or future breaches of any representations, warranties or covenants by such Limited Partner (in its capacity as such) contained herein or in the other agreements with the Partnership.
Section 10.07 Overriding Provisions .
(a) Any Transfer in violation of this Article X shall be null and void ab initio, and the provisions of Sections 10.05 and 10.06 shall not apply to any such Transfers. For the avoidance of doubt, any Person to whom a Transfer is made or attempted in violation of this Article X shall not become a Limited Partner, shall not be entitled to vote on any matters coming before the Limited Partners and shall not have any other rights in or with respect to any rights of a Limited Partner of the Partnership. The approval of any Transfer in any one or more instances shall not limit or waive the requirement for such approval in any other or future instance. The General Partner shall promptly amend the Schedule of Limited Partners to reflect any Permitted Transfer pursuant to this Article X .
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(b) Notwithstanding anything contained herein to the contrary (including, for the avoidance of doubt, the provisions of Section 10.01 and Article XI and Article XII ), in no event shall any Limited Partner Transfer any Units to the extent such Transfer would:
(i) result in the violation of the Securities Act, or any other applicable U.S. federal or state or non-U.S. Laws;
(ii) subject the Partnership to registration as an investment company under the Investment Company Act;
(iii) in the reasonable determination of the General Partner, be a violation of or a default (or an event that, with notice or the lapse of time or both, would constitute a default) under, or result in an acceleration of any indebtedness under, any promissory note, mortgage, loan agreement, indenture or similar instrument or agreement to which the Partnership or the General Partner is a party; provided that the payee or creditor to whom the Partnership or the General Partner owes such obligation is not an Affiliate of the Partnership or the General Partner;
(iv) cause the Partnership to lose its status as a partnership for U.S. federal income tax purposes or, without limiting the generality of the foregoing, cause the Partnership to be treated as a “publicly traded partnership” or to be taxed as a corporation pursuant to Section 7704 of the Code and any applicable Treasury Regulations issued thereunder, or any successor provision of the Code;
(v) be a Transfer to a Person who is not legally competent or who has not achieved his or her majority under applicable Law (excluding trusts for the benefit of minors); or
(vi) result in the Partnership having more than one hundred (100) partners, within the meaning of Treasury Regulations Section 1.7704-1(h)(1) (determined pursuant to the rules of Treasury Regulations Section 1.7704-1(h)(3)).
ARTICLE XI.
REDEMPTION AND EXCHANGE RIGHTS
Section 11.01 Redemption Right of a Limited Partner .
(a) Each Limited Partner (other than the Corporation) shall be entitled to cause the Partnership to redeem (a “ Redemption ”) all or any portion of its Common Units (the “ Redemption Right ”) at any time on or after the date that is 180 days after the date of this Agreement; provided, that, notwithstanding the foregoing, the Kingfisher Contributor may cause the Redemption of not more than 39,000,000 Common Units in the aggregate (plus any Additional Common Units (as defined in the Kingfisher Contribution Agreement)) at any time that is 90 days after the date of this Agreement. A Limited Partner desiring to exercise its Redemption Right (the “ Redeemed Partner ”) shall exercise such right by giving written notice (the “ Redemption Notice ”) to the Partnership with a copy to the Corporation (the date of the delivery of such Redemption Notice, the “ Redemption Notice Date ”). The Redemption Notice shall specify the number of Common Units (the “ Redeemed Units ”) that the Redeemed Partner intends to have the Partnership redeem. The Redemption shall be completed on the date that is three (3) Business Days following delivery of the applicable Redemption Notice, unless the Partnership elects to make the redemption payment by means of a Cash Settlement, in which case the Redemption shall be completed as promptly as practicable following delivery of the
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applicable Redemption Notice, but in any event, no more than ten (10) Business Days after delivery of such Redemption Notice (unless and to the extent that the General Partner in its sole discretion agrees in writing to waive such time periods) (the date of such completion, the “ Redemption Date ”); provided that the Partnership, the Corporation and the Redeemed Partner may change the number of Redeemed Units and/or the Redemption Date specified in such Redemption Notice to another number and/or date by mutual agreement signed in writing by each of them; provided further that a Redemption Notice may be conditioned on the closing of an underwritten distribution of the shares of Class A Common Stock that may be issued in connection with such proposed Redemption. Unless the Redeemed Partner timely has delivered a Retraction Notice as provided in Section 11.01(b) or has delayed a Redemption as provided in Section 11.01(c) or the Corporation has elected to effect a Direct Exchange as provided in Section 11.03 , on the Redemption Date (to be effective immediately prior to the close of business on the Redemption Date) (i) the Redeemed Partner shall transfer and surrender the Redeemed Units to the Partnership and a corresponding number of shares of Class C Common Stock to the Corporation, in each case free and clear of all liens and encumbrances, (ii) the Partnership shall (x) cancel the Redeemed Units, (y) transfer to the Redeemed Partner the consideration to which the Redeemed Partner is entitled under Section 11.01(b) , and (z) if the Units are certificated, issue to the Redeemed Partner a certificate for a number of Common Units equal to the difference (if any) between the number of Common Units evidenced by the certificate surrendered by the Redeemed Partner pursuant to clause (i) of this Section 11.01(a) and the Redeemed Units and (iii) the Corporation shall cancel such shares of Class C Common Stock.
(b) In exchange for its Redeemed Units, a Redeemed Partner shall be entitled to receive the Share Settlement or, at the Partnership’s election, the Cash Settlement from the Partnership. Within one (1) Business Day of delivery of the Redemption Notice, the Partnership shall give written notice (the “ Settlement Method Notice ”) to the Redeemed Partner (with a copy to the Corporation) of its intended settlement method; provided that if the Partnership does not timely deliver a Settlement Method Notice, the Partnership shall be deemed to have elected the Share Settlement method. The Redeemed Partner may retract its Redemption Notice by giving written notice (the “ Retraction Notice ”) to the Partnership (with a copy to the Corporation) at any time prior to 5:00 p.m., New York City time, on the Business Day after delivery of the Settlement Method Notice. The timely delivery of a Retraction Notice shall terminate all of the Redeemed Partner’s, the Partnership’s and the Corporation’s rights and obligations under this Section 11.01 arising from the retracted Redemption Notice.
(c) Notwithstanding anything to the contrary in Section 11.01(b) , in the event the Partnership elects a Share Settlement in connection with a Redemption, a Redeemed Partner shall be entitled, at any time prior to the consummation of a Redemption, to revoke its Redemption Notice or delay the consummation of a Redemption if any of the following conditions exists: (i) any registration statement pursuant to which the resale of the Class A Common Stock to be registered for such Redeemed Partner at or immediately following the consummation of the Redemption shall have ceased to be effective pursuant to any action or inaction by the SEC or no such resale registration statement has yet become effective; (ii) the Corporation shall have failed to cause any related prospectus to be supplemented by any required prospectus supplement necessary to effect such Redemption; (iii) the Corporation shall have exercised its right to defer, delay or suspend the filing or effectiveness of a registration statement
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and such deferral, delay or suspension shall affect the ability of such Redeemed Partner to have the resale of its Class A Common Stock registered at or immediately following the consummation of the Redemption; (iv) the Corporation shall have disclosed to such Redeemed Partner any material non-public information concerning the Corporation, the receipt of which results in such Redeemed Partner being prohibited or restricted from selling Class A Common Stock at or immediately following the Redemption without disclosure of such information (and the Corporation does not permit disclosure); (v) any stop order relating to the registration statement pursuant to which the Class A Common Stock was to be registered by such Redeemed Partner at or immediately following the Redemption shall have been issued by the SEC; (vi) there shall have occurred a material disruption in the securities markets generally or in the market or markets in which the Class A Common Stock is then traded; (vii) there shall be in effect an injunction, a restraining order or a decree of any nature of any Governmental Entity that restrains or prohibits the Redemption; (viii) the Corporation shall have failed to comply in all material respects with its obligations under the Registration Rights Agreement, and such failure shall have affected the ability of such Redeemed Partner to consummate the resale of Class A Common Stock to be received upon such redemption pursuant to an effective registration statement; or (ix) the Redemption Date would occur three (3) Business Days or less prior to, or during, a Black-Out Period; provided further , that in no event shall the Redeemed Partner seeking to delay the consummation of such Redemption and relying on any of the matters contemplated in clauses (i) through (ix) above have controlled or intentionally materially influenced any facts, circumstances, or Persons in connection therewith (except in the good faith performance of his or her duties as an officer or director of the Corporation) in order to provide such Redeemed Partner with a basis for such delay or revocation. If a Redeemed Partner delays the consummation of a Redemption pursuant to this Section 11.01(c) , (A) the Redemption Date shall occur on the third (3rd) Business Day following the date on which the conditions giving rise to such delay cease to exist (or such earlier day as the Corporation, the Partnership and such Redeemed Partner may agree in writing) and (B) notwithstanding anything to the contrary in Section 11.01(b) , the Redeemed Partner may retract its Redemption Notice by giving a Retraction Notice to the Partnership (with a copy to the Corporation) at any time prior to 5:00 p.m., New York City time, on the second (2nd) Business Day following the date on which the conditions giving rise to such delay cease to exist.
(d) The amount of the Share Settlement or the Cash Settlement that a Redeemed Partner is entitled to receive under Section 11.01(b) shall not be adjusted on account of any Distributions previously made with respect to the Redeemed Units or dividends previously paid with respect to Class A Common Stock; provided, however , that if a Redeemed Partner causes the Partnership to redeem Redeemed Units and the Redemption Date occurs subsequent to the record date for any Distribution with respect to the Redeemed Units but prior to payment of such Distribution, the Redeemed Partner shall be entitled to receive such Distribution with respect to the Redeemed Units on the date that it is made notwithstanding that the Redeemed Partner transferred and surrendered the Redeemed Units to the Partnership prior to such date.
(e) In the event of a distribution (by dividend or otherwise) by the Corporation to all holders of Class A Common Stock of evidences of its indebtedness, securities, or other assets (including Equity Securities of the Corporation), but excluding any cash dividend or distribution of any such assets received by the Corporation in respect of its Units, then in exchange for its Redeemed Units, a Redeemed Partner shall be entitled to receive, in addition to the consideration
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set forth in Section 11.01(b) , the amount of such security, securities or other property that the Redeemed Partner would have received if such Redemption Right had been exercised and the Redemption Date had occurred immediately prior to the record date or effective time of any such transaction, taking into account any adjustment as a result of any subdivision (by any split, distribution or dividend, reclassification, reorganization, recapitalization or otherwise) or combination (by reverse split, reclassification, recapitalization or otherwise) of such security, securities or other property that occurs after such record date or effective time. For the avoidance of doubt, subsequent to any such transaction, this Article XI shall apply mutatis mutandis with respect to any such security, securities or other property received by holders of Class A Common Stock in such transaction.
(f) If a Reclassification Event occurs, the General Partner or its successor, as the case may be, shall, as and to the extent necessary, amend this Agreement in compliance with Section 16.03 , and enter into any necessary supplementary or additional agreements, to ensure that, following the effective date of the Reclassification Event: (i) the rights of holders of Common Units (other than the Corporation) set forth in this Section 11.01 provide that each Common Unit is redeemable for the same amount and same type of property, securities or cash (or combination thereof) that one share of Class A Common Stock becomes exchangeable for or converted into as a result of the Reclassification Event (taking into account any adjustment as a result of any subdivision (by any split, distribution or dividend, reclassification, reorganization, recapitalization or otherwise) or combination (by reverse split, reclassification, recapitalization or otherwise) of such security, securities or other property that occurs after the record date or effective time for such Reclassification Event) and (ii) the Corporation or the successor to the Corporation, as applicable, is obligated to deliver such property, securities or cash upon such redemption. The Corporation shall not consummate or agree to consummate any Reclassification Event unless the successor Person, if any, becomes obligated to comply with the obligations of the Corporation (in whatever capacity) under this Agreement.
(g) In connection with a General Partner Change of Control, the Corporation shall have the right to require each Limited Partner (other than the Corporation) to effect a Redemption of some or all of such Limited Partner’s Common Units and a corresponding number of shares of Class C Common Stock. Any Redemption pursuant to this Section 11.01(g) shall be effective immediately prior to the consummation of the General Partner Change of Control (and, for the avoidance of doubt, shall not be effective if such General Partner Change of Control is not consummated) (the “ Change of Control Redemption Date ”). From and after the Change of Control Redemption Date, (i) the Common Units and shares of Class C Common Stock subject to such Redemption shall be deemed to be transferred to the Corporation on the Change of Control Redemption Date and (ii) such Limited Partner shall cease to have any rights with respect to the Common Units and shares of Class C Common Stock subject to such Redemption (other than the right to receive shares of Class A Common Stock pursuant to such Redemption). The Corporation shall provide written notice of an expected General Partner Change of Control to all Partners within the earlier of (x) five (5) Business Days following the execution of the agreement with respect to such General Partner Change of Control and (y) ten (10) Business Days before the proposed date upon which the contemplated General Partner Change of Control is to be effected, indicating in such notice such information as may reasonably describe the General Partner Change of Control transaction, subject to applicable law, including the date of execution of such agreement or such proposed effective date, as applicable,
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the amount and types of consideration to be paid for shares of Class A Common Stock in the General Partner Change of Control, any election with respect to types of consideration that a holder of shares of Class A Common Stock, as applicable, shall be entitled to make in connection with such General Partner Change of Control, and the number of Common Units and shares of Class C Common Stock held by such Limited Partner that the Corporation intends to require to be subject to such Redemption. Following delivery of such notice and on or prior to the Change of Control Redemption Date, the Limited Partners shall take all actions reasonably requested by the Corporation to effect such Redemption, including taking any action and delivering any document required pursuant to Section 11.01(a) to effect a Redemption; provided that (A) no Limited Partner shall be required to make any representations or warranties in connection with such Redemption other than representations and warranties as to (1) such Limited Partner’s ownership of its Common Units and the corresponding number of shares of Class C Common Stock to be redeemed free and clear of liens, (2) such Limited Partner’s power and authority to effect such Redemption, and (3) such matters pertaining to compliance with securities laws as the Corporation may reasonably require; and (B) any indemnification or other obligations assumed or incurred in connection with a Redemption shall be several and not joint and shall be allocated among all Limited Partners participating in such Redemption (collectively, the “ Redeeming Persons ”) in the same proportion as the consideration payable to each such Redeeming Person in each case other than with respect to representations made individually by the indemnifying Limited Partner ( e.g. , representations as to title or authority of such Limited Partner).
Section 11.02 Contribution of the Corporation . Subject to Section 11.03 , in connection with the exercise of a Redeemed Partner’s Redemption Rights under Section 11.01(a) , the Corporation shall contribute to the Partnership the consideration the Redeemed Partner is entitled to receive under Section 11.01(b) . Unless the Redeemed Partner has timely delivered a Retraction Notice as provided in Section 11.01(b) or has delayed a Redemption as provided in Section 11.01(c) , or the Corporation has elected to effect a Direct Exchange as provided in Section 11.03 , on the Redemption Date (to be effective immediately prior to the close of business on the Redemption Date) (i) the Corporation shall make its Capital Contribution to the Partnership (in the form of the Share Settlement or the Cash Settlement) required under this Section 11.02 , and (ii) the Partnership shall issue to the Corporation a number of Common Units equal to the number of Redeemed Units surrendered by the Redeemed Partner. Notwithstanding any other provisions of this Agreement to the contrary, in the event that the Partnership elects a Cash Settlement, the Corporation shall only be obligated to contribute to the Partnership an amount in respect of such Cash Settlement equal to the net proceeds (after deduction of any underwriters’ discounts or commissions and brokers’ fees or commissions) from the sale by the Corporation of a number of shares of Class A Common Stock equal to the number of Redeemed Units to be redeemed with such Cash Settlement; provided that the Corporation’s Capital Account shall be increased by an amount equal to any such discounts, commissions and fees relating to such sale of shares of Class A Common Stock in accordance with Section 6.05 .
Section 11.03 Exchange Right of the Corporation .
(a) Notwithstanding anything to the contrary in this Article XI , the Corporation may, in its sole and absolute discretion, elect to effect on the Redemption Date the exchange of Redeemed Units for the Share Settlement or Cash Settlement, at the Corporation’s option, through a direct exchange of such Redeemed Units and such consideration between the Redeemed Partner and the Corporation (a “ Direct Exchange ”). Upon such Direct Exchange pursuant to this Section 11.03 , the Corporation shall acquire the Redeemed Units and shall be treated for all purposes of this Agreement as the owner of such Units.
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(b) The Corporation may, at any time prior to a Redemption Date, deliver written notice (an “ Exchange Election Notice ”) to the Partnership and the Redeemed Partner setting forth its election to exercise its right to consummate a Direct Exchange; provided that such election does not prejudice the ability of the parties to consummate a Redemption or Direct Exchange on the Redemption Date. An Exchange Election Notice may be revoked by the Corporation at any time; provided that any such revocation does not prejudice the ability of the parties to consummate a Redemption on the Redemption Date. The right to consummate a Direct Exchange in all events shall be exercisable for all the Redeemed Units that would have otherwise been subject to a Redemption. Except as otherwise provided by this Section 11.03 , a Direct Exchange shall be consummated pursuant to the same timeframe and in the same manner as the relevant Redemption would have been consummated if the Corporation had not delivered an Exchange Election Notice.
Section 11.04 Reservation of Shares of Class A Common Stock; Listing; Certificate of the Corporation . At all times the Corporation shall reserve and keep available out of its authorized but unissued Class A Common Stock, solely for the purpose of issuance upon a Redemption or Direct Exchange, such number of shares of Class A Common Stock as shall be issuable upon any such Redemption or Direct Exchange pursuant to Share Settlements; provided that nothing contained herein shall be construed to preclude the Corporation from satisfying its obligations in respect of any such Redemption or Direct Exchange by delivery of purchased Class A Common Stock (which may or may not be held in the treasury of the Corporation) or the delivery of cash pursuant to a Cash Settlement. The Corporation shall deliver Class A Common Stock that has been registered under the Securities Act with respect to any Redemption or Direct Exchange to the extent a registration statement is effective and available for such shares. The Corporation shall use its commercially reasonable efforts to list the Class A Common Stock required to be delivered upon any such Redemption or Direct Exchange prior to such delivery upon each national securities exchange upon which the outstanding shares of Class A Common Stock are listed at the time of such Redemption or Direct Exchange (it being understood that any such shares may be subject to transfer restrictions under applicable securities Laws). The Corporation covenants that all Class A Common Stock issued upon a Redemption or Direct Exchange will, upon issuance, be validly issued, fully paid and non-assessable. The provisions of this Article XI shall be interpreted and applied in a manner consistent with the corresponding provisions of the Corporation’s certificate of incorporation.
Section 11.05 Effect of Exercise of Redemption or Exchange Right . This Agreement shall continue notwithstanding the consummation of a Redemption or Direct Exchange and all governance or other rights set forth herein shall be exercised by the remaining Partners and the Redeemed Partner (to the extent of such Redeemed Partner’s remaining interest in the Partnership). No Redemption or Direct Exchange shall relieve such Redeemed Partner of any prior breach of this Agreement.
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Section 11.06 Tax Treatment . Unless otherwise required by applicable Law, the parties hereto acknowledge and agree that a Redemption or a Direct Exchange, as the case may be, shall be treated as a direct exchange between the Corporation and the Redeemed Partner for U.S. federal (and applicable state and local) income tax purposes. The issuance of shares of Class A Common Stock or other securities upon a Redemption or Direct Exchange shall be made without charge to the Redeemed Partner for any stamp or other similar tax in respect of such issuance.
ARTICLE XII.
ADMISSION OF LIMITED PARTNERS
Section 12.01 Substituted Limited Partners . Subject to the provisions of Article X , in connection with the Permitted Transfer of a Limited Partner Interest hereunder, the transferee shall become a substituted Limited Partner (“ Substituted Limited Partner ”) on the effective date of such Transfer, which effective date shall not be earlier than the date of compliance with the conditions to such Transfer, and such admission shall be shown on the books and records of the Partnership.
Section 12.02 Additional Limited Partners . Subject to the provisions of Article III and Article X , any Person may be admitted to the Partnership as an additional Limited Partner (any such Person, an “ Additional Limited Partner ”) only upon furnishing to the General Partner (a) a Joinder (or other counterpart to this Agreement acceptable to the General Partner) and counterparts of any applicable Other Agreements and (b) such other documents or instruments as may be reasonably necessary or appropriate to effect such Person’s admission as a Limited Partner (including entering into such documents as the General Partner may deem appropriate in its reasonable discretion). Such admission shall become effective on the date on which the General Partner determines in its reasonable discretion that such conditions have been satisfied and when any such admission is shown on the books and records of the Partnership.
ARTICLE XIII.
WITHDRAWAL AND RESIGNATION; TERMINATION OF RIGHTS
Section 13.01 Withdrawal and Resignation of Limited Partners . No Limited Partner shall have the power or right to withdraw or otherwise resign as a Limited Partner from the Partnership prior to the dissolution and winding up of the Partnership pursuant to Article XIV . Any Limited Partner, however, that attempts to withdraw or otherwise resign as a Limited Partner from the Partnership without the prior written consent of the General Partner upon or following the dissolution and winding up of the Partnership pursuant to Article XIV , but prior to such Limited Partner receiving the full amount of Distributions from the Partnership to which such Limited Partner is entitled pursuant to Article XIV , shall be liable to the Partnership for all damages (including all lost profits and special, indirect and consequential damages) directly or indirectly caused by the withdrawal or resignation of such Partner. Upon a Transfer of all of a Limited Partner’s Units in a Transfer permitted by this Agreement, subject to the provisions of Section 10.06 , such Limited Partner shall cease to be a Partner.
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ARTICLE XIV.
DISSOLUTION AND LIQUIDATION
Section 14.01 Dissolution . The Partnership shall not be dissolved by the admission of Additional Limited Partners or Substituted Limited Partners or the attempted withdrawal or resignation of a Partner. The Partnership shall dissolve, and its affairs shall be wound up, upon:
(a) the unanimous decision of the General Partner together with all the Partners to dissolve the Partnership;
(b) a Change of Control Transaction that is not approved by the Majority Partners;
(c) a dissolution of the Partnership under Section 17-801(4) of the Delaware Act; or
(d) the entry of a decree of judicial dissolution of the Partnership under Section 17-802 of the Delaware Act.
Except as otherwise set forth in this Article XIV , the Partnership is intended to have perpetual existence. An Event of Withdrawal shall not cause a dissolution of the Partnership and the Partnership shall continue in existence subject to the terms and conditions of this Agreement.
Section 14.02 Liquidation and Termination . On dissolution of the Partnership, the General Partner shall act as liquidator or may appoint one or more Persons as liquidator. The liquidators shall proceed diligently to wind up the affairs of the Partnership and make final distributions as provided herein and in the Delaware Act. The costs of liquidation shall be borne as a Partnership expense. Until final distribution, the liquidators shall continue to operate the Partnership properties with all of the power and authority of the General Partner. The steps to be accomplished by the liquidators are as follows:
(a) as promptly as possible after dissolution and again after final liquidation, the liquidators shall cause a proper accounting to be made by a recognized firm of certified public accountants of the Partnership’s assets, liabilities and operations through the last day of the calendar month in which the dissolution occurs or the final liquidation is completed, as applicable;
(b) the liquidators shall cause notice of liquidation to be mailed to each known creditor of and claimant against the Partnership;
(c) the liquidators shall pay, satisfy or discharge from Partnership funds, or otherwise make adequate provision for payment and discharge thereof (including the establishment of a cash fund for contingent liabilities in such amount and for such term as the liquidators may reasonably determine): first, all expenses incurred in liquidation; and second, all of the debts, liabilities and obligations of the Partnership; and
(d) all remaining assets of the Partnership shall be distributed to the Partners in accordance with Article IV by the end of the Taxable Year during which the liquidation of the Partnership occurs (or, if later, by ninety (90) days after the date of the liquidation). The distribution of cash and/or property to the Partners in accordance with the provisions of this
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Section 14.02 and Section 14.03 below constitutes a complete return to the Partners of their Capital Contributions, a complete distribution to the Partners of their interest in the Partnership and all the Partnership’s property and constitutes a compromise to which all Partners have consented within the meaning of the Delaware Act. To the extent that a Partner returns funds to the Partnership, it has no claim against any other Partner for those funds.
Section 14.03 Deferment; Distribution in Kind . Notwithstanding the provisions of Section 14.02 , but subject to the order of priorities set forth therein, if upon dissolution of the Partnership the liquidators determine that an immediate sale of part or all of the Partnership’s assets would be impractical or would cause undue loss (or would otherwise not be beneficial) to the Partners, the liquidators may, in their sole discretion, defer for a reasonable time the liquidation of any assets except those necessary to satisfy Partnership liabilities (other than loans to the Partnership by Partners) and reserves. Subject to the order of priorities set forth in Section 14.02 , the liquidators may, in their sole discretion, distribute to the Partners, in lieu of cash, either (a) all or any portion of such remaining Partnership assets in-kind in accordance with the provisions of Section 14.02(d) , (b) as tenants in common and in accordance with the provisions of Section 14.02(d) , undivided interests in all or any portion of such Partnership assets or (c) a combination of the foregoing. Any such Distributions in kind shall be subject to (x) such conditions relating to the disposition and management of such assets as the liquidators deem reasonable and equitable and (y) the terms and conditions of any agreements governing such assets (or the operation thereof or the holders thereof) at such time. Any Partnership assets distributed in kind will first be written up or down to their Fair Market Value, thus creating Profit or Loss (if any), which shall be allocated in accordance with Article V . The liquidators shall determine the Fair Market Value of any property distributed in accordance with the valuation procedures set forth in Article XV .
Section 14.04 Cancellation of Certificate . On completion of the distribution of Partnership assets as provided herein, the Partnership is terminated (and the Partnership shall not be terminated prior to such time), and the General Partner (or such other Person or Persons as the Delaware Act may require or permit) shall file a certificate of cancellation with the Secretary of State of Delaware, cancel any other filings made pursuant to this Agreement that are or should be canceled and take such other actions as may be necessary to terminate the Partnership. The Partnership shall be deemed to continue in existence for all purposes of this Agreement until it is terminated pursuant to this Section 14.04 .
Section 14.05 Reasonable Time for Winding Up . A reasonable time shall be allowed for the orderly winding up of the business and affairs of the Partnership and the liquidation of its assets pursuant to Sections 14.02 and 14.03 in order to minimize any losses otherwise attendant upon such winding up.
Section 14.06 Return of Capital . The liquidators shall not be personally liable for the return of Capital Contributions or any portion thereof to the Partners (it being understood that any such return shall be made solely from Partnership assets).
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ARTICLE XV.
VALUATION
Section 15.01 Determination . “ Fair Market Value ” of a specific Partnership asset will mean the amount which the Partnership would receive in an all-cash sale of such asset in an arms-length transaction with a willing unaffiliated third party, with neither party having any compulsion to buy or sell, consummated on the day immediately preceding the date on which the event occurred which necessitated the determination of the Fair Market Value (and after giving effect to any transfer taxes payable in connection with such sale), as such amount is determined by the General Partner (or, if pursuant to Section 14.02 , the liquidators) in its good faith judgment using all factors, information and data it deems to be pertinent.
Section 15.02 Dispute Resolution . If any Limited Partner or Limited Partners dispute the accuracy of any determination of Fair Market Value in accordance with Section 15.01 , and the General Partner and such Limited Partner(s) are unable to agree on the determination of the Fair Market Value of any asset of the Partnership, the General Partner and such Limited Partner(s) shall each select a nationally recognized investment banking firm experienced in valuing securities of closely-held companies such as the Partnership in the Partnership’s industry (the “ Appraisers ”), who shall each determine the Fair Market Value of the asset or the Partnership (as applicable) in accordance with the provisions of Section 15.01 . The Appraisers shall be instructed to give written notice of their determination of the Fair Market Value of the asset or the Partnership (as applicable) within thirty (30) days of their appointment as Appraisers. If Fair Market Value as determined by an Appraiser is higher than Fair Market Value as determined by the other Appraiser by 10% or more, and the General Partner and such Limited Partner(s) do not otherwise agree on a Fair Market Value, the original Appraisers shall designate a third Appraiser meeting the same criteria used to select the original two, and the Fair Market Value shall be the average of the Fair Market Values determined by all three Appraisers, unless the General Partner and such Limited Partner(s) otherwise agree on a Fair Market Value. If Fair Market Value as determined by an Appraiser is within 10% of the Fair Market Value as determined by the other Appraiser (but not identical), and the General Partner and such Limited Partner(s) do not otherwise agree on a Fair Market Value, the General Partner shall select the Fair Market Value of one of the Appraisers. The fees and expenses of the Appraisers shall be borne by the Partnership.
ARTICLE XVI.
GENERAL PROVISIONS
Section 16.01 Power of Attorney .
(a) Each Limited Partner who is an individual hereby constitutes and appoints the General Partner (or the liquidator, if applicable) with full power of substitution, as his or her true and lawful agent and attorney-in-fact, with full power and authority in his, her or its name, place and stead, to:
(i) execute, swear to, acknowledge, deliver, file and record in the appropriate public offices (A) this Agreement, all certificates and other instruments and all amendments thereof which the General Partner deems appropriate or necessary to form,
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qualify, or continue the qualification of, the Partnership as a limited partnership in the State of Delaware and in all other jurisdictions in which the Partnership may conduct business or own property; (B) all instruments which the General Partner deems appropriate or necessary to reflect any amendment, change, modification or restatement of this Agreement in accordance with its terms; (C) all conveyances and other instruments or documents which the General Partner deems appropriate or necessary to reflect the dissolution and liquidation of the Partnership pursuant to the terms of this Agreement, including a certificate of cancellation; and (D) all instruments relating to the admission, withdrawal or substitution of any Partner pursuant to Article XII or Article XIII ; and
(ii) sign, execute, swear to and acknowledge all ballots, consents, approvals, waivers, certificates and other instruments appropriate or necessary, in the reasonable judgment of the General Partner, to evidence, confirm or ratify any vote, consent, approval, agreement or other action which is made or given by the Partners hereunder or is consistent with the terms of this Agreement, in the reasonable judgment of the General Partner, to effectuate the terms of this Agreement.
(b) The foregoing power of attorney is irrevocable and coupled with an interest, and shall survive the death, disability, incapacity, dissolution, bankruptcy, insolvency or termination of any Limited Partner who is an individual and the transfer of all or any portion of his, her or its Limited Partner Interest and shall extend to such Limited Partner’s heirs, successors, assigns and personal representatives.
Section 16.02 Confidentiality . Each of the Partners agree to hold the Partnership’s Confidential Information in confidence and may not use such information except in furtherance of the business of the Partnership or as otherwise authorized separately in writing by the General Partner. “ Confidential Information ” as used herein includes, but is not limited to, ideas, financial product structuring, business strategies, innovations and materials, all aspects of the Partnership’s business plan, proposed operation and products, corporate structure, financial and organizational information, analyses, proposed partners, software code and system and product designs, employees and their identities, equity ownership, the methods and means by which the Partnership plans to conduct its business, all trade secrets, trademarks, tradenames and all intellectual property associated with the Partnership’s business, in each case obtained by a Partner from the Partnership or any of its Affiliates or representatives. With respect to any Partner, Confidential Information does not include information or material that: (a) is rightfully in the possession of such Partner at the time of disclosure by the Partnership; (b) before or after it has been disclosed to such Partner by the Partnership, becomes part of public knowledge, not as a result of any action or inaction of such Partner in violation of this Agreement; (c) is approved for release by written authorization of the Chief Executive Officer of the Partnership or of the Corporation; (d) is disclosed to such Partner or its representatives by a third party not, to the knowledge of such Partner, in violation of any obligation of confidentiality owed to the Partnership with respect to such information; or (e) is or becomes independently developed by such Partner or its representatives without use of or reference to the Confidential Information.
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Section 16.03 Amendments . This Agreement may be amended or modified solely by the General Partner. Notwithstanding the foregoing, no amendment or modification (a) to this Section 16.03 may be made without the prior written consent of each of the Partners, (b) that modifies the limited liability of any Partner, or increases the liabilities or obligations of any Partner, in each case, may be made without the consent of each such affected Partner, (c) that materially alters or changes any rights, preferences or privileges of any Limited Partner Interests in a manner that is different or prejudicial relative to any other Limited Partner Interests, may be made without the approval of a majority in interest of the Partners holding the Limited Partner Interests affected in such a different or prejudicial manner (excluding any such Limited Partner Interests held by the General Partner or any affiliates controlled by the General Partner), (d) that materially alters or changes any rights, preferences or privileges of a holder of any class of Limited Partner Interests in a manner that is different or prejudicial relative to any other holder of the same class of Limited Partner Interests, may be made without the approval of the holder of Limited Partner Interests affected in such a different or prejudicial manner and (e) to any of the terms and conditions of this Agreement which terms and conditions expressly require the approval or action of certain Persons may be made without obtaining the consent of the requisite number or specified percentage of such Persons who are entitled to approve or take action on such matter; provided , that the General Partner, acting alone, may amend this Agreement to reflect the issuance of additional Units or Equity Securities in accordance with Section 3.04 .
Section 16.04 Title to Partnership Assets . Partnership assets shall be deemed to be owned by the Partnership as an entity, and no Partner, individually or collectively, shall have any ownership interest in such Partnership assets or any portion thereof. The Partnership shall hold title to all of its property in the name of the Partnership and not in the name of any Partner. All Partnership assets shall be recorded as the property of the Partnership on its books and records, irrespective of the name in which legal title to such Partnership assets is held. The Partnership’s credit and assets shall be used solely for the benefit of the Partnership, and no asset of the Partnership shall be transferred or encumbered for, or in payment of, any individual obligation of any Partner.
Section 16.05 Addresses and Notices . Any notice provided for in this Agreement will be in writing and will be either personally delivered, or received by certified mail, return receipt requested, or sent by reputable overnight courier service (charges prepaid) to the Partnership at the address set forth below and to any other recipient and to any Partner at such address as indicated by the Partnership’s records, or at such address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party. Notices will be deemed to have been given hereunder when delivered personally or sent by telecopier ( provided confirmation of transmission is received), three (3) days after deposit in the U.S. mail and one (1) day after deposit with a reputable overnight courier service. The Partnership’s address is:
to the Partnership:
SRII Opco, LP
15021 Katy Freeway, Suite 400
Houston, Texas 77094
Attn: Jim Hackett
E-mail: JHackett@riverstonellc.com
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with a copy (which copy shall not constitute notice) to:
Latham & Watkins LLP
811 Main Street, Suite 3700
Houston, Texas 77002
Attn: Nicholas Luongo
E-mail: Nick.Luongo@lw.com
Section 16.06 Binding Effect; Intended Beneficiaries . This Agreement shall be binding upon and inure to the benefit of the parties hereto and their heirs, executors, administrators, successors, legal representatives and permitted assigns.
Section 16.07 Creditors . None of the provisions of this Agreement shall be for the benefit of or enforceable by any creditors of the Partnership or any of its Affiliates, and no creditor who makes a loan to the Partnership or any of its Affiliates may have or acquire (except pursuant to the terms of a separate agreement executed by the Partnership in favor of such creditor) at any time as a result of making the loan any direct or indirect interest in Partnership Profits, Losses, Distributions, capital or property other than as a secured creditor.
Section 16.08 Waiver . No failure by any party to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy consequent upon a breach thereof shall constitute a waiver of any such breach or any other covenant, duty, agreement or condition.
Section 16.09 Counterparts . This Agreement may be executed in separate counterparts, each of which will be an original and all of which together shall constitute one and the same agreement binding on all the parties hereto.
Section 16.10 Applicable Law . This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, without giving effect to any choice of law or conflict of law rules or provisions (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware. Any dispute relating hereto shall be heard in the state or federal courts of the State of Delaware, and the parties agree to jurisdiction and venue therein.
Section 16.11 Severability . Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable Law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable Law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or the effectiveness or validity of any provision in any other jurisdiction, and this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.
Section 16.12 Further Action . The parties shall execute and deliver all documents, provide all information and take or refrain from taking such actions as may be reasonably necessary or appropriate to achieve the purposes of this Agreement.
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Section 16.13 Delivery by Electronic Transmission . This Agreement and any signed agreement or instrument entered into in connection with this Agreement or contemplated hereby, and any amendments hereto or thereto, to the extent signed and delivered by means of an electronic transmission, including by a facsimile machine or via email, shall be treated in all manner and respects as an original agreement or instrument and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person. At the request of any party hereto or to any such agreement or instrument, each other party hereto or thereto shall re-execute original forms thereof and deliver them to all other parties. No party hereto or to any such agreement or instrument shall raise the use of electronic transmission by a facsimile machine or via email to deliver a signature or the fact that any signature or agreement or instrument was transmitted or communicated through such electronic transmission as a defense to the formation of a contract and each such party forever waives any such defense.
Section 16.14 Right of Offset . Whenever the Partnership is to pay any sum (other than pursuant to Article IV ) to any Partner, any amounts that such Partner owes to the Partnership which are not the subject of a good faith dispute may be deducted from that sum before payment. For the avoidance of doubt, the distribution of Units to the Corporation shall not be subject to this Section 16.14 .
Section 16.15 Effectiveness . This Agreement shall be effective immediately upon the Contribution Closing (the “ Effective Time ”). The Initial Limited Partnership Agreement shall govern the rights and obligations of the Partnership and the other parties to this Agreement in their capacity as Partners prior to the Effective Time.
Section 16.16 Entire Agreement . This Agreement and those documents expressly referred to herein (including the Registration Rights Agreement and the Contribution Agreements) embody the complete agreement and understanding among the parties and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way. For the avoidance of doubt, the Initial Limited Partnership Agreement is superseded by this Agreement as of the Effective Time and shall be of no further force and effect thereafter.
Section 16.17 Remedies . Each Partner shall have all rights and remedies set forth in this Agreement and all rights and remedies which such Person has been granted at any time under any other agreement or contract and all of the rights which such Person has under any Law. Any Person having any rights under any provision of this Agreement or any other agreements contemplated hereby shall be entitled to enforce such rights specifically (without posting a bond or other security), to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights granted by Law.
Section 16.18 Descriptive Headings; Interpretation . The descriptive headings of this Agreement are inserted for convenience only and do not constitute a substantive part of this Agreement. Whenever required by the context, any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa. The use of the word “including” in this Agreement shall be by way of example rather than by limitation. Reference to any agreement, document or instrument means such agreement, document or instrument as amended or otherwise modified from time to time in accordance with the terms thereof, and if applicable hereof. Without limiting the generality of the immediately preceding sentence, no amendment or other modification to any agreement, document or instrument that requires the consent of any
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Person pursuant to the terms of this Agreement or any other agreement will be given effect hereunder unless such Person has consented in writing to such amendment or modification. Wherever required by the context, references to a Fiscal Year shall refer to a portion thereof. The use of the words “or,” “either” and “any” shall not be exclusive. The parties hereto have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement. Wherever a conflict exists between this Agreement and any other agreement, this Agreement shall control but solely to the extent of such conflict.
[ Signature Pages Follow ]
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IN WITNESS WHEREOF, the undersigned have executed or caused to be executed on their behalf this Amended and Restated Agreement of Limited Partnership as of the date first written above.
| GENERAL PARTNER: | ||
| SRII OPCO GP, LLC | ||
| By: |
/s/ Stephen S. Coats |
|
| Name: | Stephen S. Coats | |
| Title: | Secretary | |
[ Signature Page to Amended and Restated Agreement of Limited Partnership ]
| LIMITED PARTNERS: | ||
| ALTA MESA RESOURCES, INC. | ||
| By: |
/s/ Harlan H. Chappelle |
|
| Name: | Harlan H. Chappelle | |
| Title: | Chief Executive Officer | |
| HIGH MESA HOLDINGS, L.P. | ||
|
By: High Mesa Holdings GP, LLC, its general partner |
||
| By: |
/s/ Harlan H. Chappelle |
|
| Name: | Harlan H. Chappelle | |
| Title: | President and Chief Executive Officer | |
| KFM HOLDCO, LLC | ||
| By: |
/s/ Michael S. Christopher |
|
| Name: | Michael S. Christopher | |
| Title: | Secretary and Chief Financial Officer | |
| RIVERSTONE VI ALTA MESA HOLDINGS, L.P. | ||
| By: |
/s/ Peter Haskopoulos |
|
| Name: | Peter Haskopoulos | |
| Title: | Managing Director | |
[ Signature Page to Amended and Restated Agreement of Limited Partnership ]
SCHEDULE 1 *
SCHEDULE OF LIMITED PARTNERS
|
Partner |
Common
Units |
Percentage
Interest |
Contribution
Closing Capital Account Balance |
Additional
Cash Capital Contributions |
Additional
Non-Cash Capital Contributions |
Capital Accounts | ||||||||||||||||||
|
Alta Mesa Resources, Inc. |
169,371,730 | 44.25 | % | $ | 1,406,484,518 | — | — | $ | 1,406,484,518 | |||||||||||||||
|
High Mesa Holdings, L.P. |
138,402,398 | 36.16 | % | $ | 1,149,311,222 | — | — | $ | 1,149,311,222 | |||||||||||||||
|
KFM Holdco, LLC |
55,000,000 | 14.37 | % | $ | 456,727,038 | — | — | $ | 456,727,038 | |||||||||||||||
|
Riverstone VI Alta Mesa Holdings, L.P. |
20,000,000 | 5.23 | % | $ | 166,082,559 | — | — | $ | 166,082,559 | |||||||||||||||
| * | This Schedule of Limited Partners shall be updated from time to time to reflect any adjustment with respect to any subdivision (by Unit split or otherwise) or any combination (by reverse Unit split or otherwise) of any outstanding Common Units, or to reflect any additional issuances of Common Units pursuant to this Agreement. |
Exhibit A
FORM OF JOINDER AGREEMENT
This JOINDER AGREEMENT, dated as of , 20 (this “ Joinder ”), is delivered pursuant to that certain Amended and Restated Agreement of Limited Partnership of SRII Opco, LP (the “ Partnership ”), dated as of [ ], 2017 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “ Partnership Agreement ”). Capitalized terms used but not otherwise defined herein have the respective meanings set forth in the Partnership Agreement.
| 1. | Joinder to the Partnership Agreement . Upon the execution of this Joinder by the undersigned and delivery hereof to the General Partner, the undersigned hereby is and hereafter will be a Limited Partner under the Partnership Agreement and a party thereto, with all the rights, privileges and responsibilities of a Limited Partner thereunder. The undersigned hereby agrees that it shall comply with and be fully bound by the terms of the Partnership Agreement as if it had been a signatory thereto as of the date thereof. |
| 2. | Incorporation by Reference . All terms and conditions of the Partnership Agreement are hereby incorporated by reference in this Joinder as if set forth herein in full. |
| 3. | Address . All notices under the Partnership Agreement to the undersigned shall be direct to: |
[Name]
[Address]
[City, State, Zip Code]
Attn:
Facsimile:
E-mail:
IN WITNESS WHEREOF, the undersigned has duly executed and delivered this Joinder as of the day and year first above written.
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Acknowledged and agreed as of the date first set forth above: |
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| SRII OPCO GP, LLC | ||
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Exhibit 10.5
Execution Version
TAX RECEIVABLE AGREEMENT
This TAX RECEIVABLE AGREEMENT (as amended from time to time, this “ Agreement ”), dated as of February 9, 2018, is hereby entered into by and among Alta Mesa Resources, Inc. (f/k/a Silver Run Acquisition Corporation II), a Delaware corporation (the “ Corporation ”), SRII Opco, LP, a Delaware limited partnership (“ Holdings ”), Riverstone VI Alta Mesa Holdings, L.P., a Delaware partnership (“ Riverstone ”), and High Mesa Holdings LP, a Delaware limited partnership (“ HMH ” and with Riverstone and HMH as the “ Initial Limited Partners ”).
RECITALS
WHEREAS, the Initial Limited Partners and the Corporation own partnership interests in Holdings (the “ Interests ”), which is treated as a partnership for U.S. federal income Tax purposes;
WHEREAS, in connection with the Corporation’s initial contribution to Holdings, the Corporation shall issue Class C common stock of the Corporation, par value $0.0001 per share (“ Class C Shares ”) to the Initial Limited Partners;
WHEREAS, pursuant to the Partnership Agreement, each Initial Limited Partner will have the right, in its sole discretion, from time to time to require Holdings to redeem (a “ Redemption ”) all or a portion of its Interests (together with an equal number of Class C Shares, with one Interest and one Class C Share a “ Unit ”) for Class A common stock of the Corporation, par value $0.0001 per share (“ Class A Shares ”) or, under certain circumstances, cash; provided that, at the election of the Corporation in its sole discretion, the Corporation may effect a direct exchange (a “ Direct Exchange ”) of such Initial Limited Partner’s Units for Class A Shares or, under certain circumstances, cash;
WHEREAS, Holdings and each of its direct and indirect subsidiaries treated as a partnership for U.S. federal income Tax purposes will have in effect an election under Section 754 of the U.S. Internal Revenue Code of 1986, as amended (the “ Code ”), for each Taxable Year (as defined below) in which an Exchange occurs, which election is intended to result in an adjustment to the Tax basis of the assets owned by Holdings and such subsidiaries (solely with respect to the Corporation) at the time (such time, the “ Exchange Date ”) of an Exchange;
WHEREAS, the income, gain, loss, expense and other Tax (as defined below) items of the Corporation, as a Limited Partner in Holdings (and in respect of each of Holdings’ direct and indirect subsidiaries treated as disregarded entities or partnerships for U.S. federal income Tax purposes), may be affected by (i) the Basis Adjustments, (ii) the Imputed Interest and (iii) the Interest Amounts, each as defined below; and
WHEREAS, the parties to this Agreement desire to make certain arrangements with respect to the actual or deemed effect of the Basis Adjustments, the Imputed Interest and the Interest Amounts on the liability for Taxes of the Corporation.
NOW, THEREFORE, in consideration of the foregoing and the respective covenants and agreements set forth herein, and intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
Definitions . As used in this Agreement, the terms set forth in this ARTICLE I shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined).
“ Affiliate ” means, with respect to any Person, any other Person that directly or indirectly, through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such first Person.
“ Agreed Rate ” means LIBOR plus 100 basis points.
“ Agreement ” is defined in the preamble of this Agreement.
“ Amended Schedule ” is defined in Section 2.4(b) of this Agreement.
“ Available Cash ” means all cash and cash equivalents of the Corporation on hand, less the amount of cash reserves reasonably established in good faith by the Corporation to (i) provide for the proper conduct of the business of the Corporation, (ii) comply with applicable law or any Senior Obligations, or (iii) make payments under this Agreement; provided, however , that on any Payment Date the Corporation shall be deemed to have Available Cash in amount no less than the remainder of (x) the aggregate amount of distributions received by the Corporation from Holdings pursuant to Section 4.01 of the Partnership Agreement since the first Exchange Date minus (y) the sum of (A) the aggregate amount of all payments made by the Corporation in respect of Taxes (including payments under any Tax sharing agreement to any member of a Consolidated Group which includes the Corporation) or under this Agreement since the first Exchange Date plus (B) the amount of Tax distributions received by the Corporation pursuant to Section 4.01 of the Partnership Agreement during the quarter for which Available Cash is then being determined or during the immediately preceding quarter, but only to the extent such Tax distributions are reasonably expected to be utilized by the Corporation after the date of determination to pay Tax liabilities of the Corporation (including payments under any Tax sharing agreement to any member of a Consolidated Group which includes the Corporation) for such quarter or the immediately succeeding quarter.
“ Basis Adjustment ” means any adjustment to the Tax basis of an Exchange Reference Asset as a result of an Exchange, as calculated under Section 2.1 of this Agreement, including, but not limited to: (i) under the principles of Sections 732 and 1012 of the Code (including in a situation where, as a result of one or more Exchanges, Holdings becomes an entity that is disregarded as separate from its owner for Tax purposes) or (ii) Sections 743(b) and 754 of the Code (including in situations where, following an Exchange, Holdings remains in existence as an entity for Tax purposes) and, in each case, comparable sections of state and local Tax laws. Notwithstanding any other provision of this Agreement, the amount of any Basis Adjustment resulting from an Exchange of one or more Units shall be determined without regard to any Pre-Exchange Transfer of such Units and as if any such Pre-Exchange Transfer had not occurred.
“ Beneficial Owner ” of a security is a Person who directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares (i) voting power, which includes the power to vote, or to direct the voting of, such security, and/or (ii) investment power, which includes the power to dispose of, or to direct the disposition of, such security. The terms “Beneficially Own” and “Beneficial Ownership” shall have correlative meanings.
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“ Board ” means the board of directors of the Corporation.
“ Business Day ” means Monday through Friday of each week, except that a legal holiday recognized as such by the government of the United States of America or the State of Texas shall not be regarded as a Business Day.
“ Class A Shares ” is defined in the Recitals of this Agreement.
“ Code ” is defined in the Recitals of this Agreement.
“ Consolidated Group ” means any group of corporations filing consolidated, combined or unitary Tax returns of which the Corporation is a member.
“ Control ” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.
“ Corporation ” is defined in the Preamble of this Agreement.
“ Corporation Return ” means the U.S. federal, state and/or local Tax Return, as applicable, of the Corporation or any Consolidated Group filed with respect to Taxes of any Taxable Year.
“ Cumulative Net Realized Tax Benefit ” for a Taxable Year means the cumulative amount of Realized Tax Benefits of the Corporation, up to and including such Taxable Year, net of the cumulative amount of Realized Tax Detriments for the same period. The Realized Tax Benefit and Realized Tax Detriment for each Taxable Year shall be determined based on the most recent Tax Benefit Schedule or Amended Schedule, if any, in existence at the time of such determination.
“ Default Rate ” means LIBOR plus 500 basis points.
“ Determination ” shall have the meaning ascribed to such term in Section 1313(a) of the Code or similar provision of state and local Tax law, as applicable, or any other event (including the execution of an IRS Form 870-AD) that finally and conclusively establishes the amount of any liability for Tax.
“ Direct Exchange ” is defined in the preamble of this Agreement.
“ Dispute ” is defined in Section 7.8 of this Agreement.
“ Early Termination Date ” means the date of an Early Termination Notice for purposes of determining the Early Termination Payment.
“ Early Termination Notice ” is defined in Section 4.2 of this Agreement.
“ Early Termination Payment ” is defined in Section 4.3(b) of this Agreement.
“ Early Termination Rate ” means eighteen percent (18%).
“ Early Termination Schedule ” is defined in Section 4.2 of this Agreement.
“ Exchange ” means a Redemption or a Direct Exchange.
“ Exchange Act ” means the Securities Exchange Act of 1934, as amended.
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“ Exchange Basis Schedule ” is defined in Section 2.2 of this Agreement.
“ Exchange Date ” is defined in the Recitals of this Agreement.
“ Exchange Payment ” is defined in Section 5.1 of this Agreement.
“ Exchange Reference Asset ” means an asset that is held by Holdings, or by any of its direct or indirect subsidiaries treated as a partnership or disregarded entity for U.S. federal Tax purposes, at the time of an Exchange, other than any Excluded Assets. An Exchange Reference Asset also includes, without duplication, any asset the Tax basis of which is determined, in whole or in part, by reference to the Tax basis of an asset that is described in the preceding sentence, including any asset that is “substituted basis property” under Section 7701(a)(42) of the Code with respect to an Exchange Reference Asset. The Parties shall reasonably cooperate to allocate any jointly generated assets to the Exchange Reference Assets and the Excluded Assets.
“ Exchange Right ” is defined in the Preamble of this Agreement.
“ Exchanging Partner ” means a Limited Partner that has made an Exchange, but shall not include KFM Holdco, LLC, a Delaware limited liability company, to the extent that KFM Holdco obtained its Interests or Units pursuant to its contribution of KFM Midstream to Holdings.
“ Excluded Assets ” means (i) any asset (A) held by Kingfisher Midstream, LLC (or its successors or assigns), or any of its direct or indirect subsidiaries, as of the date of this Agreement, or (B) otherwise used in the Midstream Business as conducted by Kingfisher Midstream, LLC; and (ii) any asset treated as held, directly or indirectly, by a corporation that is a direct or indirect subsidiary of Holdings.
“ Expert ” is defined in Section 7.9 of this Agreement.
“ Holdings ” is defined in the Recitals of this Agreement.
“ Hydrocarbons ” means oil, gas and other hydrocarbons produced or processed in association therewith, or any combination thereof, and any minerals produced in association therewith, including all crude oil, gas, casinghead gas, condensate, natural gas liquids, and other gaseous or liquid hydrocarbons (including ethane, propane, iso-butane, nor-butane and gasoline) of any type or composition.
“ Hypothetical Tax Liability ” means, with respect to any Taxable Year, the liability for Taxes of, without duplication, (a) any Consolidated Group and the Corporation and (b) Holdings, but only with respect to Taxes imposed on Holdings and allocable to the Consolidated Group or the Corporation, in each case using the same methods, elections, conventions and similar practices used on the relevant Corporation Tax Return, but (i) calculating depreciation, amortization, depletion or other similar deductions or otherwise calculating any items of income, gain or loss using the Non-Stepped Up Tax Basis of each Exchange Reference Asset (as reflected on the applicable Exchange Basis Schedule including amendments thereto for the Taxable Year), and (ii) excluding any deduction attributable to Imputed Interest or the Interest Amount for the Taxable Year. For the avoidance of doubt, Hypothetical Tax Liability shall be determined without taking into account the carryover or carryback of any Tax item (or portions thereof) that is attributable to the Basis Adjustment, Imputed Interest, or Interest Amount, as applicable.
“ Imputed Interest ” shall mean any interest imputed under Section 1272, 1274 or 483 or other provision of the Code and any similar provision of state and local Tax law with respect to the Corporation’s payment obligations under this Agreement.
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“ Initial Limited Partners ” is defined in the preamble of this Agreement.
“ Interest ” is defined in the Recitals of this Agreement.
“ Interest Amount ” is defined in Section 3.1(b) of this Agreement.
“ IRS ” means the U.S. Internal Revenue Service.
“ LIBOR ” means for each month (or portion thereof) during any period, an interest rate per annum equal to the rate per annum reported, on the date two days prior to the first day of such month, on the Telerate Page 3750 (or if such screen shall cease to be publicly available, as reported on Reuters Screen page “LIBOR07” or by any other publicly available source of such market rate) for London interbank offered rates for United States dollar deposits for such month (or portion thereof), but shall in any case not be below zero.
“ Limited Partners ” means the Initial Limited Partners, and each other Person who from time to time executes a Joinder Agreement in the form attached hereto as Exhibit A (and which for the avoidance of doubt may include Exchanging Partners, as applicable).
“ Market Value ” shall mean the Common Unit Redemption Price, as defined in the Partnership Agreement, determined as of an Early Termination Date.
“ Material Objection Notice ” has the meaning set forth in Section 4.2.
“ Midstream Business ” means the gathering, marketing, treating, processing, storage, selling, transporting, transmission, compression, fractionation, dehydration, stabilization or treatment of Hydrocarbons, carbon dioxide or water.
“ Net Tax Benefit ” is defined in Section 3.1(b) of this Agreement.
“ Non-Stepped Up Tax Basis ” means, with respect to any Exchange Reference Asset at any time, the Tax basis that such Exchange Reference Asset would have had at such time if no Basis Adjustment had been made.
“ Objection Notice ” has the meaning set forth in Section 2.4(a).
“ Partnership Agreement ” means the Amended and Restated Agreement of Limited Partnership of Holdings, dated on or about the date hereof, as such agreement may be amended from time to time.
“ Payment Date ” means any date on which a payment is required to be made pursuant to this Agreement.
“ Person ” means any individual, corporation, firm, partnership, joint venture, limited liability company, estate, trust, business association, organization, governmental entity or other entity.
“ Pre-Exchange Transfer ” means any transfer (including upon the death of a Limited Partner) or distribution of one or more Units that occurs prior to an Exchange of such Units.
“ Realized Tax Benefit ” means, for a Taxable Year, the net excess, if any, of the Hypothetical Tax Liability over the “actual” liability for Taxes, for such Taxable Year, of (a) any Consolidated Group and the Corporation and (b) Holdings, but only with respect to Taxes imposed on Holdings and allocable to the Consolidated Group or the Corporation, such “actual” liability to be computed in accordance with
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Section 2.1 of this Agreement. If all or a portion of the actual liability for Taxes of any Consolidated Group or the Corporation (or Holdings, but only with respect to Taxes imposed on Holdings and allocable to the Consolidated Group or the Corporation) for such Taxable Year arises as a result of an audit by a Taxing Authority of any Taxable Year, such liability shall not be included in determining the Realized Tax Benefit unless and until there has been a Determination.
“ Realized Tax Detriment ” means, for a Taxable Year, the net excess, if any, of the “actual” liability for Taxes, for such Taxable Year, of (a) any Consolidated Group and the Corporation and (b) Holdings, but only with respect to Taxes imposed on Holdings and allocable to the Consolidated Group or the Corporation, such “actual” liability to be computed in accordance with Section 2.1 of this Agreement, over the Hypothetical Tax Liability for such Taxable Year. If all or a portion of the actual liability for Taxes of the Consolidated Group or the Corporation (or Holdings, but only with respect to Taxes imposed on Holdings and allocable to the Consolidated Group or the Corporation) for such Taxable Year arises as a result of an audit by a Taxing Authority of any Taxable Year, such liability shall not be included in determining the Realized Tax Detriment unless and until there has been a Determination.
“ Reconciliation Dispute ” has the meaning set forth in Section 7.9.
“ Reconciliation Procedures ” shall mean those procedures set forth in Section 7.9 of this Agreement.
“ Riverstone ” is defined in the preamble of this Agreement.
“ Schedule ” means any Exchange Basis Schedule or Tax Benefit Schedule and the Early Termination Schedule.
“ Senior Obligations ” is defined in Section 5.1 of this Agreement.
“ Subsidiaries ” means, with respect to any Person, as of any date of determination, any other Person as to which such first Person, owns, directly or indirectly, or otherwise controls more than 50% of the voting shares or other similar interests or the sole general partner interest or managing member or similar interest of such other Person.
“ Tax Benefit Payment ” is defined in Section 3.1(b) of this Agreement.
“ Tax Benefit Schedule ” is defined in Section 2.3 of this Agreement.
“ Tax Return ” means any return, declaration, report or similar statement required to be filed with respect to Taxes (including any attached schedules), including, without limitation, any information return, claim for refund, amended return and declaration of estimated Tax.
“ Taxable Year ” means a Taxable year of the Corporation as defined in Section 441(b) of the Code or comparable section of state and local Tax law, as applicable (and, therefore, for the avoidance of doubt, may include a period of less than 12 months for which a Tax Return is prepared), ending on or after the date hereof.
“ Taxes ” means any and all U.S. federal, state and local Taxes, assessments or similar charges that are based on or measured with respect to net income or profits, whether as an exclusive or on an alternative basis, and any interest, penalties or additions related thereto.
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“ Taxing Authority ” shall mean any domestic, foreign, federal, national, state, county or municipal or other local government, any subdivision, agency, commission or authority thereof, or any quasi-governmental body exercising any taxing authority or any other authority exercising Tax regulatory authority.
“ Treasury Regulations ” means the final, temporary and proposed regulations under the Code promulgated from time to time (including corresponding provisions and succeeding provisions) as in effect for the relevant Taxable period.
“ Units ” is defined in the Recitals of this Agreement.
“ Valuation Assumptions ” means, in respect of a Limited Partner, as of an Early Termination Date, the assumptions that (1) in each Taxable Year ending on or after such Early Termination Date, each Consolidated Group and the Corporation will have Taxable income sufficient to fully use the deductions and/or losses (including, as applicable and for the avoidance of doubt, any deductions taken as a result of applying the Valuation Assumptions) arising from any Basis Adjustment, Imputed Interest or Interest Amount during such Taxable Year or future Taxable Years (including, as applicable and for the avoidance of doubt, Basis Adjustments, Imputed Interest and Interest Amounts that would result from future Tax Benefit Payments that would be paid in accordance with the Valuation Assumptions) in which such deductions would become available, (2) the U.S. federal income Tax rates and state and local income Tax rates that will be in effect for each such Taxable Year will be those specified for each such Taxable Year by the Code and other law as in effect on the Early Termination Date, (3) any loss or credit carryovers relating to or generated by any Basis Adjustment, Imputed Interest or Interest Amount in respect of such Limited Partner and available as of the date of the Early Termination Schedule will be used by the Corporation or such Consolidated Group on a pro rata basis from the date of the Early Termination Schedule through the scheduled expiration date of such carryovers, (4) any non-amortizable assets will be disposed of (A) in the case of short-term investments, after 12 months and (B) in the case of all other non-amortizable assets, on the fifteenth anniversary of the earlier of the Basis Adjustment and the Early Termination Date, (5) if, at the Early Termination Date, there are Units that have not been Exchanged, then each such Unit shall be deemed to be Exchanged for the Market Value of the Class A Shares and the amount of cash that would be transferred if the Exchange occurred on the Early Termination Date, (6) for purposes of calculating depletion deductions and resulting reductions in adjusted Tax basis with respect to depletable properties held by Holdings and its Subsidiaries that are treated as disregarded entities or partnerships for U.S. federal income Tax purposes, (A) the remaining recoverable reserves with respect to each such property are equal to the recoverable reserves estimated in the most recent reserve report relating to such property (or, if there is no reserve report with respect to such property, the most recent estimate of recoverable reserves with respect to such property which is reflected in the financial records of Holdings) and (B) Holdings will recover the remaining recoverable reserves with respect to each such depletable property within the time estimated and at the rate reflected in the most recent reserve reports relating to such property (or, if there is no reserve report with respect to such property, the most recent estimate of the rate of recovery of recoverable reserves with respect to such property which is reflected in the financial records of Holdings or as otherwise reasonably determined by Holdings), (7) all taxable income of the Corporation will be subject to the maximum applicable tax rates throughout the relevant period and (8) any payment obligations pursuant to this Agreement will be satisfied on the date that any Tax Return to which such payment obligation relates is required to be filed, excluding any extensions.
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ARTICLE II.
DETERMINATION OF CUMULATIVE REALIZED TAX BENEFIT
2.1 Applicable Calculation Principles . Subject to Section 3.3(a), Section 4.1(c) and Section 4.3, the Realized Tax Benefit or Realized Tax Detriment is intended to measure the decrease or increase in the actual liability for Taxes of, without duplication, each Consolidated Group and the Corporation (and Holdings, but only with respect to Taxes imposed on Holdings and allocable to the Consolidated Group or the Corporation) for a Taxable Year attributable to Basis Adjustments, Imputed Interest and Interest Amounts, as applicable, determined using a “with and without” methodology. For the avoidance of doubt, the actual liability for Taxes will take into account the deduction of the portion of the Tax Benefit Payment that must be accounted for as interest under the Code based upon the characterization of Tax Benefit Payments as additional consideration payable by the Corporation for the Units acquired in an Exchange. Carryovers or carrybacks of any Tax item attributable to Basis Adjustments, Imputed Interest and Interest Amounts, as applicable, shall be considered to be subject to the rules of the Code and the Treasury Regulations or the appropriate provisions of U.S. state and local income and franchise Tax law, as applicable, governing the use, limitation and expiration of carryovers or carrybacks of the relevant type. If a carryover or carryback of any Tax item includes a portion that is attributable to the Basis Adjustments, Imputed Interest or Interest Amounts, as applicable, and another portion that is not, such portions shall be considered to be used in accordance with the “with and without” methodology. The parties agree that (i) any Tax Benefit Payment exceeding $100 in respect of an Exchanging Partner in an Exchange attributable to the Basis Adjustments in respect of such Exchanging Partner (other than amounts accounted for as interest under the Code) will (A) be treated as a subsequent upward purchase price adjustment and (B) have the effect of creating additional Basis Adjustments in respect of such Exchanging Partner to Exchange Reference Assets in the year of payment, and (ii) as a result, such additional Basis Adjustments in respect of such Exchanging Partner will be incorporated into the current year calculation and into future year calculations, as appropriate.
2.2 Exchange Basis Schedule . Within 120 days after the filing of the U.S. federal income Tax Return of the Corporation or any Consolidated Group for each Taxable Year in which an Exchange has been effected, the Corporation shall deliver to each Exchanging Partner a schedule (an “ Exchange Basis Schedule ”) that shows, in reasonable detail necessary to perform the calculations required by this Agreement, for purposes of Taxes, (i) the Non-Stepped Up Tax Basis of the Exchange Reference Assets attributable to such Exchanging Partner as of each applicable Exchange Date, (ii) the Basis Adjustment attributable to such Exchanging Partner with respect to the Exchange Reference Assets as a result of the Exchanges effected in such Taxable Year by such Exchanging Partner, calculated in the aggregate, (iii) the period or periods, if any, over which the Exchange Reference Assets are estimated to be depletable, amortizable and/or depreciable, and (iv) the period or periods, if any, over which each Basis Adjustment attributable to such Exchanging Partner is estimated to be depletable, amortizable and/or depreciable (which, for non-amortizable assets shall be based on the Valuation Assumptions).
2.3 Tax Benefit Schedule . Within 120 days after the filing of the U.S. federal income Tax Return of the Corporation, any Consolidated Group for any Taxable Year in which there is a Realized Tax Benefit or Realized Tax Detriment, the Corporation shall provide to each Exchanging Partner a schedule showing, in reasonable detail, the calculation of the Realized Tax Benefit or Realized Tax Detriment attributable to such Exchanging Partner for such Taxable Year (a “ Tax Benefit Schedule ”). The Schedule will become final as provided in Section 2.4(a) and may be amended as provided in Section 2.4(b) (subject to the procedures set forth in Section 2.4(b)).
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2.4 Procedures, Amendments .
(a) Procedure . Every time the Corporation delivers to an Exchanging Partner an applicable Schedule under this Agreement, including any Amended Schedule delivered pursuant to Section 2.4(b), but excluding any Early Termination Schedule or amended Early Termination Schedule, the Corporation shall also deliver to the Exchanging Partner schedules and work papers, as determined by the Corporation or reasonably requested by the Exchanging Partner, providing reasonable detail regarding the preparation of the Schedule. Without limiting the application of the preceding sentence, each time the Corporation delivers to an Exchanging Partner a Tax Benefit Schedule, in addition to the Tax Benefit Schedule, the Corporation shall deliver to such Exchanging Partner a reasonably detailed calculation by the Corporation of the applicable Hypothetical Tax Liability in respect of such Exchanging Partner, a reasonably detailed calculation by the Corporation of the actual Tax liability (determined as specified in Section 2.1), as well as any other work papers as determined by the Corporation or reasonably requested by such Exchanging Partner. The applicable Schedule shall become final and binding on all parties unless the Exchanging Partner, within 30 calendar days after receiving an Exchange Basis Schedule or amendment thereto or a Tax Benefit Schedule or amendment thereto, provides the Corporation with notice of a material objection to such Schedule (“ Objection Notice ”) made in good faith. If the parties, for any reason, are unable to successfully resolve the issues raised in such notice within 30 calendar days of receipt by the Corporation of an Objection Notice, if with respect to an Exchange Basis Schedule or a Tax Benefit Schedule, the Corporation and the Exchanging Partner shall employ the reconciliation procedures as described in Section 7.9 of this Agreement (the “ Reconciliation Procedures ”).
(b) Amended S chedule . The applicable Schedule in respect of an Exchanging Partner for any Taxable Year may be amended from time to time by the Corporation (i) in connection with a Determination affecting such Schedule, (ii) to correct material inaccuracies in the Schedule identified as a result of the receipt of additional factual information relating to a Taxable Year after the date the Schedule was provided to the Exchanging Partner, (iii) to comply with the Expert’s determination under the Reconciliation Procedures, (iv) to reflect a material change in the Realized Tax Benefit or Realized Tax Detriment in respect of the Exchanging Partner for such Taxable Year attributable to a carryback or carryforward of a loss or other Tax item to such Taxable Year, (v) to reflect a material change in the Realized Tax Benefit or Realized Tax Detriment in respect of the Exchanging Partner for such Taxable Year attributable to an amended Tax Return filed for such Taxable Year, or (vi) to adjust the Exchange Basis Schedule to take into account payments made pursuant to this Agreement (such Schedule, an “ Amended Schedule ”). The Corporation shall provide any Amended Schedule to the Exchanging Partner, within 30 calendar days of the notice of occurrence of an event referred to in clauses (i) through (vi) of the preceding sentence, and any such Amended Schedule shall be subject to approval procedures similar to those described in Section 2.4(a).
ARTICLE III.
TAX BENEFIT PAYMENTS
3.1 Payments .
(a) Payments . Subject to the last sentence of Section 4.1(b), within thirty (30) calendar days of a Tax Benefit Schedule that was delivered to an Exchanging Partner becoming final in accordance with Section 2.4(a), the Corporation shall pay to such Exchanging Partner, for such Taxable Year, the Tax Benefit Payment with respect to such Exchange determined pursuant to Section 3.1(b). Each such Tax Benefit Payment shall be made by wire transfer (or as otherwise
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directed by the Exchanging Partner) of immediately available funds to a bank account of the Exchanging Partner previously designated by such Exchanging Partner to the Corporation. For the avoidance of doubt, no Tax Benefit Payment shall be made in respect of estimated Tax payments, including, without limitation, U.S. federal estimated income Tax payments.
(b) A “ Tax Benefit Payment ” means an amount, not less than zero, equal to the sum of the Net Tax Benefit and the Interest Amount. For the avoidance of doubt, for Tax purposes, the Interest Amount shall not be treated as interest but instead shall be treated as additional consideration for the acquisition of Units in Exchanges unless otherwise required by law. The “ Net Tax Benefit ” for each Taxable Year shall be an amount equal to the excess, if any, of 85% of the Cumulative Net Realized Tax Benefit over the total amount of payments previously made under this Section 3.1, excluding payments attributable to the Interest Amount; provided, however, that for the avoidance of doubt, no Exchanging Partner shall be required to return any portion of any previously made Tax Benefit Payment. The “ Interest Amount ” for a given Taxable Year shall equal the interest on the Net Tax Benefit for such Taxable Year calculated at the Agreed Rate from the due date (without extensions) for filing the Corporation Return with respect to Taxes for the most recently ended Taxable Year until the Payment Date. The Net Tax Benefit and the Interest Amount shall be determined separately with respect to each separate Exchange, by reference to the resulting Basis Adjustment to the Corporation.
(c) The Corporation shall use good faith efforts to ensure that it has sufficient Available Cash to make all payments due under this Agreement without regard to the last sentence of Section 4.1(b).
(d) Notwithstanding any provision of this Agreement to the contrary, an Exchanging Partner may elect for the provisions of this Section 3.1(d) to apply to any Exchange by notifying the Corporation in writing on or before the due date for providing the Exchange Notice with respect to such Exchange. Following such election, the aggregate Tax Benefit Payments to be made to such Exchanging Partner with respect to any Exchange shall be limited to (i) 100% or such lower percentage such Exchanging Partner elects to apply by notifying the Corporation in writing on or before the due date for providing the Exchange Notice with respect to such Exchange, of (ii) the amount equal to the sum of (A) any cash, excluding any Tax Benefit Payments, received by such Exchanging Partner in such Exchange and (B) the aggregate Market Value of the Class A Shares received by such Exchanging Partner in such Exchange, provided, for the avoidance of doubt, that such amount shall not include any Imputed Interest with respect to such Exchange.
3.2 No Duplicative Payments . Notwithstanding anything in this Agreement to the contrary, it is intended that the provisions of this Agreement will not result in duplicative payment of any amount (including interest) required under this Agreement. It is also intended that the provisions of this Agreement will result in 85% of the Corporation’s Cumulative Net Realized Tax Benefit, and the Interest Amount thereon, being paid to the Limited Partners pursuant to this Agreement. The provisions of this Agreement shall be construed in the appropriate manner so that these fundamental results are achieved.
3.3 Pro Rata Payments; Coordination of Benefits .
(a) Notwithstanding anything in Section 3.1 to the contrary, to the extent that the aggregate Tax benefit of the Corporation or any Consolidated Group’s deduction with respect to the Basis Adjustments, Imputed Interest or Interest Amounts in respect of all Exchanging Limited Partners under this Agreement is limited in a particular Taxable Year because the Corporation or applicable Consolidated Group does not have sufficient Taxable income, the limitation on the Tax
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benefit for the Corporation or the applicable Consolidated Group shall be allocated among the Exchanging Limited Partners in proportion to the respective amounts of Realized Tax Benefits that would have been determined under this Agreement in respect of each Exchanging Partner if the Corporation or applicable Consolidated Group had sufficient Taxable income so that there were no such limitation.
(b) If for any reason the Corporation does not fully satisfy its payment obligations to make all Tax Benefit Payments due under this Agreement in respect of a particular Taxable Year, then the Corporation and the Exchanging Limited Partners agree that (i) the Corporation shall pay the same proportion of each Tax Benefit Payment due under this Agreement in respect of such Taxable Year, without favoring one obligation over another, and (ii) no Tax Benefit Payment shall be made in respect of any Taxable Year until all Tax Benefit Payments in respect of prior Taxable Years have been made in full.
ARTICLE IV.
TERMINATION
4.1 Early Termination and Breach of Agreement .
(a) The Corporation may terminate this Agreement at any time by paying to each Limited Partner the Early Termination Payment attributable to each such Limited Partner; provided, however, that this Agreement shall only terminate upon the receipt of the Early Termination Payment by all Limited Partners, and provided, further, that the Corporation may withdraw any notice to execute its termination rights under this Section 4.1(a) prior to the time at which any Early Termination Payment has been paid. Upon payment of the Early Termination Payments by the Corporation, neither the Limited Partners nor the Corporation shall have any further payment obligations under this Agreement, other than for any (a) Tax Benefit Payment agreed to by the Corporation and an Exchanging Partner as due and payable but unpaid as of the Early Termination Notice and (b) Tax Benefit Payment in respect of an Exchanging Partner due for the Taxable Year ending with or including the date of the Early Termination Notice (except to the extent that the amount described in clause (b) is included in the Early Termination Payment). For the avoidance of doubt, if an Exchange occurs after the Corporation makes the Early Termination Payments with respect to all Limited Partners, the Corporation shall have no obligations under this Agreement with respect to such Exchange, and its only obligations under this Agreement in such case shall be its obligations to all Limited Partners under Section 4.3(a).
(b) In the event that the Corporation breaches any of its material obligations under this Agreement, whether as a result of failure to make any payment when due, failure to honor any other material obligation required hereunder or by operation of law as a result of the rejection of this Agreement in a case commenced under the Bankruptcy Code or otherwise, then all obligations hereunder shall be accelerated and such obligations shall be calculated as if an Early Termination Notice had been delivered to each Limited Partner on the date of such breach and shall include, but shall not be limited to, (1) the Early Termination Payment of such Limited Partner calculated as if an Early Termination Notice had been delivered on the date of a breach, (2) any Tax Benefit Payment in respect of such Limited Partner agreed to by the Corporation and such Limited Partner as due and payable but unpaid as of the date of a breach, and (3) any Tax Benefit Payment in respect of such Limited Partner due for the Taxable Year ending with or including the date of a breach. Notwithstanding the foregoing, in the event that the Corporation breaches this Agreement, the Limited Partners shall be entitled to elect to receive the amounts set forth in clauses (1), (2) and (3) above or to seek specific performance of the terms hereof. The parties agree that the failure to make any payment due pursuant to this Agreement within six
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months of the date such payment is due shall be deemed to be a breach of a material obligation under this Agreement for all purposes of this Agreement, and that it will not be considered to be a breach of a material obligation under this Agreement to make a payment due pursuant to this Agreement within six months of the date such payment is due. Notwithstanding anything in this Agreement to the contrary, it shall not be a breach of this Agreement if the Corporation fails to make any Tax Benefit Payment (other than an Early Termination) when due to the extent that the Corporation has insufficient Available Cash to make such payment; provided, however , that the interest provisions of Section 5.2 shall apply to such late payment (unless the Corporation does not have Available Cash to make such payment as a result of limitations imposed by existing credit agreements to which Holdings is a party, in which case Section 5.2 shall apply, but the Default Rate shall be replaced by the Agreed Rate).
4.2 Early Termination Notice . If the Corporation chooses to exercise its right of early termination under Section 4.1 above, the Corporation shall deliver to each Limited Partner notice of such intention to exercise such right (“ Early Termination Notice ”) and a schedule (the “ Early Termination Schedule ”) specifying the Corporation’s intention to exercise such right and showing in reasonable detail the calculation of the Early Termination Payment for that Limited Partner. The Early Termination Schedule shall become final and binding on a Limited Partner (and on the Corporation as to that Limited Partner) unless the Limited Partner, within 30 calendar days after receiving the Early Termination Schedule, provides the Corporation with notice of a material objection to such Schedule made in good faith (“ Material Objection Notice ”). If the parties, for any reason, are unable to successfully resolve the issues raised in such notice within 30 calendar days after receipt by the Corporation of the Material Objection Notice, the Corporation and the Limited Partner shall employ the Reconciliation Procedures as described in Section 7.9 of this Agreement. All Early Termination Schedules affected by any changes resulting from a Material Objection Notice shall be updated and the Early Termination Payment(s) due in respect thereof shall be recalculated by the Corporation to take into account such changes.
4.3 Payment upon Early Termination .
(a) Within thirty (30) days calendar days after agreement between a Limited Partner and the Corporation of the Early Termination Schedule or the Expert’s determination under the Reconciliation Procedures, as applicable, the Corporation shall pay to such Limited Partner an amount equal to the Early Termination Payment determined for such Limited Partner. Such payment shall be made by wire transfer (or as otherwise directed by the Limited Partner) of immediately available funds to a bank account designated by the Limited Partner.
(b) The “ Early Termination Payment ” as of the date of the delivery of an Early Termination Schedule shall equal with respect to any Limited Partner the sum of (i) the present value, discounted at the Early Termination Rate as of such date, of all Tax Benefit Payments that would be required to be paid by the Corporation to the Limited Partner (which in the case of a Limited Partner that has Units that have not previously been Exchanged shall be calculated as if such Limited Partner made an Exchange of all its remaining Units on the Early Termination Date) and assuming that the Valuation Assumptions are applied and (ii) without duplication of any amounts referred to in (i), amounts deferred pursuant to the last sentence of Section 4.1(b) (including interest).
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ARTICLE V.
SUBORDINATION AND LATE PAYMENTS
5.1 Subordination . Notwithstanding any other provision of this Agreement to the contrary, any Tax Benefit Payment or Early Termination Payment required to be made by the Corporation to the Limited Partners under this Agreement (an “ Exchange Payment ”) shall rank subordinate and junior in right of payment to any principal, interest or other amounts due and payable in respect of any obligations in respect of indebtedness for borrowed money of the Corporation or any of its Subsidiaries (“ Senior Obligations ”) and shall rank pari passu with all current or future unsecured obligations of the Corporation that are not Senior Obligations.
5.2 Late Payments by the Corporation . The amount of all or any portion of any Exchange Payment not made to any Exchanging Partner when due under the terms of this Agreement shall be payable together with any interest thereon, computed at the Default Rate (rather than the Agreed Rate) and commencing from the date on which such Exchange Payment was due and payable.
ARTICLE VI.
NO DISPUTES; CONSISTENCY; COOPERATION
6.1 Initial Limited Partner Participation in the Corporation’s and Holdings’ Tax Matters . Except as otherwise provided herein, the Corporation shall have full responsibility for, and sole discretion over, all Tax matters concerning the Corporation, and Consolidated Group and Holdings, including without limitation the preparation, filing or amending of any Tax Return and defending, contesting or settling any issue pertaining to Taxes. Notwithstanding the foregoing, the Corporation shall notify each Initial Limited Partner of, and keep such Initial Limited Partner reasonably informed with respect to, the portion of any audit of the Corporation, and Consolidated Group and Holdings by a Taxing Authority the outcome of which is reasonably expected to affect such Initial Limited Partner’s rights and obligations under this Agreement, and shall provide to such Initial Limited Partner reasonable opportunity to provide information and other input to the Corporation, Holdings and their respective advisors concerning the conduct of any such portion of such audit; provided, however, that the Corporation and Holdings shall not be required to take any action that is inconsistent with any provision of the Partnership Agreement.
6.2 Consistency . Except for items that are explicitly described as “deemed” or in similar manner by the terms of this Agreement, the Corporation and each Limited Partner agree to report and cause to be reported for all purposes, including federal, state, and local Tax purposes and financial reporting purposes, all Tax-related items (including without limitation the Basis Adjustment and each Tax Benefit Payment) in a manner consistent with that specified by the Corporation in any Schedule required to be provided by or on behalf of the Corporation under this Agreement.
6.3 Cooperation . Each Limited Partner shall (a) furnish to the Corporation in a timely manner such information, documents and other materials as the Corporation may reasonably request for purposes of making any determination or computation necessary or appropriate under this Agreement, preparing any Tax Return or contesting or defending any audit, examination or controversy with any Taxing Authority, (b) make itself available to the Corporation and its representatives to provide explanations of documents and materials and such other information as the Corporation or its representatives may reasonably request in connection with any of the matters described in clause (a) above, and (c) reasonably cooperate in connection with any such matter, and the Corporation shall reimburse the Limited Partner for any reasonable third-party costs and expenses incurred pursuant to this Section.
ARTICLE VII.
MISCELLANEOUS
7.1 Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be deemed duly given and received (a) if delivered personally, on the date of delivery, or, if delivered by facsimile, upon confirmation of transmission by the sender’s fax machine if sent on a Business Day (or otherwise, on the Business Day following confirmation of transmission by the
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sender’s fax machine) or (b) on the first Business Day following the date of dispatch if delivered by a recognized next-day courier service. All notices hereunder shall be delivered as set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice:
if to the Corporation, to:
Alta Mesa Resources, Inc.
15021 Katy Freeway, Suite 400
Houston, Texas 77094
Attn: Harlan H. Chappelle
Fax: ___________
if to Holdings, to:
SRII Opco, LP
15021 Katy Freeway, Suite 400
Houston, Texas 77094
Attn: Jim Hackett
Fax: ___________
If to a Limited Partner, to the address and facsimile number set forth in Holdings’ records.
Any party may change its address or fax number by giving the other party written notice of its new address or fax number in the manner set forth above.
7.2 Counterparts . This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart. Delivery of an executed signature page to this Agreement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Agreement.
7.3 Entire Agreement; No Third Party Beneficiaries . This Agreement constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof. This Agreement shall be binding upon and inure solely to the benefit of each party hereto and their respective successors and permitted assigns, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.
7.4 Governing Law . This Agreement shall be governed by, and construed in accordance with, the law of the State of Texas, without regard to the conflicts of laws principles thereof that would mandate the application of the laws of another jurisdiction.
7.5 Severability . If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any law or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby are consummated as originally contemplated to the greatest extent possible.
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7.6 Successors; Assignment; Amendments; Waivers . No Limited Partner may assign this Agreement to any person without the prior written consent of the Corporation; provided, however, that (i) to the extent Units are effectively transferred in accordance with the terms of the Partnership Agreement, the transferring Limited Partner shall have the option to assign to the transferee of such Units the transferring Limited Partner’s rights under this Agreement with respect to such transferred Units, as long as such transferee has executed and delivered, or, in connection with such transfer, executes and delivers, a Joinder Agreement in the form attached hereto as Exhibit A, agreeing to become a “Limited Partner” for all purposes of this Agreement, except as otherwise provided in such Joinder Agreement, and (ii) any and all payments payable to a Limited Partner pursuant to this Agreement with respect to a Limited Partner may be assigned to any Person or Persons, including a liquidating trust, as long as any such Person has executed and delivered, or, in connection with such assignment, executes and delivers, a Joinder Agreement in the form attached hereto as Exhibit A, agreeing to be bound by Section 7.13 and acknowledging specifically the terms of the next paragraph. For the avoidance of doubt, if a Person transfers Units (regardless of whether the transferee is a “Permitted Transferee” under the terms of the Partnership Agreement) but does not assign to the transferee of such Units such Person’s rights, if any, under this Agreement with respect to such transferred Units or payments payable to such Limited Partner under this Agreement, such Person shall be entitled to receive the Tax Benefit Payments, if any, due hereunder including with respect to, any Tax Benefit Payments arising in respect of a subsequent Exchange of, such Units.
Notwithstanding the foregoing provisions of this Section 7.6, and other than a transferee or assignee who is a beneficial owner of an interest in HMH or Riverstone, (a) no transferee described in clause (i) of the immediately preceding paragraph shall have the right to enforce the provisions of Sections 2.4, 4.2, 6.1 or 6.2 of this Agreement, and (b) no assignee described in clause (ii) of the immediately preceding paragraph shall have any rights under this Agreement except for the right to enforce its right to receive payments under this Agreement.
No provision of this Agreement may be amended unless such amendment is approved in writing by each of the Corporation and Holdings and each Initial Limited Partner. No provision of this Agreement may be waived unless such waiver is in writing and signed by the party against whom the waiver is to be effective.
All of the terms and provisions of this Agreement shall be binding upon, shall inure to the benefit of and shall be enforceable by the parties hereto and their respective successors, assigns, heirs, executors, administrators and legal representatives. The Corporation shall require and cause any direct or indirect successor (whether by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Corporation, by written agreement, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Corporation would be required to perform if no such succession had taken place. For the avoidance of doubt and notwithstanding anything to the contrary herein, in the event an Initial Limited Partner transfers Units to a Permitted Transferee (as defined in the Partnership Agreement) that is a beneficial owner of interest in such Initial Limited Partner, then such beneficial owner shall have the right to enforce the provisions of Sections 2.4, 4.2 or 6.1 with respect to such transferred Units.
7.7 Titles and Subtitles . The titles of the sections and subsections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement.
7.8 Resolution of Disputes .
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(a) Any and all disputes, including but not limited to any ancillary claims of any party, arising out of, relating to or in connection with the validity, negotiation, execution, interpretation, performance or non-performance of this Agreement (including the validity, scope and enforceability of this arbitration provision) (each a “ Dispute ”) shall be finally settled by arbitration conducted by a single arbitrator in Harris County, Texas in accordance with this Section 7.8, regardless of whether some or all of any Dispute allegedly (i) is extra-contractual in nature, (ii) sounds in contract, tort or otherwise, (iii) is provided by U.S. federal or state statute, common law or otherwise, or (iv) seeks damages or any other relief, whether at law, in equity or otherwise.
(b) If the parties to the Dispute fail to agree on the selection of an arbitrator within ten (10) days of the receipt of the request for arbitration, either party may apply to the U.S. District Court of the Southern District of Texas, Houston Division, or any other court of competent jurisdiction, for the appointment of an arbitrator pursuant to the Federal Arbitration Act, 9 U.S.C. § 5.
(c) Notwithstanding the fact that any matter in dispute between the parties is to be submitted, or has already been submitted, to arbitration, the parties shall continue to observe and perform their respective obligations and duties under this Agreement during any arbitration proceedings.
(d) Subject to any relevant legal privilege, within 30 days of the selection of an arbitrator, each party shall be required to disclose to the other party all documents that are relevant to the Dispute and to identify all persons likely to have knowledge of facts relevant to the dispute. Absent a showing of undue prejudice and necessity, there shall be no other discovery, whether by requests for production, interrogatories or deposition, in connection with the arbitration. The arbitrator shall have the power to make all orders necessary for the disclosure contemplated herein, which orders the parties consent in advance to obey. If a party fails or refuses to comply with an order for disclosure, the arbitrator may take that failure into account when deciding the issues and may infer that the documents not produced would have supported the opposing party’s claims.
(e) The presentation of evidence shall be limited to: (1) no more than two pre-hearing written submissions by each party, which shall include witness statements, declarations, or affidavits, expert reports, and all documentary and tangible evidence, and legal authority upon which the party relies, and (2) cross-examination at the hearing of only persons submitting statements, declarations, affidavits, or expert reports.
(f) Barring extraordinary circumstances as may be determined by the arbitrator, the arbitration proceedings will be concluded within 120 days from the selection of the arbitrator, which time may be extended in the interest of justice and failure to adhere to or meet this limit shall not constitute a basis for challenging the award. The parties to a Dispute may by mutual written agreement, and with the consent of the arbitrator, extend any of the deadlines of this Section 7.8.
(g) In addition to monetary damages, the arbitrator shall be empowered to issue procedural orders or interim measures upon application of any party, including requests for injunctive relief, specific performance of any obligation under this Agreement, and other equitable remedies, which may be enforced as necessary in any court of competent jurisdiction. The arbitrator shall not decide a Dispute ex aqueo et bono or as amiable compositeur , and is not empowered to award damages in excess of compensatory damages, and each party hereby
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irrevocably waives any right to recover punitive, exemplary or similar damages with respect to any Dispute. The arbitrator shall not have the authority to modify or amend any term or provision of this Agreement. The award shall be final and binding upon the parties as from the date rendered, and shall be the sole and exclusive remedy between the parties regarding any claims, counterclaims, issues, or accounting presented to the arbitral tribunal. Judgment upon any award may be entered and enforced in any court having jurisdiction over a party or any of its assets.
(h) The award shall include interest, unless the arbitrator determines it is not appropriate. Interest shall run from the date of any breach or violation of the Agreement, which shall be determined by the arbitrator in its award. If the arbitrator cannot determine such date or fails to specify such date in its award, interest shall run from the date of serving the request for arbitration. Interest shall continue to run from the date of award until the award is paid in full. Interest shall be calculated and compounded monthly at the one-year US$ LIBOR rate as published by the Financial Times on the first business day of the applicable month plus 4 per cent.
(i) The arbitrator shall designate a prevailing party (or parties) in its final award and, pursuant to this determination, shall award to the prevailing party (or parties) its attorneys’ fees, costs and expenses of the arbitration (including the arbitrators’ fees and expenses) in full.
(j) Notwithstanding the provisions of paragraph (a), the Corporation may bring an action or special proceeding in any court of competent jurisdiction for the purpose of compelling a party to arbitrate, seeking temporary or preliminary relief in aid of an arbitration hereunder, and/or enforcing an arbitration award and, for the purposes of this paragraph (j), each Limited Partner (1) expressly consents to the application of paragraph (i) of this Section 7.8 to any such action or proceeding, (2) agrees that proof shall not be required that monetary damages for breach of the provisions of this Agreement would be difficult to calculate and that remedies at law would be inadequate, and (3) irrevocably appoints the Corporation as such Limited Partner’s agent for service of process in connection with any such action or proceeding and agrees that service of process upon such agent, who shall promptly advise such Limited Partner of any such service of process, shall be deemed in every respect effective service of process upon the Limited Partner in any such action or proceeding.
(k) EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF COURTS LOCATED IN AUSTIN, TEXAS FOR THE PURPOSE OF ANY JUDICIAL PROCEEDING BROUGHT IN ACCORDANCE WITH THE PROVISIONS OF THIS SECTION 7.8, OR ANY JUDICIAL PROCEEDING ANCILLARY TO AN ARBITRATION OR CONTEMPLATED ARBITRATION ARISING OUT OF OR RELATING TO OR CONCERNING THIS AGREEMENT. Such ancillary judicial proceedings include any suit, action or proceeding to compel arbitration, to obtain temporary or preliminary judicial relief in aid of arbitration, or to confirm an arbitration award. The parties acknowledge that the forum designated by this paragraph (b) have a reasonable relation to this Agreement, and to the parties’ relationship with one another; and the parties hereby waive, to the fullest extent permitted by applicable law, any objection which they now or hereafter may have to personal jurisdiction or to the laying of venue of any such ancillary suit, action or proceeding brought in any court referred to in this Section 7.8 and such parties agree not to plead or claim the same.
7.9 Reconciliation . In the event that the Corporation and the Limited Partner are unable to resolve a disagreement with respect to the matters governed by Sections 2.4, 4.2 and 6.2 within the relevant period designated in this Agreement ( “ Reconciliation Dispute ”), the Reconciliation Dispute shall be submitted for determination to a nationally recognized expert (the “ Expert ”) in the particular area of
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disagreement mutually acceptable to both parties. The Expert shall be a partner in a nationally recognized accounting firm or a law firm, and the Expert shall not, and, unless the Limited Partner agrees otherwise, the firm that employs the Expert shall not, have any material relationship with either the Corporation or the Limited Partner or other actual or potential conflict of interest. If the parties are unable to agree on an Expert within fifteen (15) days of receipt by the respondent(s) of written notice of a Reconciliation Dispute, the Expert shall be appointed by the International Chamber of Commerce Centre for Expertise. The Expert shall resolve any matter relating to the Exchange Basis Schedule or an amendment thereto or the Early Termination Schedule or an amendment thereto within 30 calendar days and shall resolve any matter relating to a Tax Benefit Schedule or an amendment thereto within 15 calendar days or as soon thereafter as is reasonably practicable, in each case after the matter has been submitted to the Expert for resolution. Notwithstanding the preceding sentence, if the matter is not resolved before any payment that is the subject of a disagreement would be due (in the absence of such disagreement) or any Tax Return reflecting the subject of a disagreement is due, the undisputed amount shall be paid on such date and such Tax Return may be filed as prepared by the Corporation, subject to adjustment or amendment upon resolution.
The costs and expenses relating to the engagement of such Expert or amending any Tax Return shall be borne equally by the Corporation and such Limited Partner except as provided in the next sentence. The Corporation and each Limited Partner shall bear their own costs and expenses of such proceeding, unless a Limited Partner has a prevailing position that is more than 10% of the payment at issue, in which case the Corporation shall reimburse such Limited Partner for any reasonable out-of-pocket costs and expenses in such proceeding. Any dispute as to whether a dispute is a Reconciliation Dispute within the meaning of this Section 7.9 shall be decided by the Expert. The Expert shall finally determine any Reconciliation Dispute and the determinations of the Expert pursuant to this Section 7.9 shall be binding on the Corporation and the Limited Partner and may be entered and enforced in any court having jurisdiction.
7.10 Withholding . The Corporation shall be entitled to deduct and withhold from any payment payable pursuant to this Agreement such amounts as the Corporation is required to deduct and withhold with respect to the making of such payment under the Code or any provision of state, local or foreign Tax law. To the extent that amounts are so withheld and paid over to the appropriate Taxing Authority by the Corporation, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Exchanging Partner.
7.11 Tax Covenant . The Corporation, Holdings and each of the Limited Partners hereby acknowledge that, as of the date of this Agreement, the aggregate value of the Tax Benefit Payments cannot reasonably be ascertained for U.S. federal income Tax or other applicable Tax purposes.
7.12 Admission of the Corporation into a Consolidated Group; Transfers of Corporate Assets .
(a) If the Corporation becomes a member of an affiliated or consolidated group of corporations that files a consolidated income Tax Return pursuant to Sections 1501 et seq. of the Code or any corresponding provisions of state, local or foreign law, then: (i) the provisions of this Agreement shall be applied with respect to the group as a whole; and (ii) Tax Benefit Payments, Early Termination Payments and other applicable items hereunder shall be computed with reference to the consolidated Taxable income of the group as a whole.
(b) If any entity that is obligated to make an Exchange Payment hereunder transfers one or more assets to a corporation with which such entity does not file a consolidated Tax Return pursuant to Section 1501 of the Code, such entity, for purposes of calculating the amount of any Exchange Payment ( e.g. , calculating the gross income of the entity and determining the Realized Tax Benefit of such entity) due hereunder, shall be treated as having disposed of such
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asset in a fully Taxable transaction on the date of such transfer. The consideration deemed to be received by such entity shall be equal to the fair market value of the transferred asset, plus (i) the amount of debt to which such asset is subject, in the case of a transfer of an encumbered asset or (ii) the amount of debt allocated to such asset, in the case of a transfer of a partnership interest.
7.13 Confidentiality . Each Limited Partner and assignee acknowledges and agrees that the information of the Corporation is confidential and, except in the course of performing any duties as necessary for the Corporation and its Affiliates, as required by law or legal process or to enforce the terms of this Agreement, such person shall keep and retain in the strictest confidence and not disclose to any Person any confidential matters, acquired pursuant to this Agreement, of the Corporation and its Affiliates and successors, concerning Holdings and its Affiliates and successors or the other Limited Partners, learned by the Limited Partner heretofore or hereafter. This clause 7.13 shall not apply to (i) any information that has been made publicly available by the Corporation or any of its Affiliates, becomes public knowledge (except as a result of an act of such Limited Partner in violation of this Agreement) or is generally known to the business community and (ii) the disclosure of information to the extent necessary for a Limited Partner to prepare and file his or her Tax Returns, to respond to any inquiries regarding the same from any Taxing Authority or to prosecute or defend any action, proceeding or audit by any Taxing Authority with respect to such returns. Notwithstanding anything to the contrary herein, each Limited Partner and assignee (and each employee, representative or other agent of such Limited Partner or assignee, as applicable) may disclose to any and all Persons, without limitation of any kind, the Tax treatment and Tax structure of the Corporation, Holdings, the Limited Partners and their Affiliates, and any of their transactions, and all materials of any kind (including opinions or other Tax analyses) that are provided to the Limited Partners relating to such Tax treatment and Tax structure.
If a Limited Partner or assignee commits a breach, or threatens to commit a breach, of any of the provisions of this Section 7.13, the Corporation shall have the right and remedy to have the provisions of this Section 7.13 specifically enforced by injunctive relief or otherwise by any court of competent jurisdiction without the need to post any bond or other security, it being acknowledged and agreed that any such breach or threatened breach shall cause irreparable injury to the Corporation or any of its Subsidiaries or the other Limited Partners and the accounts and funds managed by the Corporation and that money damages alone shall not provide an adequate remedy to such Persons. Such rights and remedies shall be in addition to, and not in lieu of, any other rights and remedies available at law or in equity.
7.14 Partnership Agreement . To the extent applicable, this Agreement shall be treated as part of the partnership agreement of Holdings as described in Section 761(c) of the Code and Sections 1.704-1(b)(2)(ii)(h) and 1.761-1(c) of the Treasury Regulations.
7.15 Independent Nature of Exchanging Limited Partners’ Rights and Obligations . The obligations of each Limited Partner hereunder are several and not joint with the obligations of any other Limited Partner, and no Limited Partner shall be responsible in any way for the performance of the obligations of any other Limited Partner hereunder. The decision of each Limited Partner to enter into this Agreement has been made by such Limited Partner independently of any other Limited Partner. Nothing contained herein, and no action taken by any Limited Partner pursuant hereto, shall be deemed to constitute the Limited Partners as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Limited Partners are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated hereby and the Corporation acknowledges that the Limited Partners are not acting in concert or as a group, and the Corporation will not assert any such claim, with respect to such obligations or the transactions contemplated hereby.
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7.16 Headings . The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.
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IN WITNESS WHEREOF, the Corporation, Holdings, Riverstone and HMH have duly executed this Agreement as of the date first written above.
| THE CORPORATION: | ||
| ALTA MESA RESOURCES, INC. , | ||
| a Delaware corporation | ||
| By: | /s/ Harlan H. Chappelle | |
| Name: Harlan H. Chappelle | ||
| Title: Chief Executive Officer | ||
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Tax Receivable Agreement
| HOLDINGS : | ||
| SRII OPCO, LP, | ||
| a Delaware limited partnership | ||
| By: |
/s/ Stephen S. Coats |
|
| Name: Stephen S. Coats | ||
| Title: Secretary | ||
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Signature Page to the
Tax Receivable Agreement
| RIVERSTONE: | ||||
| RIVERSTONE VI ALTA MESA HOLDINGS, L.P. , | ||||
| a Delaware limited partnership | ||||
| By: | /s/ Peter Haskopoulos | |||
| Name: Peter Haskopoulos | ||||
| Title: Managing Director | ||||
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Signature Page to the
Tax Receivable Agreement
| HMH : | ||
| HIGH MESA HOLDINGS, LP , | ||
| a Delaware limited partnership | ||
| By: | High Mesa Holdings GP, LLC, | |
| a Delaware limited liability company, | ||
| its General Partner | ||
| By: |
/s/ Harlan H. Chappelle |
|
| Harlan H. Chappelle, | ||
| President and Chief Executive Officer | ||
End of Signatures.
Signature Page to the
Tax Receivable Agreement
EXHIBIT A
JOINDER
This JOINDER (this “ Joinder ”) to the Tax Receivable Agreement, dated as of , by and among Alta Mesa Resources, Inc. (f/k/a Silver Run Acquisition Corporation II), a Delaware corporation (the “ Corporation ”), SRII Opco, LP, a Delaware limited partnership (“ Holdings ”), Riverstone VI Alta Mesa Holdings, L.P., a Delaware partnership (“ Riverstone ”), and High Mesa Holdings LP, a Delaware limited partnership (“ HMH ”, with Riverstone and HMH, each a “ Permitted Transferee ”).
WHEREAS, on , Permitted Transferee acquired (the “ Acquisition ”) Interests in Holdings and the corresponding shares of Class C common stock of the Corporation (collectively, “ Units ” and, together with all other Units hereinafter acquired by Permitted Transferee from Transferor and its Permitted Transferees (as defined in the Tax Receivable Agreement), the “Acquired Units”) from (“ Transferor ”) ; and
WHEREAS, Transferor, in connection with the Acquisition, has required Permitted Transferee to execute and deliver this Joinder pursuant to Section 7.6 of the Tax Receivable Agreement.
NOW, THEREFORE, in consideration of the foregoing and the agreements contained herein, Permitted Transferee hereby agrees as follows:
Section 1.1. Definitions . To the extent capitalized words used in this Joinder are not defined in this Joinder, such words shall have the meaning set forth in the Tax Receivable Agreement.
Section 1.2. Joinder . Permitted Transferee hereby acknowledges and agrees to become a “ Limited Partner ” (as defined in the Tax Receivable Agreement) for all purposes of the Tax Receivable Agreement, including but not limited to, being bound by Sections 2.4, 4.2, 6.1, 6.2 and 7.12 of the Tax Receivable Agreement, with respect to the Acquired Units.
Section 1.3. Notice . All notices, requests, consents and other communications hereunder to Permitted Transferee shall be deemed to be sufficient if contained in a written instrument delivered in person or sent by facsimile (provided a copy is thereafter promptly delivered as provided in this Section 1.3) or nationally recognized overnight courier, addressed to Permitted Transferee at the address or facsimile number set forth below or such other address or facsimile number as may hereafter be designated in writing by Permitted Transferee:
Section 1.4. Governing Law . THIS JOINDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING EFFECT TO CONFLICT OF LAWS PRINCIPLES THEREOF.
IN WITNESS WHEREOF, this Joinder has been duly executed and delivered by Permitted Transferee as of the date first above written.
| By: |
|
|
| Name: | ||
| Title: |
Exhibit 10.6
Execution Version
RESTRICTIVE COVENANT AGREEMENT
THIS RESTRICTIVE COVENANT AGREEMENT (this “ Agreement ”) is entered into as of February 9, 2018, by and between Alta Mesa Resources, Inc., a Delaware corporation (“ Buyer ”), and Asset Risk Management, LLC, a Delaware limited liability company (the “ Restricted Party ”). Capitalized terms used and not otherwise defined in this Agreement have the meanings ascribed to such terms in the Contribution Agreement (as defined below). Buyer and the Restricted Party are sometimes referred to collectively herein as the “ Parties ” and each, individually, as a “ Party ”.
PRELIMINARY STATEMENTS
WHEREAS , Buyer is a party to that certain Contribution Agreement by and among Buyer, KFM Holdco, LLC (“ Contributor ”), Kingfisher Midstream, LLC (the “ Company ”), and for limited purposes, certain other parties, dated as of August 16, 2017 (the “ Contribution Agreement ”), pursuant to which, Buyer has agreed to acquire all of the membership interests of the Company;
WHEREAS , the Restricted Party is a party to that certain Amended and Restated Operating and Construction Management Agreement by and between the Restricted Party and the Company, dated as of December 22, 2016, pursuant to which, the Restricted Party provides certain services to and on behalf of the Company; and
WHEREAS , as a condition to Buyer’s obligation to consummate the Transactions, Buyer requires that the Restricted Party execute and deliver this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and obligations contained in this Agreement and the Contribution Agreement and other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledge, the Parties agree as follows:
STATEMENT OF AGREEMENT
1. Definitions .
(a) “Hedge” means over-the-counter swaps, including fixed price or options, puts, calls, collars, and other cash-settled transactions constituting “swaps” under the Dodd-Frank Act but excluding futures and any swaps subject to a clearing requirement.
(b) “ Marketing Services ” means the following services that the Restricted Party or one or more of its Affiliates furnishes or may furnish for or on behalf of various producers of Hydrocarbons: (i) managing all sales-related activities and marketing of producers’ Hydrocarbons, including joint venture and joint interest sales and establishing new direct market opportunities with end-users for such Hydrocarbons; (ii) acting as agent of producers’ gas gathering and treating agreements for the purpose of nominating, scheduling, monitoring daily deliveries, monitoring and resolving imbalances, and administering capacity release sales; (iii) monitoring and confirming producers’ Hydrocarbons sale and transportation activities for accuracy and timeliness such as initiation of flow, volume statements, gas sales statements,
transportation statements, invoices and payments, and summarizing and communicating such information to the producer; (iv) managing, in consultation with producers, contract administration for the sale, processing and transportation of producers’ Hydrocarbons; (v) coordinating management, nominations and scheduling of volumes of producers’ Hydrocarbons; (vi) confirming and reconciling actual volumes of producers’ Hydrocarbons to producers’ capacity rights; (vii) calculating, managing and monitoring pipeline imbalances; (viii) providing reporting to producers of all their Hydrocarbon sales volumes, revenues, associated transaction costs, and transportation fees; (ix) conducting marketing and operational meetings with producers and providing performance reviews; (x) negotiating the terms and conditions of third party sales agreements; (xi) performing such other services reasonably requested by producers relating to the marketing of producers’ Hydrocarbons, including blending operations; and (xii) developing and assisting in the development and execution of risk management strategies using Hedges.
(c) “ Restricted Area ” means the following counties in the State of Oklahoma – Kingfisher, Garfield, Major, Blaine and Logan – and the following townships in Canadian County in the State of Oklahoma – 14N 6W, 14N 5W, 13N 6W and 13N 5W.
(d) “ Restricted Business ” means the owning or operating of tangible assets for the business of gathering, transporting, processing, treating, storing and disposing of crude oil, natural gas, other hydrocarbons and related liquids, including water, within the Restricted Area; provided , however , that Marketing Services shall not be included in the definition of Restricted Business and the Restricted Party may perform Marketing Services without restriction or limitation hereunder.
2. Acknowledgement . Buyer would not have entered into Contribution Agreement if the Restricted Party had not agreed to the covenants set forth herein; (ii) this Agreement is a material term and material incentive for entering into the Contribution Agreement; and (iii) the Restricted Party had access to and is, directly or indirectly, selling to Buyer as part of the Contribution Agreement the goodwill of the Company and information that is confidential and proprietary to the Company, that constitutes a valuable, special and unique asset of the Company, and with respect to which Buyer is entitled to the protections afforded by this Agreement and to the remedies for enforcement of this Agreement provided by law or in equity (including those remedies the availability of which may be within the discretion of the court or arbitrator that presides over any action for which enforcement of this Agreement is brought).
3. Restrictive Covenants .
(a) For a period of 18 months after the Closing Date, the Restricted Party agrees that it will not (i) directly or indirectly employ or engage any (A) Transferred Employee or (B) employee of Buyer or any of its Affiliates (including for this purpose Alta Mesa Holdings, LP, and its Subsidiaries) with whom the Restricted Party or any of its Affiliates had contact with or became aware of prior to the Closing Date or in connection with the Transactions (collectively, the “ Restricted Employees ”), or (ii) directly or indirectly solicit the employment or services of, or cause or attempt to cause to leave the employment or service of the Company, Buyer or any Affiliate of Buyer, any Restricted Employees; provided , however , that the Restricted Party may solicit or hire any Restricted Employees if (X) Buyer has consented to the solicitation or hiring of such individual in writing, which consent Buyer may withhold in its sole discretion, or (Y) such solicitation solely occurs by general solicitation for employment not directed at any such Restricted Employees.
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(b) For a period of 18 months after the Closing Date, the Restricted Party agrees that it will not, directly or indirectly, acting alone or as a member of a partnership or company, as a holder or owner of any security, as a lender, agent, advisor, consultant or independent contractor: (i) within the Restricted Area, carry on, participate in, or be engaged in (whether for its own account or for the account of any other Person) the Restricted Business; (ii) share in the earnings of, or beneficially own or hold any security issued by, or otherwise own or hold any interest in any entity which is engaged in the Restricted Business within the Restricted Area; or (iii) encourage or induce, directly or indirectly, any customer or supplier of the Company who is a customer or supplier of the Company within the Restricted Area immediately prior to or any time during the six month period ending at the Closing, or is a prospective customer or supplier of the Company within the Restricted Area immediately prior to or any time during the six month period ending at the Closing, to curtail, cancel or materially reduce its business or refrain from doing business with, Buyer or its Affiliates (which after Closing includes the Company) within the Restricted Area. Notwithstanding the foregoing provisions of this Section 3(b) , the Restricted Party may own, solely as an investment, securities of an entity that is engaged in the Restricted Business within the Restricted Area if the Restricted Party (A) is not an Affiliate of the issuer of such securities, (B) does not, directly or indirectly, beneficially own more than 5% in the aggregate of such class of securities, and (C) has no active participation in such entity.
(c) From the Closing Date and through December 31, 2019, Buyer and the Restricted Party will, and will use commercially reasonable efforts to cause its Affiliates and Representatives to, (i) maintain the strict confidentiality of any and all Confidential Information and (ii) not disclose such Confidential Information to any Person other than any of its Affiliates or Representatives, except (x) to the extent required by Law (provided that if required by Law, Buyer or the Restricted Party, as applicable, agrees, to the extent legally permissible, to give the other Party prior written notice of such disclosure in sufficient time to permit Buyer or the Restricted Party, as applicable, to seek a protective order should it so determine) or (y) in a Claim brought by Buyer or the Restricted Party, as applicable, in the pursuit of its remedies under this Agreement. Buyer and the Restricted Party shall, whenever such Party discloses Confidential Information other than pursuant to clause (x) and (y) of the preceding sentence, (1) notify all Persons to whom Confidential Information is disclosed of the confidential nature of the materials disclosed and the provisions of this Agreement; and (2) ensure that all Persons to whom the terms of this Agreement or the Confidential Information is disclosed keep such information confidential and do not disclose or divulge such information to any unauthorized Person in each case in accordance with this Agreement.
(d) The Restricted Party hereby agrees that if it violates or threatens to violate any of the provisions of this Section 3 it would be difficult to determine the entire cost, damage or injury which Buyer and its Affiliates would sustain. The Restricted Party acknowledges that if it violates any of the provisions of this Section 3 , Buyer may have no adequate remedy at law. In the event of such violation, Buyer shall have the right, in addition to any other rights that may be available to it, to seek to obtain in any court of competent jurisdiction injunctive relief to
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restrain any violation by the Restricted Party of any provision of this Section 3 or to seek to compel specific performance by the Restricted Party of one or more of its obligations under this Section 3 . The seeking or obtaining by Buyer of such injunctive relief shall not foreclose or in any way limit the right of Buyer to obtain a money judgment against the Restricted Party for any damage to Buyer that may result from any breach by the Restricted Party of any provision of this Section 3 .
(e) The Restricted Party acknowledges that the covenants contained in this Section 3 are reasonable in geographic and temporal scope, and the Restricted Party acknowledges that the covenants contained in this Section 3 are reasonable in temporal scope and that the scope of each of the activities being restrained is reasonable and does not impose a greater restraint than is necessary to protect the goodwill or other business interest of Buyer and the Company. If any court of competent jurisdiction determines that any of such covenants, provisions or portions of Section 3 , or any part thereof, are unenforceable or otherwise invalid, then (i) the validity and enforceability of any remaining covenants, provisions or portions thereof shall not be affected by such determination, (ii) those of such covenants, provisions or portions that are determined to be unenforceable because of the duration or scope thereof shall be reformed if possible by the court to reduce their duration or scope so as to render the same enforceable against the Restricted Party to the maximum duration and broadest scope permitted by law, and if such reformation is not possible, then severance by the court, and (iii) all remaining covenants, provisions, portions and terms of this Section 3 shall be valid and enforceable to the fullest extent permitted by law.
4. Amendment . This Agreement may be amended, supplemented or modified only by a written instrument duly executed by the Restricted Party and Buyer.
5. Assignment; Binding Effect . Any Party may assign its rights and obligations hereunder to an Affiliate but such assignment shall not release such Party from its obligations hereunder. Except as provided in the preceding sentence, neither this Agreement nor any right, interest or obligation hereunder may be assigned by any Party without the prior written consent of the other Party, and any attempt to do so will be void, except for assignments and transfers by operation of Law. Subject to this Section 5 , this Agreement is binding upon, inures to the benefit of and is enforceable by the Parties and their respective successors and permitted assigns.
6. Headings . The headings used in this Agreement have been inserted for convenience of reference only and do not modify, define or limit any of the terms or provisions hereof.
7. Counterparts; Facsimile . This Agreement may be executed in any number of counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument. Any facsimile or .pdf copies hereof or signature hereon shall, for all purposes, be deemed original.
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8. Governing Law, Venue and Jurisdiction .
(a) This Agreement shall be governed by and construed in accordance with the Laws of the State of Texas (without regard to any conflict of laws principles thereof). Each of the Parties irrevocably agrees that any legal action or proceeding with respect to this Agreement shall be brought and determined by courts of the State of Texas located in Harris County and the federal courts of the United States of America located in the State of Texas, Southern District, and each of the Parties irrevocably submits to the exclusive jurisdiction of such courts solely in respect of any legal proceeding arising out of or related to this Agreement. The Parties further agree that the Parties shall not bring suit with respect to any disputes arising out of this Agreement in any court or jurisdiction other than the above specified courts; provided , however , that the foregoing shall not limit the rights of the Parties to obtain execution of judgment in any other jurisdiction. The Parties further agree, to the extent permitted by Law, that a final and nonappealable judgment against a Party in any action or proceeding contemplated above shall be conclusive and may be enforced in any other jurisdiction within or outside the United States by suit on the judgment, a certified copy of which shall be conclusive evidence of the fact and amount of such judgment.
(b) EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND WITH RESPECT TO ANY COUNTERCLAIM RELATED THERETO
[Signature page follows]
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IN WITNESS WHEREOF , the undersigned have executed this Agreement as of the date first above written.
| Asset Risk Management, LLC | ||
| By: |
/s/ Zachary D. Lee |
|
| Name: | Zachary D. Lee | |
| Title: | Chief Executive Officer | |
Signature Page to Restrictive Covenant Agreement
| Alta Mesa Resources, Inc. | ||
| By: |
/s/ Stephen S. Coats |
|
| Name: | Stephen S. Coats | |
| Title: | Secretary | |
Signature Page to Restrictive Covenant Agreement
Exhibit 10.7
FORM OF INDEMNITY AGREEMENT
THIS INDEMNITY AGREEMENT (this “ Agreement ”) is made as of February 9, 2018, by and between Alta Mesa Resources, Inc., a Delaware corporation (the “ Company ”), and [•] (“ Indemnitee ”).
RECITALS
WHEREAS , highly competent persons have become more reluctant to serve publicly-held corporations as directors, officers or in other capacities unless they are provided with adequate protection through insurance or adequate indemnification against inordinate risks of claims and actions against them arising out of their service to and activities on behalf of such corporations;
WHEREAS , the Board of Directors of the Company (the “ Board ”) has determined that, in order to attract and retain qualified individuals, the Company will attempt to maintain on an ongoing basis, at its sole expense, liability insurance to protect persons serving the Company and its subsidiaries from certain liabilities. Although the furnishing of such insurance has been a customary and widespread practice among United States-based corporations and other business enterprises, the Company believes that, given current market conditions and trends, such insurance may be available to it in the future only at higher premiums and with more exclusions. At the same time, directors, officers and other persons in service to corporations or business enterprises are being increasingly subjected to expensive and time-consuming litigation relating to, among other things, matters that traditionally would have been brought only against the Company or business enterprise itself. The Second Amended and Restated Certificate of Incorporation (the “ Charter ”) and the Bylaws (the “ Bylaws ”) of the Company require indemnification of the officers and directors of the Company. Indemnitee may also be entitled to indemnification pursuant to applicable provisions of the Delaware General Corporation Law (“ DGCL ”). The Charter, Bylaws and the DGCL expressly provide that the indemnification provisions set forth therein are not exclusive, and thereby contemplate that contracts may be entered into between the Company and members of the Board, officers and other persons with respect to indemnification, hold harmless, exoneration, advancement and reimbursement rights;
WHEREAS , the uncertainties relating to such insurance and to indemnification have increased the difficulty of attracting and retaining such persons;
WHEREAS , the Board has determined that the increased difficulty in attracting and retaining such persons is detrimental to the best interests of the Company’s stockholders and that the Company should act to assure such persons that there will be increased certainty of such protection in the future;
WHEREAS , it is reasonable, prudent and necessary for the Company contractually to obligate itself to indemnify, hold harmless, exonerate and to advance expenses on behalf of, such persons to the fullest extent permitted by applicable law so that they will serve or continue to serve the Company free from undue concern that they will not be so protected against liabilities;
WHEREAS , this Agreement is a supplement to and in furtherance of the Charter and Bylaws and any resolutions adopted pursuant thereto, and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder;
WHEREAS , Indemnitee may not be willing to serve as an officer or director, advisor or in another capacity without adequate protection, and the Company desires Indemnitee to serve in such capacity. Indemnitee is willing to serve, continue to serve and to take on additional service for or on behalf of the Company on the condition that he be so indemnified; and
NOW, THEREFORE , in consideration of the premises and the covenants contained herein, the Company and Indemnitee do hereby covenant and agree as follows:
TERMS AND CONDITIONS
1. SERVICES TO THE COMPANY . In consideration of the Company’s covenants and obligations hereunder, Indemnitee will serve or continue to serve as an officer, director, advisor, key employee or any other capacity of the Company, as applicable, for so long as Indemnitee is duly elected or appointed or retained or until Indemnitee tenders his resignation or until Indemnitee is removed. The foregoing notwithstanding, this Agreement shall continue in full force and effect after Indemnitee has ceased to serve as a director, officer, advisor, key employee or in any other capacity of the Company, as provided in Section 17. This Agreement, however, shall not impose any obligation on Indemnitee or the Company to continue Indemnitee’s service to the Company beyond any period otherwise required by law or by other agreements or commitments of the parties, if any.
2. DEFINITIONS . As used in this Agreement:
(a) References to “ agent ” shall mean any person who is or was a director, officer or employee of the Company or a subsidiary of the Company or other person authorized by the Company to act for the Company, to include such person serving in such capacity as a director, officer, employee, fiduciary or other official of another corporation, partnership, limited liability company, joint venture, trust or other enterprise at the request of, for the convenience of, or to represent the interests of the Company or a subsidiary of the Company.
(b) The terms “ Beneficial Owner ” and “ Beneficial Ownership ” shall have the meanings set forth in Rule 13d-3 promulgated under the Exchange Act (as defined below) as in effect on the date hereof.
(c) A “ Change in Control ” shall be deemed to occur upon the earliest to occur after the date of this Agreement of any of the following events:
(i) Acquisition of Stock by Third Party . Other than an affiliate of Riverstone Investment Group LLC, High Mesa Holdings, LP, High Mesa, Inc., AM Equity Holdings, LP, KFM Holdco, LLC, HPS Investment Partners, LLC or Bayou City Energy Management, LLC, any Person (as defined below) is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing fifteen percent (15%) or more of the combined voting power of the Company’s then outstanding securities entitled to vote generally in the election of directors, unless (1) the change in the relative Beneficial Ownership of the
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Company’s securities by any Person (as defined below) results solely from a reduction in the aggregate number of outstanding shares of securities entitled to vote generally in the election of directors, or (2) such acquisition was approved in advance by the Continuing Directors (as defined below) and such acquisition would not constitute a Change in Control under part (iii) of this definition;
(ii) Change in Board of Directors . Individuals who, as of the date hereof, constitute the Board, and any new director whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two thirds of the directors then still in office who were directors on the date hereof or whose election for nomination for election was previously so approved (collectively, the “ Continuing Directors ”), cease for any reason to constitute at least a majority of the members of the Board;
(iii) Corporate Transactions . The effective date of a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination, involving the Company and one or more businesses (a “ Business Combination ”), in each case, unless, following such Business Combination: (1) all or substantially all of the individuals and entities who were the Beneficial Owners of securities entitled to vote generally in the election of directors immediately prior to such Business Combination beneficially own, directly or indirectly, more than 51% of the combined voting power of the then outstanding securities of the Company entitled to vote generally in the election of directors resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more Subsidiaries (as defined below)) in substantially the same proportions as their ownership immediately prior to such Business Combination, of the securities entitled to vote generally in the election of directors; (2) other than an affiliate of Riverstone Investment Group LLC, High Mesa Holdings, LP, High Mesa, Inc., AM Equity Holdings, LP, KFM Holdco, LLC, HPS Investment Partners, LLC or Bayou City Energy Management, LLC, no Person (excluding any corporation resulting from such Business Combination) is the Beneficial Owner, directly or indirectly, of 15% or more of the combined voting power of the then outstanding securities entitled to vote generally in the election of directors of the surviving corporation except to the extent that such ownership existed prior to the Business Combination; and (3) at least a majority of the Board of Directors of the corporation resulting from such Business Combination were Continuing Directors at the time of the execution of the initial agreement, or of the action of the Board of Directors, providing for such Business Combination;
(iv) Liquidation . The approval by the stockholders of the Company of a complete liquidation of the Company or an agreement or series of agreements for the sale or disposition by the Company of all or substantially all of the Company’s assets, other than factoring the Company’s current receivables or escrows due (or, if such stockholder approval is not required, the decision by the Board to proceed with such a liquidation, sale, or disposition in one transaction or a series of related transactions); or
(v) Other Events . There occurs any other event of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or any successor rule) (or a response to any similar item on any similar schedule or form) promulgated under the Exchange Act (as defined below), whether or not the Company is then subject to such reporting requirement.
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(d) “ Corporate Status ” describes the status of a person who is or was a director, officer, trustee, general partner, manager, managing member, fiduciary, employee or agent of the Company or of any other Enterprise (as defined below) which such person is or was serving at the request of the Company.
(e) “ Delaware Court ” shall mean the Court of Chancery of the State of Delaware.
(f) “ Disinterested Director ” shall mean a director of the Company who is not and was not a party to the Proceeding (as defined below) in respect of which indemnification is sought by Indemnitee.
(g) “ Enterprise ” shall mean the Company and any other corporation, constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger to which the Company (or any of its wholly owned subsidiaries) is a party, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise of which Indemnitee is or was serving at the request of the Company as a director, officer, trustee, general partner, managing member, fiduciary, employee or agent.
(h) “ Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended.
(i) “ Expenses ” shall include all direct and indirect costs, fees and expenses of any type or nature whatsoever, including, without limitation, all reasonable attorneys’ fees and costs, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, fees of private investigators and professional advisors, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, fax transmission charges, secretarial services and all other disbursements, obligations or expenses in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in, settlement or appeal of, or otherwise participating in, a Proceeding (as defined below), including reasonable compensation for time spent by Indemnitee for which he or she is not otherwise compensated by the Company or any third party. Expenses also shall include Expenses incurred in connection with any appeal resulting from any Proceeding (as defined below), including without limitation the principal, premium, security for, and other costs relating to any cost bond, supersedeas bond, or other appeal bond or its equivalent. Expenses, however, shall not include amounts paid in settlement by Indemnitee or the amount of judgments or fines against Indemnitee.
(j) References to “ fines ” shall include any excise tax assessed on Indemnitee with respect to any employee benefit plan; references to “ serving at the request of the Company ” shall include any service as a director, officer, employee, agent or fiduciary of the Company which imposes duties on, or involves services by, such director, officer, employee, agent or fiduciary with respect to an employee benefit plan, its participants or beneficiaries; and if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in the best interests of the participants and beneficiaries of an employee benefit plan, Indemnitee shall be deemed to have acted in a manner “ not opposed to the best interests of the Company ” as referred to in this Agreement.
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(k) “ Independent Counsel ” shall mean a law firm or a member of a law firm with significant experience in matters of corporation law and that neither presently is, nor in the past five years has been, retained to represent: (i) the Company or Indemnitee in any matter material to either such party (other than with respect to matters concerning Indemnitee under this Agreement, or of other indemnitees under similar indemnification agreements); or (ii) any other party to the Proceeding (as defined below) giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement.
(l) The term “ Person ” shall have the meaning as set forth in Sections 13(d) and 14(d) of the Exchange Act as in effect on the date hereof; provided, however, that “Person” shall exclude: (i) the Company; (ii) any Subsidiaries (as defined below) of the Company; (iii) any employment benefit plan of the Company or of a Subsidiary (as defined below) of the Company or of any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company; and (iv) any trustee or other fiduciary holding securities under an employee benefit plan of the Company or of a Subsidiary (as defined below) of the Company or of a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company.
(m) The term “ Proceeding ” shall include any threatened, pending or completed action, suit, arbitration, mediation, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether brought in the right of the Company or otherwise and whether of a civil (including intentional or unintentional tort claims), criminal, administrative or investigative or related nature, in which Indemnitee was, is, will or might be involved as a party or otherwise by reason of the fact that Indemnitee is or was a director or officer of the Company, by reason of any action (or failure to act) taken by him or of any action (or failure to act) on his part while acting as a director or officer of the Company, or by reason of the fact that he is or was serving at the request of the Company as a director, officer, trustee, general partner, managing member, fiduciary, employee or agent of any other Enterprise, in each case whether or not serving in such capacity at the time any liability or expense is incurred for which indemnification, reimbursement, or advancement of expenses can be provided under this Agreement.
(n) The term “ Subsidiary, ” with respect to any Person, shall mean any corporation, limited liability company, partnership, joint venture, trust or other entity of which a majority of the voting power of the voting equity securities or equity interest is owned, directly or indirectly, by that Person.
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3. INDEMNITY IN THIRD-PARTY PROCEEDINGS . To the fullest extent permitted by applicable law, the Company shall indemnify, hold harmless and exonerate Indemnitee in accordance with the provisions of this Section 3 if Indemnitee was, is, or is threatened to be made, a party to or a participant (as a witness, deponent or otherwise) in any Proceeding, other than a Proceeding by or in the right of the Company to procure a judgment in its favor by reason of Indemnitee’s Corporate Status. Pursuant to this Section 3, Indemnitee shall be indemnified, held harmless and exonerated against all Expenses, judgments, liabilities, fines, penalties and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses, judgments, fines, penalties and amounts paid in settlement) actually, and reasonably incurred by Indemnitee or on his behalf in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company and, in the case of a criminal Proceeding, had no reasonable cause to believe that his conduct was unlawful.
4. INDEMNITY IN PROCEEDINGS BY OR IN THE RIGHT OF THE COMPANY . To the fullest extent permitted by applicable law, the Company shall indemnify, hold harmless and exonerate Indemnitee in accordance with the provisions of this Section 4 if Indemnitee was, is, or is threatened to be made, a party to or a participant (as a witness, deponent or otherwise) in any Proceeding by or in the right of the Company to procure a judgment in its favor by reason of Indemnitee’s Corporate Status. Pursuant to this Section 4, Indemnitee shall be indemnified, held harmless and exonerated against all Expenses actually and reasonably incurred by him or on his behalf in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company. No indemnification, hold harmless or exoneration for Expenses shall be made under this Section 4 in respect of any claim, issue or matter as to which Indemnitee shall have been finally adjudged by a court to be liable to the Company, unless and only to the extent that any court in which the Proceeding was brought or the Delaware Court shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnification, to be held harmless or to exoneration.
5. INDEMNIFICATION FOR EXPENSES OF A PARTY WHO IS WHOLLY OR PARTLY SUCCESSFUL . Notwithstanding any other provisions of this Agreement, to the extent that Indemnitee was or is, by reason of Indemnitee’s Corporate Status, a party to (or a participant in) and is successful, on the merits or otherwise, in any Proceeding or in defense of any claim, issue or matter therein, in whole or in part, the Company shall, to the fullest extent permitted by applicable law, indemnify, hold harmless and exonerate Indemnitee against all Expenses actually and reasonably incurred by him in connection therewith. If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall, to the fullest extent permitted by applicable law, indemnify, hold harmless and exonerate Indemnitee against all Expenses actually and reasonably incurred by him or on his behalf in connection with each successfully resolved claim, issue or matter. If Indemnitee is not wholly successful in such Proceeding, the Company also shall, to the fullest extent permitted by applicable law, indemnify, hold harmless and exonerate Indemnitee against all Expenses reasonably incurred in connection with a claim, issue or matter related to any claim, issue, or matter on which Indemnitee was successful. For purposes of this Section and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.
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6. INDEMNIFICATION FOR EXPENSES OF A WITNESS . Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of his Corporate Status, a witness or deponent in any Proceeding to which Indemnitee was or is not a party or threatened to be made a party, he shall, to the fullest extent permitted by applicable law, be indemnified, held harmless and exonerated against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith.
7. ADDITIONAL INDEMNIFICATION, HOLD HARMLESS AND EXONERATION RIGHTS .
(a) Notwithstanding any limitation in Sections 3, 4, or 5, the Company shall, to the fullest extent permitted by applicable law, indemnify, hold harmless and exonerate Indemnitee if Indemnitee is a party to or threatened to be made a party to any Proceeding (including a Proceeding by or in the right of the Company to procure a judgment in its favor) against all Expenses, judgments, liabilities, fines, penalties and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses, judgments, liabilities, fines, penalties and amounts paid in settlement) actually and reasonably incurred by Indemnitee in connection with the Proceeding. No indemnification, hold harmless or exoneration rights shall be available under this Section 7(a) on account of Indemnitee’s conduct which constitutes a breach of Indemnitee’s duty of loyalty to the Company or its stockholders or is an act or omission not in good faith or which involves intentional misconduct or a knowing violation of the law.
(b) Notwithstanding any limitation in Sections 3, 4, 5 or 7(a), the Company shall, to the fullest extent permitted by applicable law, indemnify, hold harmless and exonerate Indemnitee if Indemnitee is a party to or threatened to be made a party to any Proceeding (including a Proceeding by or in the right of the Company to procure a judgment in its favor) against all Expenses, judgments, liabilities, fines, penalties and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses, judgments, liabilities, fines, penalties and amounts paid in settlement) actually and reasonably incurred by Indemnitee in connection with the Proceeding.
8. CONTRIBUTION IN THE EVENT OF JOINT LIABILITY .
(a) To the fullest extent permissible under applicable law, if the indemnification, hold harmless and/or exoneration rights provided for in this Agreement are unavailable to Indemnitee in whole or in part for any reason whatsoever, the Company, in lieu of indemnifying, holding harmless or exonerating Indemnitee, shall pay, in the first instance, the entire amount incurred by Indemnitee, whether for judgments, liabilities, fines, penalties, amounts paid or to be paid in settlement and/or for Expenses, in connection with any Proceeding without requiring Indemnitee to contribute to such payment, and the Company hereby waives and relinquishes any right of contribution it may have at any time against Indemnitee.
(b) The Company shall not enter into any settlement of any Proceeding in which the Company is jointly liable with Indemnitee (or would be if joined in such Proceeding) unless such settlement provides for a full and final release of all claims asserted against Indemnitee.
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(c) The Company hereby agrees to fully indemnify, hold harmless and exonerate Indemnitee from any claims for contribution which may be brought by officers, directors or employees of the Company other than Indemnitee who may be jointly liable with Indemnitee.
9. EXCLUSIONS . Notwithstanding any provision in this Agreement, the Company shall not be obligated under this Agreement to make any indemnification, advance expenses, hold harmless or exoneration payment in connection with any claim made against Indemnitee:
(a) for which payment has actually been received by or on behalf of Indemnitee under any insurance policy, contract, agreement or other indemnity or advancement provision or otherwise, except with respect to any excess beyond the amount actually received under any insurance policy, contract, agreement, other indemnity or advancement provision or otherwise;
(b) for an accounting of profits made from the purchase and sale (or sale and purchase) by Indemnitee of securities of the Company within the meaning of Section 16(b) of the Exchange Act (or any successor rule) or similar provisions of state statutory law or common law; or
(c) except as otherwise provided in Sections 14(f)-(g) hereof, prior to a Change in Control, in connection with any Proceeding (or any part of any Proceeding) initiated by Indemnitee, including any Proceeding (or any part of any Proceeding) initiated by Indemnitee against the Company or its directors, officers, employees or other indemnitees, unless (i) the Board authorized the Proceeding (or any part of any Proceeding) prior to its initiation or (ii) the Company provides the indemnification, advance of expenses, hold harmless or exoneration payment, in its sole discretion, pursuant to the powers vested in the Company under applicable law. Indemnitee shall seek payments or advances from the Company only to the extent that such payments or advances are unavailable from any insurance policy of the Company covering Indemnitee.
10. ADVANCES OF EXPENSES; DEFENSE OF CLAIM .
(a) Notwithstanding any provision of this Agreement to the contrary, and to the fullest extent not prohibited by applicable law, the Company shall pay the Expenses incurred by Indemnitee (or reasonably expected by Indemnitee to be incurred by Indemnitee within three months) in connection with any Proceeding within ten (10) days after the receipt by the Company of a statement or statements requesting such advances from time to time, prior to the final disposition of any Proceeding. Advances shall, to the fullest extent permitted by law, be unsecured and interest free. Advances shall, to the fullest extent permitted by law, be made without regard to Indemnitee’s ability to repay the Expenses and without regard to Indemnitee’s ultimate entitlement to be indemnified, held harmless or exonerated under the other provisions of this Agreement. Advances shall include any and all reasonable Expenses incurred pursuing a Proceeding to enforce this right of advancement, including Expenses incurred preparing and forwarding statements to the Company to support the advances claimed. To the fullest extent required by applicable law, such payments of Expenses in advance of the final disposition of the Proceeding shall be made only upon the Company’s receipt of an undertaking, by or on behalf of
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Indemnitee, to repay the advanced amounts to the extent that it is ultimately determined that Indemnitee is not entitled to be indemnified, held harmless or exonerated by the Company under the provisions of this Agreement, the Charter, the Bylaws, applicable law or otherwise. This Section 10(a) shall not apply to any claim made by Indemnitee for which an indemnification, advance of expenses, hold harmless or exoneration payment is excluded pursuant to Section 9.
(b) The Company will be entitled to participate in the Proceeding at its own expense.
(c) The Company shall not settle any action, claim or Proceeding (in whole or in part) which would impose any Expense, judgment, liability, fine, penalty or limitation on Indemnitee without Indemnitee’s prior written consent.
11. PROCEDURE FOR NOTIFICATION AND APPLICATION FOR INDEMNIFICATION .
(a) Indemnitee agrees to notify promptly the Company in writing upon being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding, claim, issue or matter therein which may be subject to indemnification, hold harmless or exoneration rights, or advancement of Expenses covered hereunder. The failure of Indemnitee to so notify the Company shall not relieve the Company of any obligation which it may have to Indemnitee under this Agreement, or otherwise.
(b) Indemnitee may deliver to the Company a written application to indemnify, hold harmless or exonerate Indemnitee in accordance with this Agreement. Such application(s) may be delivered from time to time and at such time(s) as Indemnitee deems appropriate in his sole discretion. Following such a written application for indemnification by Indemnitee, Indemnitee’s entitlement to indemnification shall be determined according to Section 12 (a) of this Agreement.
12. PROCEDURE UPON APPLICATION FOR INDEMNIFICATION .
(a) A determination, if required by applicable law, with respect to Indemnitee’s entitlement to indemnification shall be made in the specific case by one of the following methods, which shall be at the election of Indemnitee: (i) by a majority vote of the Disinterested Directors, even though less than a quorum of the Board, (ii) by a committee of such directors designated by majority vote of such directors, (iii) if there are no Disinterested Directors or if such directors so direct, by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee, or (iv) by vote of the stockholders of the Company. The Company promptly will advise Indemnitee in writing with respect to any determination that Indemnitee is or is not entitled to indemnification, including a description of any reason or basis for which indemnification has been denied. If it is so determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within ten (10) days after such determination. Indemnitee shall reasonably cooperate with the person, persons or entity making such determination with respect to Indemnitee’s entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and
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which is reasonably available to Indemnitee and reasonably necessary to such determination. Any costs or Expenses (including reasonable attorneys’ fees and disbursements) incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company (irrespective of the determination as to Indemnitee’s entitlement to indemnification) and the Company hereby agrees to indemnify and to hold Indemnitee harmless therefrom.
(b) In the event the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 12(a) hereof, the Independent Counsel shall be selected as provided in this Section 12(b). The Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall request that such selection be made by the Board), and Indemnitee shall give written notice to the Company advising it of the identity of the Independent Counsel so selected and certifying that the Independent Counsel so selected meets the requirements of “Independent Counsel” as defined in Section 2 of this Agreement. If the Independent Counsel is selected by the Board, the Company shall give written notice to Indemnitee advising him of the identity of the Independent Counsel so selected and certifying that the Independent Counsel so selected meets the requirements of “Independent Counsel” as defined in Section 2 of this Agreement. In either event, Indemnitee or the Company, as the case may be, may, within ten (10) days after such written notice of selection shall have been received, deliver to the Company or to Indemnitee, as the case may be, a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of “Independent Counsel” as defined in Section 2 of this Agreement, and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person so selected shall act as Independent Counsel. If such written objection is so made and substantiated, the Independent Counsel so selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court of competent jurisdiction has determined that such objection is without merit. If, within twenty (20) days after submission by Indemnitee of a written request for indemnification pursuant to Section 11(b) hereof, no Independent Counsel shall have been selected and not objected to, either the Company or Indemnitee may petition the Delaware Court for resolution of any objection which shall have been made by the Company or Indemnitee to the other’s selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the Delaware Court, and the person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel under Section 12(a) hereof. Upon the due commencement of any judicial proceeding or arbitration pursuant to Section 14 (a) of this Agreement, Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing).
(c) The Company agrees to pay the reasonable fees and expenses of Independent Counsel and to fully indemnify and hold harmless such Independent Counsel against any and all Expenses, claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto.
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13. PRESUMPTIONS AND EFFECT OF CERTAIN PROCEEDINGS .
(a) In making a determination with respect to entitlement to indemnification hereunder, the person, persons or entity making such determination shall presume that Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with Section 11(b) of this Agreement, and the Company shall have the burden of proof to overcome that presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption. Neither the failure of the Company (including by the Disinterested Directors or Independent Counsel) to have made a determination prior to the commencement of any action pursuant to this Agreement that indemnification is proper in the circumstances because Indemnitee has met the applicable standard of conduct, nor an actual determination by the Company (including by the Disinterested Directors or Independent Counsel) that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct.
(b) If the person, persons or entity empowered or selected under Section 12 of this Agreement to determine whether Indemnitee is entitled to indemnification shall not have made a determination within thirty (30) days after receipt by the Company of the request therefor, the requisite determination of entitlement to indemnification shall, to the fullest extent permitted by law, be deemed to have been made and Indemnitee shall be entitled to such indemnification, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (ii) a final judicial determination that any or all such indemnification is expressly prohibited under applicable law; provided, however, that such 30-day period may be extended for a reasonable time, not to exceed an additional fifteen (15) days, if the person, persons or entity making the determination with respect to entitlement to indemnification in good faith requires such additional time for the obtaining or evaluating of documentation and/or information relating thereto.
(c) The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that his conduct was unlawful.
(d) For purposes of any determination of good faith, Indemnitee shall be deemed to have acted in good faith if Indemnitee’s action is based on the records or books of account of the Enterprise, including financial statements, or on information supplied to Indemnitee by the directors, manager, or officers of the Enterprise in the course of their duties, or on the advice of legal counsel for the Enterprise, its Board, any committee of the Board or any director, trustee, general partner, manager or managing member, or on information or records given or reports made to the Enterprise, its Board, any committee of the Board or any director, trustee, general partner, manager or managing member, by an independent certified public accountant or by an appraiser or other expert selected by the Enterprise, its Board, any committee of the Board or any director, trustee, general partner, manager or managing member. The provisions of this Section 13(d) shall not be deemed to be exclusive or to limit in any way the other circumstances in which Indemnitee may be deemed or found to have met the applicable standard of conduct set forth in this Agreement.
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(e) The knowledge and/or actions, or failure to act, of any other director, officer, trustee, partner, manager, managing member, fiduciary, agent or employee of the Enterprise shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement.
14. REMEDIES OF INDEMNITEE .
(a) In the event that (i) a determination is made pursuant to Section 12 of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement of Expenses, to the fullest extent permitted by applicable law, is not timely made pursuant to Section 10 of this Agreement, (iii) no determination of entitlement to indemnification shall have been made pursuant to Section 12(a) of this Agreement within thirty (30) days after receipt by the Company of the request for indemnification, (iv) payment of indemnification is not made pursuant to Section 5, 6, 7 or the last sentence of Section 12(a) of this Agreement within ten (10) days after receipt by the Company of a written request therefor, (v) a contribution payment is not made in a timely manner pursuant to Section 8 of this Agreement, (vi) payment of indemnification pursuant to Section 3 or 4 of this Agreement is not made within ten (10) days after a determination has been made that Indemnitee is entitled to indemnification, or (vii) payment to Indemnitee pursuant to any hold harmless or exoneration rights under this Agreement or otherwise is not made in accordance with this Agreement, Indemnitee shall be entitled to an adjudication by the Delaware Court to such indemnification, hold harmless, exoneration, contribution or advancement rights. Alternatively, Indemnitee, at his option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association. Except as set forth herein, the provisions of Delaware law (without regard to its conflict of laws rules) shall apply to any such arbitration. The Company shall not oppose Indemnitee’s right to seek any such adjudication or award in arbitration.
(b) In the event that a determination shall have been made pursuant to Section 12(a) of this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 14 shall be conducted in all respects as a de novo trial, or arbitration, on the merits and Indemnitee shall not be prejudiced by reason of that adverse determination.
(c) In any judicial proceeding or arbitration commenced pursuant to this Section 14, Indemnitee shall be presumed to be entitled to be indemnified, held harmless, exonerated and advanced Expenses under this Agreement and the Company shall have the burden of proving Indemnitee is not entitled to be indemnified, held harmless, exonerated and advanced Expenses, as the case may be, and the Company may not refer to or introduce into evidence any determination pursuant to Section 12(a) of this Agreement adverse to Indemnitee for any purpose. If Indemnitee commences a judicial proceeding or arbitration pursuant to this Section 14, Indemnitee shall not be required to reimburse the Company for any advances pursuant to Section 10 until a final determination is made with respect to Indemnitee’s entitlement to indemnification (as to which all rights of appeal have been exhausted or lapsed).
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(d) If a determination shall have been made pursuant to Section 12(a) of this Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 14, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law.
(e) The Company shall be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 14 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court or before any such arbitrator that the Company is bound by all the provisions of this Agreement.
(f) The Company shall indemnify and hold harmless Indemnitee to the fullest extent permitted by law against all Expenses and, if requested by Indemnitee, shall (within ten (10) days after the Company’s receipt of such written request) pay to Indemnitee, to the fullest extent permitted by applicable law, such Expenses which are incurred by Indemnitee in connection with any judicial proceeding or arbitration brought by Indemnitee: (i) to enforce his rights under, or to recover damages for breach of, this Agreement or any other indemnification, hold harmless, exoneration, advancement or contribution agreement or provision of the Charter, or the Bylaws now or hereafter in effect; or (ii) for recovery or advances under any insurance policy maintained by any person for the benefit of Indemnitee, regardless of the outcome and whether Indemnitee ultimately is determined to be entitled to such indemnification, hold harmless or exoneration right, advancement, contribution or insurance recovery, as the case may be (unless such judicial proceeding or arbitration was not brought by Indemnitee in good faith).
(g) Interest shall be paid by the Company to Indemnitee at the legal rate under Delaware law for amounts which the Company indemnifies, holds harmless or exonerates, or advances, or is obliged to indemnify, hold harmless or exonerate or advance for the period commencing with the date on which Indemnitee requests indemnification, to be held harmless, exonerated, contribution, reimbursement or advancement of any Expenses and ending with the date on which such payment is made to Indemnitee by the Company.
15. SECURITY . Notwithstanding anything herein to the contrary, to the extent requested by Indemnitee and approved by the Board, the Company may at any time and from time to time provide security to Indemnitee for the Company’s obligations hereunder through an irrevocable bank line of credit, funded trust or other collateral. Any such security, once provided to Indemnitee, may not be revoked or released without the prior written consent of Indemnitee.
16. NON-EXCLUSIVITY; SURVIVAL OF RIGHTS; INSURANCE; SUBROGATION .
(a) The rights of Indemnitee as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Charter, the Bylaws, any agreement, a vote of stockholders of the Company or a resolution of directors, or otherwise. No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any Proceeding (regardless of when such Proceeding is first threatened, commenced or
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completed) or claim, issue or matter therein arising out of, or related to, any action taken or omitted by such Indemnitee in his Corporate Status prior to such amendment, alteration or repeal. To the extent that a change in applicable law, whether by statute or judicial decision, permits greater indemnification, hold harmless or exoneration rights or advancement of Expenses than would be afforded currently under the Charter, the Bylaws or this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy.
(b) The DGCL, the Charter and the Bylaws permit the Company to purchase and maintain insurance or furnish similar protection or make other arrangements including, but not limited to, providing a trust fund, letter of credit, or surety bond (“ Indemnification Arrangements ”) on behalf of Indemnitee against any liability asserted against him or incurred by or on behalf of him or in such capacity as a director, officer, employee or agent of the Company, or arising out of his status as such, whether or not the Company would have the power to indemnify him against such liability under the provisions of this Agreement or under the DGCL, as it may then be in effect. The purchase, establishment, and maintenance of any such Indemnification Arrangement shall not in any way limit or affect the rights and obligations of the Company or of Indemnitee under this Agreement except as expressly provided herein, and the execution and delivery of this Agreement by the Company and Indemnitee shall not in any way limit or affect the rights and obligations of the Company or the other party or parties thereto under any such Indemnification Arrangement.
(c) To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers, trustees, partners, managers, managing members, fiduciaries, employees, or agents of the Company or of any other Enterprise which such person serves at the request of the Company, Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any such director, officer, trustee, partner, managers, managing member, fiduciary, employee or agent under such policy or policies. If, at the time the Company receives notice from any source of a Proceeding as to which Indemnitee is a party or a participant (as a witness, deponent or otherwise), the Company has director and officer liability insurance in effect, the Company shall give prompt notice of such Proceeding to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of Indemnitee, all amounts payable as a result of such Proceeding in accordance with the terms of such policies.
(d) In the event of any payment under this Agreement, the Company, to the fullest extent permitted by law, shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.
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(e) The Company’s obligation to indemnify, hold harmless, exonerate or advance Expenses hereunder to Indemnitee who is or was serving at the request of the Company as a director, officer, trustee, partner, manager, managing member, fiduciary, employee or agent of any other Enterprise shall be reduced by any amount Indemnitee has actually received as indemnification, hold harmless or exoneration payments or advancement of expenses from such Enterprise. Notwithstanding any other provision of this Agreement to the contrary, (i) Indemnitee shall have no obligation to reduce, offset, allocate, pursue or apportion any indemnification, hold harmless, exoneration, advancement, contribution or insurance coverage among multiple parties possessing such duties to Indemnitee prior to the Company’s satisfaction and performance of all its obligations under this Agreement, and (ii) the Company shall perform fully its obligations under this Agreement without regard to whether Indemnitee holds, may pursue or has pursued any indemnification, advancement, hold harmless, exoneration, contribution or insurance coverage rights against any person or entity other than the Company.
17. DURATION OF AGREEMENT . All agreements and obligations of the Company contained herein shall continue during the period Indemnitee serves as a director or officer of the Company or as a director, officer, trustee, partner, manager, managing member, fiduciary, employee or agent of any other corporation, partnership, joint venture, trust, employee benefit plan or other Enterprise which Indemnitee serves at the request of the Company and shall continue thereafter so long as Indemnitee shall be subject to any possible Proceeding (including any rights of appeal thereto and any Proceeding commenced by Indemnitee pursuant to Section 14 of this Agreement) by reason of his Corporate Status, whether or not he is acting in any such capacity at the time any liability or expense is incurred for which indemnification or advancement can be provided under this Agreement.
18. SEVERABILITY . If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including, without limitation, each portion of any Section, paragraph or sentence of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and shall remain enforceable to the fullest extent permitted by law; (b) such provision or provisions shall be deemed reformed to the extent necessary to conform to applicable law and to give the maximum effect to the intent of the parties hereto; and (c) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any Section, paragraph or sentence of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby.
19. ENFORCEMENT AND BINDING EFFECT .
(a) The Company expressly confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on it hereby in order to induce Indemnitee to serve as a director, officer or key employee of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving as a director, officer or key employee of the Company.
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(b) Without limiting any of the rights of Indemnitee under the Charter or Bylaws, as they may be amended from time to time, this Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the subject matter hereof.
(c) The indemnification, hold harmless, exoneration and advancement of expenses rights provided by or granted pursuant to this Agreement shall be binding upon and be enforceable by the parties hereto and their respective successors and assigns (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company), shall continue as to an Indemnitee who has ceased to be a director, officer, employee or agent of the Company or a director, officer, trustee, general partner, manager, managing member, fiduciary, employee or agent of any other Enterprise at the Company’s request, and shall inure to the benefit of Indemnitee and his spouse, assigns, heirs, devisees, executors and administrators and other legal representatives.
(d) The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all or a substantial part, of the business and/or assets of the Company, by written agreement in form and substance satisfactory to Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.
(e) The Company and Indemnitee agree herein that a monetary remedy for breach of this Agreement, at some later date, may be inadequate, impracticable and difficult of proof, and further agree that such breach may cause Indemnitee irreparable harm. Accordingly, the parties hereto agree that Indemnitee may, to the fullest extent permitted by law, enforce this Agreement by seeking, among other things, injunctive relief and/or specific performance hereof, without any necessity of showing actual damage or irreparable harm and that by seeking injunctive relief and/or specific performance, Indemnitee shall not be precluded from seeking or obtaining any other relief to which he may be entitled. The Company and Indemnitee further agree that Indemnitee shall, to the fullest extent permitted by law, be entitled to such specific performance and injunctive relief, including temporary restraining orders, preliminary injunctions and permanent injunctions, without the necessity of posting bonds or other undertaking in connection therewith. The Company acknowledges that in the absence of a waiver, a bond or undertaking may be required of Indemnitee by a court of competent jurisdiction, and the Company hereby waives any such requirement of such a bond or undertaking to the fullest extent permitted by law.
20. MODIFICATION AND WAIVER . No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by the Company and Indemnitee. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions of this Agreement nor shall any waiver constitute a continuing waiver.
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21. NOTICES . All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given (i) if delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed, or (ii) mailed by certified or registered mail with postage prepaid, on the third (3rd) business day after the date on which it is so mailed:
(a) If to Indemnitee, at the address indicated on the signature page of this Agreement, or such other address as Indemnitee shall provide in writing to the Company.
(b) If to the Company, to:
Alta Mesa Resources, Inc.
15021 Katy Freeway
Suite 400
Houston, TX 77094
Attention: Michael A. McCabe
With a copy, which shall not constitute notice, to
Latham & Watkins LLP
811 Main Street
Suite 3700
Houston, TX 77002
Attention: Debbie P. Yee
or to any other address as may have been furnished to Indemnitee in writing by the Company.
22. APPLICABLE LAW AND CONSENT TO JURISDICTION . This Agreement and the legal relations among the parties shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to its conflict of laws rules. Except with respect to any arbitration commenced by Indemnitee pursuant to Section 14(a) of this Agreement, to the fullest extent permitted by law, the Company and Indemnitee hereby irrevocably and unconditionally: (a) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Delaware Court and not in any other state or federal court in the United States of America or any court in any other country; (b) consent to submit to the exclusive jurisdiction of the Delaware Court for purposes of any action or proceeding arising out of or in connection with this Agreement; (c) waive any objection to the laying of venue of any such action or proceeding in the Delaware Court; and (d) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Delaware Court has been brought in an improper or inconvenient forum, or is subject (in whole or in part) to a jury trial. To the fullest extent permitted by law, the parties hereby agree that the mailing of process and other papers in connection with any such action or proceeding in the manner provided by Section 21 or in such other manner as may be permitted by law, shall be valid and sufficient service thereof.
23. IDENTICAL COUNTERPARTS . This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement.
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24. MISCELLANEOUS . Use of the masculine pronoun shall be deemed to include usage of the feminine pronoun where appropriate. The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.
25. PERIOD OF LIMITATIONS . No legal action shall be brought and no cause of action shall be asserted by or in the right of the Company against Indemnitee, Indemnitee’s spouse, heirs, executors or personal or legal representatives after the expiration of two years from the date of accrual of such cause of action, and any claim or cause of action of the Company shall be extinguished and deemed released unless asserted by the timely filing of a legal action within such two-year period; provided, however, that if any shorter period of limitations is otherwise applicable to any such cause of action such shorter period shall govern.
26. ADDITIONAL ACTS . If for the validation of any of the provisions in this Agreement any act, resolution, approval or other procedure is required to the fullest extent permitted by law, the Company undertakes to cause such act, resolution, approval or other procedure to be affected or adopted in a manner that will enable the Company to fulfill its obligations under this Agreement.
[Signature Pages Follow]
18
IN WITNESS WHEREOF , the parties hereto have caused this Indemnity Agreement to be signed as of the day and year first above written.
| ALTA MESA RESOURCES, INC. | ||
| By: |
|
|
| Name: | Harlan H. Chappelle | |
| Title: | Chief Executive Officer |
[ Signature Page to Indemnity Agreement ]
| INDEMNITEE |
| By: |
| Name: |
| Title: |
| Address: |
[ Signature Page to Indemnity Agreement ]
Exhibit 10.8
FORM OF AMENDMENT NO. 1 TO THE INDEMNITY AGREEMENT
This Amendment No. 1 (this “ Amendment ”) to that certain Indemnity Agreement, dated March 29, 2017 (the “ Original Agreement ”), by and between Alta Mesa Resources, Inc., a Delaware corporation (the “ Company ”) (formerly, Silver Run Acquisition Corporation II), and [•] (the “ Indemnitee ”), is entered into by Company and Indemnitee and is dated as of February 9, 2018. Capitalized terms used herein but not defined in this Amendment have the meanings given to such terms in the Original Agreement.
RECITALS
WHEREAS , the Company and Indemnitee entered into the Original Agreement, pursuant to which Company agreed to indemnify Indemnitee for services provided as an officer or director, advisor or in another capacity for the Company;
WHEREAS , pursuant to Section 20 of the Original Agreement, the Original Agreement may be supplemented, modified or amended only by a written instrument duly executed by the Company and Indemnitee; and
WHEREAS , the Company and Indemnitee desire to amend the Original Agreement on the terms and conditions set forth in this Amendment.
NOW, THEREFORE , in consideration of the premises and the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Indemnitee hereby agree as follows:
ARTICLE I
AMENDMENTS
1.1 Amendments to Section 2. Section 2(c)(i) and Section 2(c)(iii) of the Original Agreement is hereby amended by including the phrase “High Mesa Holdings, LP, High Mesa, Inc., AM Equity Holdings, LP, KFM Holdco, LLC, HPS Investment Partners, LLC or Bayou City Energy Management, LLC,” after the references to “Riverstone Investment Group LLC,” contained therein.
In addition, the following shall be added to Section(c) after subclause (v):
“The Company and the Indemnitee agree that, notwithstanding anything to the contrary in this Section 2(c), the transactions contemplated by: (i) that certain Contribution Agreement, dated as of August 16, 2017, among High Mesa Holdings, LP, a Delaware limited partnership (the “ Alta Mesa Contributor ”), High Mesa Holdings GP, LLC, a Texas limited liability company, Alta Mesa Holdings, LP, a Texas limited partnership, Alta Mesa Holdings GP, LLC, a Texas limited liability company, the Company and, solely for certain provisions therein, the equity owners of the Alta Mesa Contributor, (ii) that certain Contribution Agreement, dated as of August 16, 2017, among KFM Holdco, LLC, a Delaware limited liability company (the “ Kingfisher Contributor ”), Kingfisher Midstream, LLC, a Delaware limited liability company, the
Company and, solely for certain provisions therein, the equity owners of the Kingfisher Contributor and (iii) that certain Contribution Agreement, dated as of August 16, 2017, between Riverstone VI Alta Mesa Holdings, L.P., a Delaware limited partnership, will not constitute a Change in Control pursuant to this Agreement.”
ARTICLE II
MISCELLANEOUS
2.1 No Other Amendments; No Waiver of Rights. Except as amended by this Amendment, the Original Agreement shall remain unmodified and in full force and effect.
2.2 Applicable Law and Consent to Jurisdiction. This Amendment and the legal relations among the parties shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to its conflict of laws rules. To the fullest extent permitted by law, the Company and Indemnitee hereby irrevocably and unconditionally: (a) agree that any action or proceeding arising out of or in connection with this Amendment shall be brought only in the Delaware Court and not in any other state or federal court in the United States of America or any court in any other country; (b) consent to submit to the exclusive jurisdiction of the Delaware Court for purposes of any action or proceeding arising out of or in connection with this Amendment; (c) waive any objection to the laying of venue of any such action or proceeding in the Delaware Court; and (d) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Delaware Court has been brought in an improper or inconvenient forum, or is subject (in whole or in part) to a jury trial. To the fullest extent permitted by law, the parties hereby agree that the mailing of process and other papers in connection with any such action or proceeding in the manner provided by Section 21 of the Original Agreement or in such other manner as may be permitted by law, shall be valid and sufficient service thereof.
2.3 Identical Counterparts. This Amendment may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Amendment. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Amendment.
[Signature Page Follows]
IN WITNESS WHEREOF , the parties hereto have caused this Amendment No. 1 to the Indemnity Agreement to be signed as of the day and year first above written.
| ALTA MESA RESOURCES, INC. | ||
| By: |
|
|
| Name: | Harlan H. Chappelle | |
| Title: | Chief Executive Officer |
| INDEMNITEE | ||
| By: |
|
|
| Name: | ||
| Title: | ||
[ Signature Page to Indemnity Agreement Amendment ]
Exhibit 10.9
Execution Version
MANAGEMENT SERVICES AGREEMENT
By and Between:
ALTA MESA HOLDINGS, LP,
as the “ Agent ”
and
HIGH MESA, INC.,
as the “ Company ”
February 9, 2018
TABLE OF CONTENTS
| Page | ||||||
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ARTICLE 1 DEFINITIONS |
1 | |||||
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1.1 |
Certain Defined Terms | 1 | ||||
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1.2 |
Interpretation | 5 | ||||
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ARTICLE 2 SERVICES |
6 | |||||
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2.1 |
Engagement | 6 | ||||
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2.2 |
Services | 6 | ||||
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2.3 |
Limitation on Powers and Duties | 8 | ||||
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2.4 |
Independent Contractor Status | 8 | ||||
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2.5 |
Performance of Services by Affiliates; Retention of Professionals | 9 | ||||
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2.6 |
Standard of Care | 9 | ||||
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2.7 |
Exculpation | 9 | ||||
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2.8 |
Indemnification; Disclaimer | 10 | ||||
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2.9 |
Responsibilities of the Company | 11 | ||||
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2.10 |
Changes to Services | 11 | ||||
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2.11 |
Document Retention | 11 | ||||
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ARTICLE 3 COMPENSATION AND EXPENSE REIMBURSEMENT |
11 | |||||
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3.1 |
Management Fee | 11 | ||||
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3.2 |
Expenses | 12 | ||||
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3.3 |
Use of Company Funds | 13 | ||||
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3.4 |
Invoices; Penalty Rate | 13 | ||||
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3.5 |
Disputed Invoices | 13 | ||||
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3.6 |
Taxes | 14 | ||||
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3.7 |
Audit Rights | 14 | ||||
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3.8 |
Insurance | 14 | ||||
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ARTICLE 4 TERM AND TERMINATION |
14 | |||||
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4.1 |
Term | 14 | ||||
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4.2 |
Termination | 14 | ||||
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4.3 |
Effect of Termination | 15 | ||||
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4.4 |
Transition Obligations | 15 | ||||
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4.5 |
Survival | 15 | ||||
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ARTICLE 5 MISCELLANEOUS |
16 | |||||
|
5.1 |
Force Majeure | 16 | ||||
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5.2 |
Entire Agreement | 16 | ||||
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5.3 |
Amendment | 16 | ||||
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5.4 |
Waiver | 16 | ||||
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5.5 |
Assignability | 16 | ||||
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5.6 |
Parties in Interest | 17 | ||||
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5.7 |
Binding Effect | 17 | ||||
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5.8 |
Notices | 17 | ||||
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|
5.9 |
Severability of Provisions |
17 | ||||
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5.10 |
Governing Law |
17 | ||||
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5.11 |
Consent to Jurisdiction |
17 | ||||
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5.12 |
WAIVER OF JURY TRIAL |
18 | ||||
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5.13 |
Proprietary Information |
18 | ||||
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5.14 |
Confidentiality |
19 | ||||
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5.15 |
Further Assurances |
19 | ||||
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5.16 |
Advice of Counsel |
20 | ||||
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5.17 |
Counterparts |
20 |
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ANNEX I |
INSURANCE |
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ANNEX II |
AGENT SERVICE EMPLOYEES |
|
|
ANNEX III |
ANNUAL BUDGET |
*****
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MANAGEMENT SERVICES AGREEMENT
THIS MANAGEMENT SERVICES AGREEMENT (as the same may be amended, restated or otherwise modified, this “ Agreement ”) is made and entered into as of the 9th day of February, 2018 (the “ Effective Date ”), by and between Alta Mesa Holdings, LP, a Texas limited partnership (the “ Agent ”), and High Mesa, Inc., a Delaware corporation (the “ Company ”). The Agent and the Company are referred to individually herein as a “ Party ” and collectively as the “ Parties ”.
WHEREAS, the Agent, High Mesa Holdings, L.P., a Delaware limited partnership and an Affiliate (as defined herein) of the Company (“ Contributor ”), and certain other parties are party to that certain Contribution Agreement dated as of August 8, 2017 (as the same may be amended, restated or otherwise modified, the “ Contribution Agreement ”);
WHEREAS, entry into this Agreement in connection with the closing of the transactions contemplated by the Contribution Agreement was a material inducement to Contributor’s entry into the Contribution Agreement;
WHEREAS, prior to the closing of the transactions contemplated by, and pursuant to the terms of, the Contribution Agreement, the Agent distributed to the Company certain oil and gas properties and related assets (the “ Distributed Assets ”);
WHEREAS, prior to the date hereof, the Company operated the Northwest Gas Processing System (the “ NGPS Assets ”);
WHEREAS, during the Term (as defined herein), the Company desires to engage the Agent to provide or cause to be provided certain administrative, management and operational services necessary to manage the Business (as defined herein) of the Company and, other than the AMH Group (as defined herein), its subsidiaries (collectively, the “ Company Group ”), and the Agent is willing to render such administrative, management and operational services, subject to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants, agreements and conditions set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Certain Defined Terms. As used in this Agreement (including the recitals hereof), the following terms shall have the respective meanings assigned to them in this Section 1.1 :
“ Affiliate ” of any specified entity means any other entity directly or indirectly controlling or controlled by or under direct or indirect common control with such specified entity and “control”, when used with respect to any specified entity, means the power to direct the management and policies of such entity, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing. For the purposes of this Agreement, (i) neither any
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member of the Company Group nor any member of the AMH Group shall be considered an Affiliate of (A) Bayou City or (B) Highbridge and (ii) (A) no member of the Company Group shall be considered an Affiliate of any member of the AMH Group and (B) no member of the AMH Group shall be considered an Affiliate of any member of the Company Group.
“ Agent ” has the meaning given to such term in the Preamble.
“ Agent Expenses ” has the meaning given to such term in Section 3.2(a) .
“ Agent Service Employee ” means an individual employed by the Agent or one of its Affiliates that is actively engaged in the provision of Services during the Term.
“ Agreement ” has the meaning given to such term in the Preamble.
“ AMH Group ” means Silver Run Acquisition Corp II, SRII Opco, LP and any of their respective subsidiaries, including the Agent.
“ Annual Budget ” means the budget attached as Annex III as may be modified in writing by both the Agent and the Company from time to time.
“ Assets ” means the Distributed Assets, the NGPS Assets and any other assets acquired by the Company through lease swaps, drilling wells or installation of a production facility.
“ Bankruptcy Code ” means Title 11 of the United States Code entitled “Bankruptcy.”
“ Bankruptcy Event ” means, when used with respect to a Person, that (a) such Person has (i) applied for or consented to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its property, (ii) admitted in writing its inability to pay its debts as such debts become due, (iii) made a general assignment for the benefit of its creditors, (iv) commenced a voluntary case under the Bankruptcy Code, (v) filed a petition seeking to take advantage, as a debtor, of any other law relating to bankruptcy, insolvency, reorganization, winding-up or composition or readjustment of debts, or (vi) failed to controvert in a timely and appropriate manner, or acquiesced in writing to, any petition filed against it in an involuntary case under the Bankruptcy Code; or (b) a proceeding or case has been commenced without the application or consent of such Person in any court of competent jurisdiction seeking (i) its liquidation, reorganization, dissolution, winding-up, or the composition or readjustment of its debts, or (ii) the appointment of a trustee, receiver, custodian or the like of such Person under any law relating to bankruptcy, insolvency, reorganization, winding-up or the composition or readjustment of its debts, and such proceeding or case shall continue undismissed, or any order, judgment or decree approving or ordering any of the foregoing shall be entered and continue unstayed and in effect, for a period of ninety (90) or more consecutive days.
“ Bayou City ” means Bayou City Energy Management, LLC and any of its controlled subsidiaries.
“ Board ” means the Board of Directors of the Company as established pursuant to the Company Agreement.
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“ Business ” means the business of the Company Group.
“ Business Day ” means a day other than a Saturday, Sunday, or other day on which commercial banks in the State of Texas are authorized or required to close for the general transaction of banking business.
“ Claim ” has the meaning given to such term in Section 2.8(a) .
“ Company ” has the meaning given to such term in the Preamble.
“ Company Agreement ” means that certain Fifth Amended and Restated Stockholders Agreement dated as of the Effective Date by and among High Mesa Inc., HPS Investment Partners, LLC, Bayou City Energy Management, LLC and each of the Stockholders signatory thereto, including all schedules and annexes hereto, as the same may be amended, restated, or otherwise modified from time to time (provided that the Agent shall have received a copy of the Company Agreement prior to the Execution Date and shall have no obligation with respect to any such amendments, restatements or other modifications entered into after the date hereof).
“ Company Group ” has the meaning given to such term in the Recitals.
“ Confidential Information ” has the meaning given to such term in Section 5.14 .
“ Damages ” has the meaning given to such term in Section 2.8(a) .
“ Disclosing Party ” has the meaning given to such term in Section 5.14 .
“ Effective Date ” has the meaning given to such term in the Preamble.
“ Emergency ” means taking any and all actions and making repairs, including implementing an emergency shutdown of any or all of the Assets, that are required or appropriate to avoid, prevent or mitigate (a) imminent harm to persons or property, including injury, illness or death or damage to the Assets or an environmental condition; (b) violation of any applicable Law that could reasonably be expected to result in a material loss or liability to the Company; or (c) curtailment of service on the Assets.
“ Exculpatee ” has the meaning given to such term in Section 2.7(a) .
“ Force Majeure ” means any cause or causes beyond the reasonable control of a Party that prevents or hinders the Party from performing its duties, obligations and services under this Agreement, including: (i) acts of God, (ii) landslides, lightning, earthquakes, tornadoes, named tropical storms and hurricanes, flood, fire or explosion, (iii) war or threat of war (declared or undeclared), invasion, riot, terrorist attack or other civil unrest, (iv) Governmental Order or Law, (v) actions, embargoes or blockades in effect on or after the date of this Agreement, (vi) action by any Governmental Authority, (vii) national or regional emergency, (viii) strikes, labor stoppages or slowdowns or other industrial disturbances, and (ix) shortage of adequate power or transportation facilities.
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“ Fundamental Change ” means, with respect to an entity, the sale of such entity, in one transaction or a series of related transactions, whether structured as (a) a sale or other transfer of all or substantially all of the equity securities of the entity (including by way of merger, consolidation, share exchange, or similar transaction), (b) the sale or other transfer of all or substantially all of the assets of the entity promptly followed by a dissolution and liquidation of the entity, (c) the sale of all or substantially all of the Assets or (d) a combination of any of the foregoing.
“ Governmental Authority ” means any federal, state, municipal, national or other government, governmental department, commission, board, bureau, court, agency or instrumentality or political subdivision thereof, or any entity or officer exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to any government or any court, in each case whether associated with a state of the United States, the United States, or a foreign entity or government.
“ Governmental Order ” means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority.
“ Highbridge ” means HPS Investment Partners, LLC and any of its controlled subsidiaries.
“ Indemnitee(s) ” has the meaning given to such term in Section 2.8(a) .
“ Initial Term ” has the meaning given to such term in Section 4.1 .
“ Intellectual Property Rights ” has the meaning given to such term in Section 5.13(b) .
“ Law ” means any statute, law, principle of common law, rule, regulation, judgment, order, ordinance, requirement, code, writ, injunction, or decree of any Governmental Authority.
“ Management Fee ” has the meaning given to such term in Section 3.1 .
“ Monthly Estimate ” has the meaning given to such term in Section 3.2(b) .
“ Monthly Funding Amount ” means, with respect to a calendar month, an amount equal to (a) the Monthly Estimate for such calendar month, plus (b) a reasonable contingency amount, which shall not exceed 5% of the Monthly Estimate for such calendar month, less (c) the amounts (if any) by which any prior calendar month’s Monthly Estimate or Shortfall Estimate exceeded the actual expenditures paid in the calendar month to which such prior Monthly Estimate or Shortfall Estimate relates and which excess has not been applied pursuant to this clause (c) to reduce a subsequent calendar month’s Monthly Funding Amount.
“ Parties ” has the meaning given to such term in the Preamble.
“ Party ” has the meaning given to such term in the Preamble.
“ Penalty Rate ” has the meaning given to such term in Section 3.4 .
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“ Person ” means and includes natural persons, corporations, limited partnerships, general partnerships, limited liability companies, limited liability partnerships, joint stock companies, joint ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and Governmental Authorities.
“ Proprietary Information ” means any patent, copyright and other intellectual property rights in the methodologies, processes, models, strategic plans and other information about the disclosing Party’s business, industry, products and services, plans, specifications, operation methods, pricing, costs, techniques, manuals, know-how and other intellectual property, in written, oral or other tangible form, provided by one Party to another Party or its representative.
“ Receiving Party ” has the meaning given to such term in Section 5.14 .
“ Renewal Term ” has the meaning given to such term in Section 4.1 .
“ Representatives ” has the meaning given to such term in Section 5.14 .
“ Service Percentage ” has the meaning given to such term in Section 3.2(c) .
“ Services ” has the meaning given to such term in Section 2.2 .
“ Term ” means the period commencing on the Effective Date and ending on the termination or expiration of this Agreement.
“ Third Party ” means any Person that is not a Party.
“ Work Product ” has the meaning given to such term in Section 5.13(b) .
1.2 Interpretation. In this Agreement, except to the extent the context otherwise requires: (a) any reference to an Article, a Section, a Schedule or an Annex is a reference to an article or section hereof, or a schedule or an annex hereto, respectively, and to a subsection or a clause is, unless otherwise stated, a reference to a subsection or a clause of the Section or subsection in which the reference appears; (b) the words “hereof”, “herein”, “hereto”, “hereunder” and the like mean and refer to this Agreement as a whole and not merely to the specific Article, Section, subsection, paragraph or clause in which the respective word appears; (c) the meaning of defined terms shall be equally applicable to both the singular and plural forms of the terms defined; (d) the words “including”, “includes” and “include” shall be deemed to be followed by the words “without limitation;” (e) references to agreements and other contractual instruments shall be deemed to include all subsequent amendments and other modifications thereto, but only to the extent such amendments and other modifications are not prohibited by the terms of this Agreement; (f) references to statutes or regulations are to be construed as including all statutory and regulatory provisions consolidating, amending or replacing the statute or regulation referred to; (g) any table of contents, captions and headings are for convenience of reference only and shall not affect the interpretation or construction of this Agreement; and (h) in the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including”, the words “to” and “until” each mean “to but excluding”, and the word “through” means “to and including”.
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ARTICLE 2
SERVICES
2.1 Engagement. On the terms and subject to the conditions and qualifications set forth in this Agreement, the Company hereby engages Agent, acting directly or through its Affiliates and their respective employees, agents, contractors or independent Third Parties, and Agent hereby accepts such engagement, to provide Services to the Company Group.
2.2 Services . Except as otherwise limited by this Agreement or the Company Agreement and subject to the last sentence of this Section 2.2 , the Agent shall, in accordance with the standards set forth in Section 2.6 , take all appropriate actions on behalf of the Company Group to supervise and administer the business, operations and affairs of the Company Group, including the following matters (in each case, as directed and supervised by the Board) (collectively, the “ Services ”):
(a) establishing and maintaining the books and records, including accounting, contract and other records and files necessary and appropriate for the proper conduct by the Company Group of its business and operations (including keeping a full and complete accounting of all revenues and income of the Company Group, costs incurred by or on behalf of the Company Group and costs incurred by or on behalf of the Agent in connection with the performance by the Agent of the Services);
(b) Monitor the receipts, income and expenditures of the Company Group;
(c) Provide, or arrange for Third Party professionals, Third Party service providers, and legal, human resources, land, operations, purchasing, communications, information system, technical and other services as may be necessary to properly carry on the business and operations of the Company Group;
(d) Supervise, manage, direct and operate all aspects of the day-to-day management and administration of the Company Group;
(e) Supervise, manage and administer activities necessary for the Company Group to comply with and perform all of the Company Group’s obligations, responsibilities and covenants under any agreement binding upon the Company Group;
(f) Provide such clerical, bookkeeping, and contract administration services as are necessary and appropriate for the conduct of the Company Group’s business;
(g) File, or cause to be filed, all necessary or appropriate filings with federal, state and local authorities under Applicable Law to maintain the Company Group’s existence, its qualification to do business, and its registration under any assumed or fictitious name;
(h) File and record, or cause to be filed and recorded, such documents and papers as are necessary and appropriate to evidence the Company Group’s ownership of any of its assets;
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(i) Give and receive notices, execute drawdown certificates, furnish required reports and information and monitor compliance on behalf of the Company Group as required or permitted by any agreement binding upon the Company Group;
(j) Assist in the making of all filings and in the obtaining of all licenses, permits and approvals from any Governmental Authority as may be necessary or appropriate under Applicable Law in connection with the operations or business of the Company Group and submit any application, filing or notice for the renewal of any existing licenses or permits;
(k) Administer the Company Group’s performance of its obligations under any agreement binding upon the Company Group;
(l) Review and provide support for the implementation of the Company Group’s insurance program, including obtaining and maintaining for the Company Group all insurance required to be maintained by the Company Group, conducting periodic risk management surveys of the operations of the Company Group, handling all claims and insuring proper collection for any insurance coverage, and providing copies of policies, endorsements, inspections, claims, quotes and other reports or documentation related to the Company Group;
(m) Review the provision of services by the Company Group’s accountants, including the examination by such accountants of the financial records and statements of the Company Group;
(n) Make such reports and recommendations to the Board and officers of the Company Group , including concerning the performance of the independent accountants, as the Board or the officers of the Company Group may reasonably request or deem appropriate;
(o) File, or cause to be filed, with the appropriate Governmental Authorities, all required federal, state, and local tax returns for the Company Group including cooperating with professional service providers engaged by the Company Group, providing the Board with drafts of each income tax return twenty (20) days prior to the last date on which such tax return can be timely filed and each other tax return five (5) days prior to the last date on which tax return can be timely filed, for the Board’s review and approval, informing the Board in a timely manner of any tax issues that arise and meeting the tax information and tax return reporting deadlines;
(p) Make available such information regarding the Company Group, and available to the Agent, as may be requested by the Board, the officers of the Company Group, or the Company Group’s attorneys;
(q) Provide such assistance to the Company Group’s counsel and auditors as generally may be required to properly carry on the business and operations of the Company Group;
(r) Assist in the representation of the Company Group before any Governmental Authority; and
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(s) Perform such other acts which are necessary or appropriate to carry out its obligations hereunder.
Notwithstanding anything to the contrary in this Agreement, the Agent shall not be obligated to provide any Services the provision of which would violate any Laws. Notwithstanding anything to the contrary in this Agreement, except in the case of an Emergency, the Agent shall not be obligated to provide any Services for which funding is not provided pursuant to ARTICLE 3 .
2.3 Limitation on Powers and Duties . Notwithstanding the provisions of Sections 2.1 and 2.2 , without the prior approval of the Board (such approval to be provided or withheld in accordance with the terms of the Company Agreement), the Agent shall not:
(a) amend, change or modify this Agreement;
(b) initiate any claim or lawsuit by any member of the Company Group;
(c) take any action on behalf of the Company or any of its Affiliates that, if taken by the Company or any of its Affiliates, would require Unanimous Consent (as defined in the Company Agreement); or
(d) commence on behalf of any member of the Company Group, or cause any member of the Company Group to commence, any Bankruptcy Event, reorganization, arrangement, insolvency, or receivership proceeding under the laws of the United States of America or any other country or any state or province thereof.
2.4 Independent Contractor Status . Notwithstanding anything in this Agreement to the contrary, (a) the relationship of the Agent to the Company Group shall be and remain that of an independent contractor; (b) neither the Agent, any of its Affiliates nor any of their respective directors, managers, officers, employees or agents shall be deemed to be an employee of the Company Group; and (c) nothing herein shall be deemed or construed to create an agency, partnership, joint venture or similar relationship under applicable state Law between the Agent, on the one hand, and the Company Group, on the other hand, or to cause any Party to be responsible in any way for the debts and obligations of the other Party. All debts and liabilities to Third Parties required or permitted to be incurred by the Agent under this Agreement in the course of providing the Services shall be the debts and liabilities of the Company Group, and the Agent shall not be liable for any such obligations by reason of providing Services on behalf of the Company Group. Nothing stated in this Agreement shall operate to create any special or fiduciary duty between the Parties. At all times during the performance of Services by the Agent, all persons performing such Services who shall be in the employ or under the control of the Agent or its Affiliates (including Agent Service Employees, agents, contractors, temporary employees and consultants), shall not be deemed, solely because of the provision of such Services, to be an employee of the Company and shall not be entitled to any payment, benefit or perquisite directly from the Company on account of such Services, including participation in any employee benefit and pension plans maintained by the Company or any Affiliate of the Company.
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2.5 Performance of Services by Affiliates; Retention of Professionals . Subject to the limitations of Sections 2.1 , 2.2 and 2.3 , (a) in discharging its obligations hereunder, the Agent may engage any of its Affiliates or any Third Party professionals and other service providers to perform Services on its behalf and (b) the Company hereby appoints the Agent during the Term to act as its agent in connection with the Company Group’s retention of any such Third Party professionals and other service providers which, as determined by the Agent in its discretion but subject to the Annual Budget, are needed to perform the Services; provided, however, that Agent shall be responsible for Services rendered by its Affiliates, Third Party professionals or other service providers. All costs or fees payable to such Affiliates, professionals and other service providers shall be borne by the Company Group.
2.6 Standard of Care . In supervising, administering and managing the business and affairs of the Company Group pursuant to this ARTICLE 2, the Agent shall perform all of its duties in accordance with reasonable and prudent practices, as relevant to the Services, of the oil and gas industry, and in material compliance with all applicable Laws and the terms of this Agreement. Agent will (a) maintain separate accounts, financial statements, books and records from those of the Company Group and (b) prevent any funds or accounts of the Company Group from being commingled with the funds or accounts of Agent.
2.7 Exculpation .
(a) Neither the Agent, its Affiliates, nor its or their respective partners, members, officers, directors, managers, employees or agents (individually and collectively referred to as an “ Exculpatee ”), shall be liable, responsible, or accountable in damages or otherwise to the Company Group, or its owners, members, employees, agents or assigns, for any action taken or failure to act (EVEN IF SUCH ACTION OR FAILURE TO ACT CONSTITUTED THE SOLE, CONCURRENT OR COMPARATIVE NEGLIGENCE OF THE AGENT OR SUCH EXCULPATEE ) in connection with the Services provided hereunder, unless such act or failure to act was the result of fraud, willful misconduct or gross negligence on the part of the Exculpatee. The Exculpatees shall have no liability whatsoever under this Agreement for failing to act (or limiting its actions) hereunder, and no obligation to provide any Services, when funds fully covering the Agent’s Services for any such action have not been included in an Annual Budget and provided to the Agent pursuant to this Agreement.
(b) IN NO EVENT SHALL THE EXCULPATEE EVER BE LIABLE TO ANY SUCH PERSON OR ENTITY, OR ANY OTHER PARTY UNDER THIS AGREEMENT OR IN CONNECTION WITH SERVICES PROVIDED HEREUNDER, FOR ANY PUNITIVE, INCIDENTAL, CONSEQUENTIAL, SPECIAL OR INDIRECT DAMAGES IN TORT, CONTRACT OR OTHERWISE, UNLESS SUCH PUNITIVE, INCIDENTAL, CONSEQUENTIAL, SPECIAL OR INDIRECT DAMAGES IN TORT, CONTRACT OR OTHERWISE ARE CLAIMED BY A THIRD PARTY AND SUCH DAMAGES TO SUCH THIRD PARTY WERE THE RESULT OF FRAUD, WILLFUL MISCONDUCT OR GROSS NEGLIGENCE ON THE PART OF SUCH EXCULPATEE. TO THE EXTENT PERMITTED BY LAW, THE COMPANY HEREBY WAIVES THE PROVISIONS OF THE TEXAS DECEPTIVE TRADE PRACTICES CONSUMER PROTECTION ACT, §§ 17.41, ET. SEQ., OF THE TEXAS BUSINESS AND COMMERCE CODE (OTHER THAN SECTION 17.555). The exculpation provided by this Section 2.7 shall continue as to an Exculpatee who has ceased to serve in such capacity, and shall inure to the benefit of the heirs, successors, assigns, administrators and personal representatives of the Exculpatees.
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2.8 Indemnification ; Disclaimer. Without limiting Section 2.7 :
(a) THE COMPANY SHALL RELEASE, INDEMNIFY, DEFEND AND HOLD HARMLESS THE AGENT AND ITS OWNERS, OFFICERS, MEMBERS, MANAGERS, DIRECTORS, SHAREHOLDERS, AFFILIATES, EMPLOYEES AND AGENTS (IN THIS SECTION 2.8 SOMETIMES INDIVIDUALLY REFERRED TO AS AN “ INDEMNITEE ” AND COLLECTIVELY AS THE “ INDEMNITEES ”) FROM AND AGAINST ANY AND ALL LOSSES, LIABILITIES, EXPENSES, DAMAGES, JUDGMENTS, FINES, SETTLEMENTS AND OTHER AMOUNTS (INCLUDING REASONABLE ATTORNEYS’ FEES AND EXPENSES) (COLLECTIVELY, THE “ DAMAGES ”) ARISING FROM ANY CLAIMS, DEMANDS, ACTIONS, SUITS OR PROCEEDINGS, CIVIL, CRIMINAL, ADMINISTRATIVE OR INVESTIGATIVE (EACH, A “ CLAIM ”), IN WHICH THE INDEMNITEE IS OR MAY BE INVOLVED, OR THREATENED TO BE INVOLVED, AS A PARTY OR OTHERWISE, BY REASON OF OR IN ANY WAY ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE AGENT’S SERVICES HEREUNDER, INCLUDING CLAIMS FOR PERSONAL INJURY OR DEATH OF ANY PERSONS ARISING IN CONNECTION WITH THE PERFORMANCE OF THE SERVICES; PROVIDED , HOWEVER , THAT NO INDEMNITEE SHALL BE INDEMNIFIED BY THE COMPANY FOR ANY ACTS OR OMISSIONS BY THE INDEMNITEE THAT CONSTITUTE FRAUD, WILLFUL MISCONDUCT OR GROSS NEGLIGENCE ON THE PART OF SUCH INDEMNITEE.
(b) THE PARTIES RECOGNIZE AND AGREE THAT AN INDEMNITEE MAY BE ENTITLED TO INDEMNIFICATION FROM ACTS OR OMISSIONS THAT MAY GIVE RISE TO ORDINARY, CONCURRENT OR COMPARATIVE NEGLIGENCE, AND THIS SECTION 2.8 DOES NOT LIMIT ANY OTHER INDEMNIFICATION OBLIGATION THAT IS AVAILABLE TO THE INDEMNITEE. THE LIMITATIONS ON LIABILITY AND INDEMNITIES IN THIS AGREEMENT ARE INTENDED TO BE ENFORCEABLE AGAINST THE PARTIES IN ACCORDANCE WITH THE EXPRESS TERMS AND SCOPE THEREOF NOTWITHSTANDING ANY EXPRESS NEGLIGENCE RULE OR ANY SIMILAR DIRECTIVE THAT WOULD PROHIBIT OR OTHERWISE LIMIT INDEMNITIES BECAUSE OF THE NEGLIGENCE (WHETHER SOLE, JOINT OR CONCURRENT OR ACTIVE OR PASSIVE) OR OTHER FAULT OR STRICT LIABILITY OF ANY OF THE INDEMNIFIED PARTIES. THE PARTIES AGREE THAT, TO THE EXTENT REQUIRED BY APPLICABLE LAW TO BE EFFECTIVE OR ENFORCEABLE, THE PROVISIONS IN THIS AGREEMENT IN ALL-CAPS FONT ARE “CONSPICUOUS” FOR THE PURPOSE OF ANY APPLICABLE LAW.
(c) Expenses incurred by an Indemnitee in defending or investigating a threatened or pending Claim for which the Indemnitee seeks indemnification pursuant to this Section 2.8 shall be paid by the Company Group in advance of the final disposition of such Claim upon receipt of an undertaking by or on behalf of such Indemnitee to repay such amount if it shall ultimately be finally determined that such Indemnitee is not entitled to be indemnified by the Company Group.
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(d) The indemnification provided by this Section 2.8 shall continue as to an Indemnitee who has ceased to serve in such capacity, and shall inure to the benefit of the heirs, successors, assigns, administrators and personal representatives of the Indemnitees.
(e) THE AGENT SPECIFICALLY DISCLAIMS ANY REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED (i) RELATING TO THE SERVICES, INCLUDING ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, (ii) RELATING TO THE RESULTS TO BE OBTAINED FROM THE SERVICES, AND (iii) THAT THE SERVICES ARE ERROR-FREE OR NON-INTERRUPTIBLE.
2.10 Responsibilities of the Company . The Company shall provide the Agent reasonable access to any data, information, materials and access to any systems or personnel that the Agent determines is reasonably necessary or appropriate for the Agent to perform the Services hereunder. To the extent the Agent shall have charge or possession of any of the Company Group’s assets in connection with the provision of the Services pursuant to this Agreement, the Agent shall (i) hold such assets in the name and for the benefit of the Company Group and (ii) separately maintain and not commingle such assets with any assets of the Agent or any other Person. The Company Group is solely responsible for the accuracy and completeness of any and all such data that it submits to the Agent. The Company shall, upon reasonable notice, give the Agent and its Affiliates reasonable access, during regular business hours and at such other times as are reasonably required, to the relevant premises, including the Assets, to the extent reasonably necessary for the purposes of providing and receiving Services.
2.11 Changes to Services . Additions or changes to the Services listed in this ARTICLE 2 may be made at any time by amending the Agreement in accordance with Section 5.3 . Such additions or changes, including any fees or fee adjustments related to such additions or changes, shall be agreed between the Parties before any work commences.
2.12 Document Retention . The Parties shall retain documents and other information relating to the Services for at least the time period that is required by applicable Law. Promptly following termination of this Agreement under Section 4.2 , the Agent shall deliver to such Person as the Company may designate in writing, copies of all title files, division order files, well files, production records, equipment inventories, and production, severance, and ad valorem tax records pertaining to the assets of the Company Group and other information about the assets and operations of the Company Group reasonably requested by the Company (which are in the possession of the Agent).
ARTICLE 3
COMPENSATION AND EXPENSE REIMBURSEMENT
3.1 Management Fee . As consideration for the Services rendered by the Agent to the Company under this Agreement, the Company shall pay the Agent a management fee in the amount of $10,000 per month (the “ Management Fee ”). On or before the first day of each month during the Term, the Company shall remit to the Agent the Management Fee for such month; provided that with respect to the payment to be made for the first month of the Initial Term, the Company shall remit to the Agent, upon execution of this Agreement, the pro-rated portion of the Management Fee for such month for the period of time from and including the date hereof to the end of such month.
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3.2 Expenses .
(a) In addition to the Management Fee, the Company shall be responsible for the following costs and expenses incurred by the Agent in providing the Services: (i) the proportionate, fully-burdened costs and expenses (as reasonably incurred by the Agent) of the Agent Service Employees, including any overtime, bonuses or incentive compensation and the costs of employee benefits (including workers compensation) provided to the Agent Service Employees; provided, that the proportion of such costs and expenses as to an Agent Service Employee that may be properly allocable to the Company shall be determined by multiplying the amount of such costs and expenses by the Service Percentage, (ii) to the extent that any Agent Service Employee was primarily dedicated to the provision of Services and the management of the Business, any severance costs associated with such Agent Service Employee to the extent any Asset with which such Agent Service Employee provided services is no longer owned or operated by the Company or such Agent Service Employee no longer provides services with respect to such Asset, (iii) all direct expenses incurred by the Agent in providing the Services and payable to Third Parties, (iv) reimbursement of properly incurred and allocated general and administrative overhead; provided, that the proportion of such overhead as to an Agent Service Employee that may be properly allocable to the Company shall be determined by multiplying the amount of such overhead by the Service Percentage, and (v) any other costs and expenses required to be reimbursed to the Agent by the Company pursuant to this Agreement or as actually incurred by the Agent in connection with its provision of the Services, in each case, in accordance with and subject to the Annual Budget then in effect or in connection with an Emergency (collectively, the “ Agent Expenses ”).
(b) At least five Business Days prior to the commencement of each calendar month, the Agent shall prepare and deliver to the Company, (i) a notice of the estimated amount of Agent Expenses anticipated to be paid in such calendar month (the “ Monthly Estimate ”) , (ii) the Monthly Funding Amount for such calendar month and (iii) reasonable supporting documentation for the expenses covered in such Monthly Estimate. On or before the first day of each month during the Term, the Company shall remit to the Agent the Monthly Estimate for such month. For the avoidance of doubt, the Agent shall not be required to advance any direct expenses.
(c) If the Agent reasonably believes that the deposits made pursuant to Section 3.2(b) will be insufficient to satisfy the projected costs and expenses to be paid during the then current calendar month pursuant to the Monthly Estimate, then the Agent shall prepare and deliver to the Company, a notice of the estimated amount of the shortfall for such calendar month (a “ Shortfall Estimate ”). The Company shall cause the Shortfall Estimate to be deposited in the Management Account within five (5) Business Days of the day the Company received notice thereof from the Agent.
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(d) The Parties acknowledge that attached as Annex II is a schedule setting forth those Agent Service Employees that provided Services with respect to the Assets prior to the date of the Contribution Agreement and the approximate percentage of each such Agent Service Employee’s time that was allocated to the provision of the Services with respect to the Assets prior to date of the Contribution Agreement (the “ Service Percentage ”). For the avoidance of doubt, the Annual Budget shall include the percentage of each Agent Service Employee’s time allocated to the Services, which may not be the percentage set forth on Annex II .
3.3 Use of Company Funds . Subject to the terms and conditions of this Agreement, the Agent will pay the costs incurred in performing the Services as they become due and payable by the applicable member of the Company Group, and all local, state and federal taxes incurred related thereto, from the applicable Company Group bank account(s), and the Agent will have the right to withdraw funds from such account(s) for such purposes. The Agent will not make any expenditure of, or otherwise use, any funds of any Company Group member, except for (a) expenditures contemplated by the applicable Annual Budget and this Agreement and (b) expenditures required in the event of an Emergency.
3.4 Invoices; Penalty Rate . The Company Group agrees to pay interest at the rate of 10% per year (or the maximum rate permitted by applicable Law, whichever is less) for all amounts not paid within thirty (30) days from the date of the invoice therefor (the “ Penalty Rate ”).
3.5 Disputed Invoices .
(a) In the event that the Company disputes in good faith all or any portion of an invoice submitted by Agent for reimbursable expenses, other than expenses incurred in connection with an Emergency, the Company Group may withhold payment of the amount disputed by the Company in good faith and such withheld payments shall not be subject to the Penalty Rate; provided that the Company gives Agent written notice of its disagreement with the disputed amount, stating the reasons therefor in reasonable detail and providing supporting documentation as appropriate. If Agent agrees in writing with the Company, then the Company Group shall not be required to pay the disputed amount to Agent. The Agent and the Company shall endeavor in good faith to promptly settle any disputed amount. If any such amount withheld is subsequently determined by agreement of the Parties or otherwise to have been unjustifiably withheld, then the Company Group shall promptly pay Agent the amount withheld plus the Penalty Rate from the date that such amount should have been paid until the date of such payment.
(b) If, within twenty (20) days after receipt of any written exception pursuant to Section 3.5(a) , the Company and Agent have been unable to resolve any dispute, and if (i) such dispute relates to whether amounts were properly charged or services actually performed and (ii) the aggregate amount in dispute exceeds $100,000, either of Company or Agent may submit the dispute to an independent Third Party auditing firm that is mutually agreeable to the Board, on the one hand, and Agent, on the other hand. The Parties shall cooperate with such auditing firm and shall provide such auditing firm access to such books and records as may be reasonably necessary to permit a determination by such auditing firm. The resolution by the auditing firm shall be final and binding on the Parties and the Parties shall each be responsible for 50% of such auditing firm’s fees for such review and determination.
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3.6 Taxes . In addition to all charges specified in this ARTICLE 3 , the Company Group shall pay or reimburse the Agent for all state or local, sales and use taxes, or amounts levied in lieu thereof, based on charges set forth in this ARTICLE 3 ; provided, however, the Company Group shall have no responsibility for taxes imposed on the Agent’s net income by any taxing authority.
3.7 Audit Rights . At any time during the Term and for a period of one (1) year following the termination of this Agreement, the Company shall have the right, exercisable at its option and expense, to review and copy the records of the Company Group maintained by the Agent (so long as, with respect to any period following the Term, such records have not been delivered by the Agent pursuant to Section 2.11 ), and if necessary, to verify the performance by the Agent of its obligations under this Agreement, and to audit such records. This audit right may be exercised from time to time (but in no event more than once in any calendar quarter) during normal business hours upon reasonable notice to the Agent. The Company shall use its commercially reasonable efforts to conduct any such audit or examination in a manner that minimizes the inconvenience or disruption to the Agent.
3.8 Insurance . Throughout the Term, (a) the Company shall maintain, at its sole cost, insurance covering the Assets and the Business as a reasonably prudent owner or operator of assets similar to the Assets would maintain, and (b) the Agent shall maintain the insurance coverage set out on Annex I , and the Company shall reimburse the Agent for the portion of its insurance premiums attributable to such coverage. In each of the insurance policies required by this Section 3.8 , the Party holding the insurance will waive and require its insurers to waive any right of subrogation or recovery against, and name as an additional insured, the other Party (and if applicable the Indemnitees). Upon a Party’s reasonable request, the other Party will deliver copies of all insurance policies and certificates of insurance required by this Section 3.8 .
ARTICLE 4
TERM AND TERMINATION
4.1 Term . This Agreement shall commence on the Effective Date and continue in effect for an initial period of one hundred eighty (180) days (the “ Initial Term ”). Thereafter, this Agreement shall automatically renew for additional consecutive one hundred eighty (180) day periods (each, a “ Renewal Term ”), unless terminated by either Party upon at least ninety (90) days written notice to the other Party prior to the end of the Initial Term or any Renewal Term.
4.2 Termination . Notwithstanding Section 4.1 , this Agreement shall terminate upon the earliest to occur of the following:
(a) The mutual written agreement of the Parties, effective as of the date so mutually agreed;
(b) By election of the Company:
(i) upon the Agent’s material breach of this Agreement, if such breach is not remedied within sixty (60) days after the Agent’s receipt of the Company’s written notice thereof, or such longer period as is reasonably required to cure such breach; provided that the Agent commences to cure such breach within such 60-day period and proceeds with due diligence to cure such breach and such breach is continuing at the time notice of termination is delivered to the Agent,
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(ii) upon the occurrence of a Fundamental Change with respect to the Company or the Agent, or
(iii) upon the occurrence of a Bankruptcy Event with respect to either the Company or the Agent.
(c) By election of the Agent:
(i) upon the Company’s material breach of this Agreement, if such breach is not remedied within sixty (60) days after the Company’s receipt of the Agent’s written notice thereof, or such longer period as is reasonably required to cure such breach; provided that the Company commences to cure such breach within such 60-day period and proceeds with due diligence to cure such breach and such breach is continuing at the time notice of termination is delivered to the Company,
(ii) upon the failure of the Company to pay any Management Fee or, subject to Section 3.5 , any Monthly Expense to the Agent within ten (10) Business Days of its due date;
(iii) upon the occurrence of a Fundamental Change with respect to the Company, or
(iv) upon the occurrence of a Bankruptcy Event with respect to either the Company or the Agent.
4.3 Effect of Termination . If this Agreement is terminated in accordance with Section 4.2 above, all rights and obligations under this Agreement shall cease except for (a) obligations that expressly survive termination of this Agreement, including as provided in Section 4.5 ; (b) liabilities and obligations that have accrued prior to such termination, including the obligation to pay any amounts that have become due and payable prior to such termination; and (c) the obligation to pay any portion of the Agent’s costs and expenses that has accrued prior to such termination, even if such portion has not become due and payable at that time.
4.4 Transition Obligations . For a period of not more than sixty (60) days after the termination of this Agreement, the Agent shall take all actions that the Company reasonably requests to effect the transition of the Services hereunder to a successor provider or providers of such services, as reasonably designated by the Company, in an orderly and expeditious manner.
4.5 Survival . Upon the termination or expiration of this Agreement, all amounts payable to the Agent pursuant to ARTICLE 3 (other than interest that accrues on unpaid amounts) shall cease to accrue. However, the Company Group shall (a) pay the Agent for all Services performed up through the termination or expiration date (including any transition period pursuant to Section 4.4 ) and (b) subject to Section 3.5, reimburse the Agent for all costs and expenses reimbursable pursuant to Section 3.4 that are incurred or are otherwise attributable to the period on or prior to the termination or expiration date (including any transition period pursuant to Section 4.4 ). The provisions of Sections 2.7 , 2.8 , 3.7 4.3 , this Section 4.5 , and ARTICLE 5 (other than Section 5.1 ) shall survive any termination or expiration of this Agreement indefinitely or for such shorter period provided in such Section.
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ARTICLE 5
MISCELLANEOUS
5.1 Force Majeure . The obligations of a Party under this Agreement shall be suspended during the period and to the extent that the Agent is prevented due to a Force Majeure; provided , however , that a Party shall not be excused by Force Majeure from any obligation to pay money incurred prior to the Force Majeure. The Party suffering a Force Majeure shall give notice of suspension as soon as reasonably practicable to the other Party stating the date and extent of such suspension and the cause thereof, and shall exercise due diligence to end its inability to perform as promptly as practicable. Notwithstanding the foregoing, a Party is not required to settle any strike, lockout or other labor dispute in which it may be involved. The Term (including the Initial Term or Renewal Term, as applicable) shall be automatically extended for a period of time equal to the time lost by reason of the suspension not to exceed ninety (90) days.
5.2 Entire Agreement . This Agreement constitutes the complete and exclusive statement of agreement among, and supersedes all prior written and oral agreements or statements by and among, the Parties with respect to the subject matter herein. No representation, promise, inducement, statement or intention, condition or warranty has been made by or on behalf of either Party that is not set forth in this Agreement or the documents referred to herein.
5.3 Amendment . This Agreement may not be amended or modified except by a written instrument specifically referring to this Agreement and executed by all of the Parties.
5.4 Waiver . The failure of either Party at any time or from time to time to require performance of the other Party’s obligations under this Agreement shall in no manner affect the right to enforce any provision of this Agreement at any subsequent time, and the waiver of any rights arising out of any breach shall not be construed as a waiver of any rights arising out of any subsequent breach.
5.5 Assignability . Neither Party may assign, delegate or transfer (by merger, operation of Law or otherwise) its respective rights or delegate its respective obligations under this Agreement without the express prior written consent of the other Party. Notwithstanding the foregoing, the Agent may assign its rights and obligations under this Agreement, in whole or in part, to an Affiliate without the prior written consent of the Company; provided that no such assignment will relieve the Agent of its obligations under this Agreement. Any purported assignment, delegation, or transfer in contravention of this Section 5.5 shall be void and unenforceable. The foregoing provisions of this Section 5.5 are not intended to prohibit or restrict the Agent from engaging subcontractors or Affiliates to perform some or all of the Services; provided that the Agent shall remain fully responsible and liable for performance of any such Services as if such subcontracted activities had been performed directly by the Agent.
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5.6 Parties in Interest . Except for Sections 2.7 and 2.8 , the provisions of this Agreement are solely for the benefit of the Parties and their respective successors and permitted assigns, and are not intended to confer upon any other Person any third party beneficiary rights under this Agreement.
5.7 Binding Effect . This Agreement shall inure to the benefit of and shall be binding upon the Parties and their respective successors and permitted assigns.
5.8 Notices . All notices, requests, demands or other communications provided for hereunder shall be in writing. Notices may be given by personal delivery, by overnight courier, by electronic mail with acknowledgement of receipt requested or received, or by certified or registered United Sates mail, return receipt requested. Except as otherwise expressly provided herein, notice shall be deemed to have been given (a) if by personal delivery, on the date of delivery; (b) if by overnight courier, on the earlier of the date delivery is first attempted or the next Business Day after the same has been delivered to a reputable commercial overnight courier; (c) if by electronic mail, on the date of such transmission if sent by 5:00 p.m. (Houston time) on a Business Day, or if sent thereafter, on the next Business Day; and (d) if by certified or registered United States Mail, on the earlier of the date delivery is first attempted or three (3) Business Days after delivery to the United States Post Office, postage prepaid, return receipt requested. Notices shall be sent to the intended recipient at the addresses set forth below its signature on the signature page, or to the most recent addresses which the indented recipient has provided to the other parties for purposes of, and in accordance with, this Section 5.8 .
5.9 Severability of Provisions . If any provision of this Agreement is held to be invalid, prohibited, or otherwise unenforceable by a court of competent jurisdiction, this Agreement shall be considered divisible and such provision shall be deemed inoperative to the extent it is deemed invalid, prohibited, or unenforceable, and in all other respects this Agreement shall remain in full force and effect; provided , however , that if any such provision may be made enforceable by limitation thereof, then such provision shall be deemed to be so limited and shall be reformed, construed and enforced to the maximum extent permitted by applicable Law.
5.10 Governing Law . This Agreement, and any instrument or agreement required hereunder (to the extent not expressly provided for therein), shall be governed by, and construed under, the internal laws of the State of Texas, without reference to conflicts of laws rules thereof.
5.11 Consent to Jurisdiction . Each Party irrevocably consents and agrees that any action, proceeding, or other litigation by or against any other Party or Parties with respect to any claim or cause of action based upon or arising out of or related to this Agreement or the transactions contemplated hereby, shall be brought and tried exclusively in the federal or state courts located in the City of Houston, County of Harris, in the State of Texas, and any such legal action or proceeding may be removed to the aforesaid courts. By execution and delivery of the Agreement, each Party accepts, for itself and in respect of its property, generally and unconditionally, the exclusive jurisdiction of the aforesaid courts. Each Party hereby irrevocably waives (a) any objection which it may now or hereafter have to the laying of venue with respect any such action, proceeding, or litigation arising out of or in connection with this Agreement or the transactions contemplated hereby brought in the aforesaid courts, and (b) any right to stay or dismiss any such action, proceeding, or litigation brought before the aforesaid courts on the basis
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of forum non-conveniens . Each Party further agrees that personal jurisdiction over it may be affected by service of process by certified mail, postage prepaid, addressed as provided in Section 5.8 of this Agreement, and when so made shall be as if served upon it personally within the State of Texas.
5.12 WAIVER OF JURY TRIAL . TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY HEREBY WAIVES ITS RIGHTS TO A TRIAL BY JURY WITH RESPECT TO ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY A PARTY AGAINST THE OTHER PARTY, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. EACH PARTY HEREBY AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION 5.12 AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT, OR ANY PROVISION HEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS, OR MODIFICATIONS TO THIS AGREEMENT. EACH PARTY ACKNOWLEDGES THAT THE FOREGOING WAIVER CONSTITUTES A MATERIAL CONSIDERATION FOR THE OTHER PARTY EXECUTING THIS AGREEMENT.
5.13 Proprietary Information .
(a) The Company acknowledges that all Proprietary Information provided or created by the Agent in rendering Services shall be the sole and exclusive property of the Agent. Each Party agrees to honor the other Party’s copyrights, patents, and trademarks, and will not use the other Party’s Proprietary Information without the other Party’s prior written consent except in the course of rendering or receiving Services hereunder.
(b) The Company acknowledges and agrees that all writings, works of authorship, technology, inventions, discoveries, ideas and other work product of any nature whatsoever, that are created, prepared, produced, authored, edited, amended, conceived or reduced to practice by Agent or any of its employees, either individually or jointly with others, during the Term and relating in any way to the Services or the business or contemplated business, research or development of the Agent (regardless of when or where the work product is prepared or whose equipment or other resources is used in preparing the same), all printed, physical and electronic copies, all improvements, rights and claims related to the foregoing, and any other tangible embodiments thereof (collectively, “ Work Product ”), as well as any and all rights in and to copyrights, trade secrets, trademarks (and related goodwill), mask works, patents and other intellectual property rights therein arising in any jurisdiction throughout the world and all related rights of priority under international conventions with respect thereto, including all pending and future applications and registrations therefor, and continuations, divisions, continuations-in-part, reissues, extensions and renewals thereof (collectively, “ Intellectual Property Rights ”), shall be the sole and exclusive property of the Agent. The Company hereby
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irrevocably assigns to the Agent, for no additional consideration, the Company Group’s entire right, title and interest in and to all Work Product and Intellectual Property Rights therein, including the right to sue, counterclaim and recover for all past, present and future infringement, misappropriation or dilution thereof, and all rights corresponding thereto throughout the world. Nothing contained in this Agreement shall be construed to reduce or limit the Agent’s rights, title or interest in any Work Product or Intellectual Property Rights so as to be less in any respect than the Agent would have had in the absence of this Agreement.
5.14 Confidentiality . Except as specifically provided in this Agreement, the Parties agree that any and all information that is not otherwise publicly available (“ Confidential Information ”) communicated by one Party or its employees or representatives (the “ Disclosing Party ”) to the other Party or its employees or representatives (the “ Receiving Party ”), whether disclosed before or after the Effective Date, (a) shall be treated as confidential, proprietary, and trade secret information of Disclosing Party, (b) shall be held in strict confidence by the Receiving Party, (c) shall be used only for purposes of this Agreement by the Receiving Party, and (d) that no Confidential Information, including the provisions of this Agreement and the Proprietary Information, shall be disclosed by the Receiving Party, its affiliates, subsidiaries or contractors, and each of their respective directors, officers, employees, consultants, agents, or representatives (“ Representatives ”), without the prior written consent of the Disclosing Party, except as may be necessary by reason of legal, accounting or regulatory requirements beyond the reasonable control of the Receiving Party. The Receiving Party shall limit access to the Disclosing Party’s Confidential Information to only those of its Representatives that are bound by obligations that are substantially similar to those contained in this Section 5.14 . The Receiving Party shall safeguard Confidential Information with at least the same degree of care (which shall always be at least a reasonable amount of care) that it uses to safeguard its own confidential, proprietary, and trade secret information of a similar nature. This Section 5.14 shall not apply to information (i) which is in the public domain (other than through its unauthorized disclosure by Receiving Party or its Representatives), (ii) which the Receiving Party legitimately had in its possession prior to receiving it from the Disclosing Party, (iii) which the Receiving Party legitimately obtained from a Third Party who rightfully acquired such information, or (iv) which the Receiving Party independently developed without reference to the information received from the Disclosing Party. If the Receiving Party must disclose any Confidential Information pursuant to applicable Law or regulation or by operation of Law, the Receiving Party may disclose only such minimum Confidential Information as is legally required; provided that the Receiving Party shall provide reasonable notice to the Disclosing Party of such requirement and a reasonable opportunity to object to such disclosure. In any event, the Receiving Party shall be fully liable for any breach of this Agreement by its Representatives and agrees, at its sole expense, to take all reasonable measures to restrain its Representatives from any prohibited or unauthorized disclosure or use of the Disclosing Party’s Confidential Information. This Section 5.14 shall survive the termination of this Agreement for a period of one (1) year.
5.15 Further Assurances . The Parties agree to execute such additional instruments, agreements and documents, and to take such other actions, as may be necessary to effect the purposes of this Agreement.
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5.16 Advice of Counsel . The Parties have read this Agreement and have voluntarily executed this Agreement. In making this Agreement, the Parties have obtained the advice of legal counsel and agree that this Agreement is the product of arms-length negotiations. This Agreement was drafted by counsel for the Parties and there shall not be a presumption or construction against any Party; each Party hereby expressly waiving the doctrine of contra proferentem with respect to the interpretation and application of this Agreement.
5.17 Counterparts . This Agreement and any amendment, waivers, consents or supplements hereto or in connection herewith may be executed by one or more of the Parties on any number of separate counterparts, by facsimile or email, and all of said counterparts taken together shall be deemed to constitute one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signatures are physically attached to the same document. A facsimile or portable document format (“pdf”) signature page shall constitute an original for purposes hereof.
[SIGNATURES TO FOLLOW]
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IN WITNESS WHEREOF, the Parties have caused this Management Services Agreement to be executed by a duly authorized officer, to be effective as of the Effective Date first written above.
| AGENT: | ||
|
ALTA MESA HOLDINGS, LP a Texas limited partnership |
||
| By: Alta Mesa Holdings GP, LLC, its general partner | ||
| By: |
/s/ Harlan H. Chappelle |
|
| Name: | Harlan H. Chappelle | |
| Title: | President and Chief Executive Officer | |
| Address : | 15021 Katy Freeway | |||
| Suite 400 | ||||
| Houston, TX 77094 | ||||
| Attn: | Harlan H. Chappelle | |||
| Phone: | (281) 530-0991 | |||
| Email: | hchappelle@altamesa.net | |||
Signature Page to Management Services Agreement
| COMPANY: | ||
|
HIGH MESA INC. a Delaware corporation |
||
| By: |
/s/ Harlan H. Chappelle |
|
| Name: | Harlan H. Chappelle | |
| Title: | President and Chief Executive Officer | |
| Address : | ||||
| Attn: Harlan H. Chappelle | ||||
| Phone: (281) 530-0991 | ||||
| Email: hchappelle@altamesa.net | ||||
| with copies to: | ||||
| Address : | HPS Investment Partners, LLC | |||
| 40 West 57th Street 33rd Floor | ||||
| New York, NY 10019 | ||||
| Attn: Jeff Hostettler | ||||
| Phone: (212) 287-6747 | ||||
| Email: jeff.hostettler@hpspartners.com | ||||
| and | ||||
| Address: | Bayou City Energy Management, LLC | |||
| 1201 Louisiana Street, Suite 3308 | ||||
| Houston, TX 77002 | ||||
| Attn: William W. McMullen | ||||
| Phone: (713) 400-8210 | ||||
| Email: will@bayoucityenergy.com | ||||
Signature Page to Management Services Agreement
Annex I
Insurance
|
1. General Liability |
$1,000,000/occurrence | |
| $2,000,000 policy aggregate | ||
| $1,000,000 Employee benefits | ||
|
2. Umbrella Liability |
$74,000,000 occurrence/aggregate | |
|
3. Excess Liability |
$51,000,000 occurrence/aggregate | |
|
4. Workers Compensation |
Workers Comp: Statutory
Employers Liability: $1,000,000 |
|
|
5. Commercial Auto |
Liability$1,000,000 combined single limit | |
|
6. Oil Spill Financial Responsibility |
$35,000,000 per occurrence | |
|
7. Excess Care Custody & Control |
$35,000,000 per occurrence | |
|
8. Commercial Property |
Building/Contents Value | |
|
9. Energy Package |
||
|
A. Control of Well |
||
|
Drilling Wells |
||
|
Area 3 Wells |
50,000,000 | |
|
Wells with CWC AFE greater than $10,000,000 excluding Area 3 and Vertical Oklahoma Wells |
$40,000,000 | |
|
Wells with CWC AFE greater than $7,000,000 but not exceeding $10,000,000 excluding Area 3 and Vertical Oklahoma Wells |
$30,000,000 | |
|
Wells with CWC AFE greater than $4,000,000 but not exceeding $7,000,000 excluding Area 3 and |
||
|
Vertical Oklahoma Wells |
$20,000,000 | |
|
Wells with CWC AFE not exceeding $4,000,000 excluding Area 3 but including |
||
|
Vertical Oklahoma Wells |
$15,000,000 | |
|
All Other Wells |
||
|
Area 3 Wells |
$50,000,000 | |
|
CL&F B-1 and CL&F C-1 Wells |
$20,000,000 | |
|
Area 2 Wet |
$20,000,000 | |
|
Onshore, but excluding Vertical |
||
|
Oklahoma Wells |
$10,000,000 | |
|
Vertical Oklahoma Wells |
$5,000,000 | |
|
Care Custody and Control |
$25,000,000 | |
|
B. Offshore Property |
||
|
Platforms, Caissons, Equipment - Pre 2000 |
$370,000 |
|
Platforms, Caissons, Equipment - Post 2000 |
$2,230,000 | |
|
Pipelines |
$400,000 | |
|
Oil in Storage |
$500,000 | |
|
Compressors |
$1,351,875 | |
|
Total Loss Only - Platforms |
$9,066,125 | |
|
C. Onshore Property |
||
|
General Property |
$14,783,600 | |
|
Contractors Equipment |
$1,873,000 | |
|
Kingfisher SWD Facilities |
$5,000,000 | |
|
Idaho Treating Facility |
$10,784,493 | |
|
Compressors |
$20,023,003 | |
|
D. Business Interruption |
||
|
Idaho Treating Facility |
$15,000,000 |
Annex II
Agent Service Employees
|
Employee |
Function |
FTE% | ||||
|
DIRECT ADMINISTRATION AND OPERATIONS |
||||||
|
BHUIYAN, MOFAZZAL H |
Engineering |
100 | % | |||
|
BROWN, TOMMY |
Engineering |
100 | % | |||
|
COLOTTA, WENDY F |
Engineering |
100 | % | |||
|
DANFORD, MATTHEW D |
Engineering |
100 | % | |||
|
ERSKINE, RODNEY |
Engineering |
100 | % | |||
|
GORE, MITCHELL EUGENE |
Engineering |
100 | % | |||
|
HAYES, DALE R |
Engineering |
100 | % | |||
|
HYNES, CHRISTA R |
Engineering |
100 | % | |||
|
JAMESON, MAX |
Engineering |
100 | % | |||
|
JANIK, JEFFREY |
Engineering |
100 | % | |||
|
JOHNSON, JERRY |
Engineering |
100 | % | |||
|
KASSAB, DIANE M |
Engineering |
100 | % | |||
|
KENT, JENNIE L |
Engineering |
100 | % | |||
|
KOSIER, KLINTON R |
Engineering |
100 | % | |||
|
LOVE, GARLAND L |
Engineering |
100 | % | |||
|
MANNING, DEBRA A |
Engineering |
100 | % | |||
|
NATH, JOSHUA A |
Engineering |
100 | % | |||
|
OREILLY, DALE S |
Engineering |
100 | % | |||
|
PULLEN, SCOTT |
Engineering |
100 | % | |||
|
SMITH, KATHRYN R |
Engineering |
100 | % | |||
|
SMITH, WENDELL |
Engineering |
100 | % | |||
|
WEIBEL, BENNY j |
Engineering |
100 | % | |||
|
BELVEAL, DONALD |
Florida Field Operations |
100 | % | |||
|
CAWTHON JR, ROBERT A |
Florida Field Operations |
100 | % | |||
|
ELLIS, JAMES |
Florida Field Operations |
100 | % | |||
|
LECCESE, MYLES |
Florida Field Operations |
100 | % | |||
|
LEE, GUY M |
Florida Field Operations |
100 | % | |||
|
LEE, JOSEPH |
Florida Field Operations |
100 | % | |||
|
PUGH, RONALD E |
Florida Field Operations |
100 | % | |||
|
SIMPSON, TONEY |
Florida Field Operations |
100 | % | |||
|
SLADE, TERRY |
Florida Field Operations |
100 | % | |||
|
STRENGTH, BILLIE |
Florida Field Operations |
100 | % | |||
|
STRENGTH, RUFUS |
Florida Field Operations |
100 | % | |||
|
STRENGTH, TERRY |
Florida Field Operations |
100 | % | |||
|
WATSON JR, DENNIS L |
Florida Field Operations |
100 | % | |||
|
WETZEL, MICHAEL |
Florida Field Operations |
100 | % | |||
|
KRAMBERGER, JOHN |
Geology |
100 | % | |||
|
LUECK, EVERETT |
Geology |
100 | % | |||
|
MCMENNAMY, MICHAEL H |
Geology |
100 | % | |||
|
YANTOSCA, JOHN |
Geology |
100 | % | |||
|
MOORE III, WADE L |
Land |
100 | % | |||
|
PEPPER, DAVID S |
Land |
100 | % | |||
|
WIGHT, DAVID |
Land |
100 | % | |||
|
ZATARAIN, LEE |
Land |
100 | % | |||
|
DAVIS, JEREMY T |
Little Willow Field Operations |
100 | % | |||
|
DUDLEY, JOSHUA CLAYTON |
Little Willow Field Operations |
100 | % | |||
|
HALL, ADAM SCOTT |
Little Willow Field Operations |
100 | % | |||
|
JAGGERS, MARK WILLIAM |
Northwest Gas Management |
100 | % | |||
|
MEYER, CHRISTIE LYNN |
Northwest Gas Management |
100 | % | |||
|
NEGRON, PHILLIP J |
Northwest Gas Management |
100 | % | |||
|
TAYLOR III, AUSTIN |
Northwest Gas Management |
100 | % | |||
|
HARRIS, PATRICK |
Northwest Gas Plant |
100 | % | |||
|
HARTUNG, TYLER |
Northwest Gas Plant |
100 | % | |||
|
HENDRICKS, WILLIAM |
Northwest Gas Plant |
100 | % | |||
|
JENSEN, TAYLOR WILLIAM |
Northwest Gas Plant |
100 | % | |||
|
JOHANEK, DANIEL P |
Northwest Gas Plant |
100 | % | |||
|
JOHNSON, EDWARD CHARLES |
Northwest Gas Plant |
100 | % | |||
|
BACCIGALOPI, MICHAEL J |
Weeks Island Field Operations |
100 | % | |||
|
BONSALL, LANCE PAUL |
Weeks Island Field Operations |
100 | % | |||
|
BOUDREAUX, KEATON KYLE |
Weeks Island Field Operations |
100 | % | |||
|
BRIDGES, CHADDUN |
Weeks Island Field Operations |
100 | % | |||
|
CLARK, CECIL JOSEPH |
Weeks Island Field Operations |
100 | % | |||
|
CLEMENT, DAVID |
Weeks Island Field Operations |
100 | % | |||
|
Employee |
Function |
FTE% | ||||
|
DERISE, ROSS SIDNEY |
Weeks Island Field Operations |
100 | % | |||
|
DETIVEAUX, JAIME J |
Weeks Island Field Operations |
100 | % | |||
|
DOXEY, CHRISTOPHER C |
Weeks Island Field Operations |
100 | % | |||
|
GEORGE, RAYMOND |
Weeks Island Field Operations |
100 | % | |||
|
HILL, DALE |
Weeks Island Field Operations |
100 | % | |||
|
KIDDER, BROCK L |
Weeks Island Field Operations |
100 | % | |||
|
LABOVE, CHARLES EVANS |
Weeks Island Field Operations |
100 | % | |||
|
LANDRY, GERRIT G |
Weeks Island Field Operations |
100 | % | |||
|
LEBLANC, TODD |
Weeks Island Field Operations |
100 | % | |||
|
MCDANIEL, JEREMY CHARLES |
Weeks Island Field Operations |
100 | % | |||
|
MEYERS, TAMMY M |
Weeks Island Field Operations |
100 | % | |||
|
MHIRE, JOSEPH W |
Weeks Island Field Operations |
100 | % | |||
|
MUDD, KELVIN T |
Weeks Island Field Operations |
100 | % | |||
|
MUFFOLETTO, MARY IRMA |
Weeks Island Field Operations |
100 | % | |||
|
NUNEZ, DANIEL G |
Weeks Island Field Operations |
100 | % | |||
|
OZENNE JR, WALLACE |
Weeks Island Field Operations |
100 | % | |||
|
RUTHERFORD, JAMES |
Weeks Island Field Operations |
100 | % | |||
|
STURLESE, ANTHONY C |
Weeks Island Field Operations |
100 | % | |||
|
STURLESE, JOSEPH |
Weeks Island Field Operations |
100 | % | |||
|
INDIRECT ADMINISTRATION AND OPERATIONS |
||||||
|
ARNOLD, MELISSA RENEE |
Accounting |
11 | % | |||
|
BARROW, MARLA |
Accounting |
11 | % | |||
|
BLAIR, WANDA MOREY |
Accounting |
11 | % | |||
|
DALE, RICHARD S |
Accounting |
11 | % | |||
|
ETHRIDGE, MITCHELL C |
Accounting |
11 | % | |||
|
GAITHER, CHELSEA |
Accounting |
11 | % | |||
|
GORE, CAROL LOUISE |
Accounting |
11 | % | |||
|
GULIZIA, JESSICA MICHELLE |
Accounting |
11 | % | |||
|
JACOBS, PATRICIA ELAINE |
Accounting |
11 | % | |||
|
KALISH, SCOTT S |
Accounting |
11 | % | |||
|
LANCON, LINDA MARIE |
Accounting |
11 | % | |||
|
LITTEKEN, ADELA S |
Accounting |
11 | % | |||
|
LUTKENHAUS, CHARLENE A |
Accounting |
11 | % | |||
|
MEDINA, DIANA DIZON |
Accounting |
11 | % | |||
|
MUNGIA, RICHARD |
Accounting |
11 | % | |||
|
NGO, HANG |
Accounting |
11 | % | |||
|
PANACCIONE, ROBERT J |
Accounting |
11 | % | |||
|
RIOS, REYNALDO |
Accounting |
11 | % | |||
|
SHINN, SHANN K |
Accounting |
11 | % | |||
|
SMITH, RONALD J |
Accounting |
11 | % | |||
|
SPAIN, AMY |
Accounting |
11 | % | |||
|
TEMPLE, DANIEL E |
Accounting |
11 | % | |||
|
THOMAS, ASHLEY |
Accounting |
11 | % | |||
|
TRAN, ANTHONY M |
Accounting |
11 | % | |||
|
VALENTINE, SCOTT RICK |
Accounting |
11 | % | |||
|
WONG, MICHELLE |
Accounting |
11 | % | |||
|
COWAND, SCOTT |
Acquisitions & Divestitures |
6 | % | |||
|
RICKS, RICHARD |
Acquisitions & Divestitures |
6 | % | |||
|
BALDAUFF, JOHN J |
Engineering |
9 | % | |||
|
BREAUX, ALLEN D |
Engineering |
9 | % | |||
|
COLE JR, HOMER E |
Engineering |
9 | % | |||
|
COLE, AMY LYNN |
Engineering |
9 | % | |||
|
CORSEY, GREGORY |
Engineering |
9 | % | |||
|
DELOSANGELESMARTINEZ, MARIA |
Engineering |
9 | % | |||
|
HUSSER, ALEXIS S |
Engineering |
9 | % | |||
|
JOHNSON, JUSTIN LEE |
Engineering |
9 | % | |||
|
KEY, DONNA LYNN |
Engineering |
9 | % | |||
|
LOUDERMAN, RONDA G |
Engineering |
9 | % | |||
|
MCCLURE, DAVID |
Engineering |
9 | % | |||
|
MOORE JR, WADE LEVI |
Engineering |
9 | % | |||
|
NOYNAERT, JARED MICHAEL |
Engineering |
9 | % | |||
|
SHORT, TAMARA L |
Engineering |
9 | % | |||
|
WALKER, ERIKA A |
Engineering |
9 | % | |||
|
WON, SUYOUN |
Engineering |
9 | % | |||
|
CHAPPELLE, HARLAN |
Executive |
6 | % | |||
|
ELLIS, MICHAEL |
Executive |
6 | % | |||
|
FREW, MARCIA |
Executive |
6 | % | |||
|
MCCABE, MICHAEL A |
Executive |
6 | % | |||
|
Employee |
Function |
FTE% | ||||
|
ALSARRAF, TAMARA |
Finance | 11 | % | |||
|
BRIDGES, DUSTIN WARREN |
Finance | 11 | % | |||
|
COOK, JENNIFER LYNNE |
Geology | 9 | % | |||
|
KOSIER, KARL |
Geology | 9 | % | |||
|
SMITH, DAVID |
Geology | 9 | % | |||
|
ADAMS, SUELLEN C |
Human Resources | 11 | % | |||
|
HAYES, ANGELA S |
Human Resources | 11 | % | |||
|
MARTIN, SHANNON LEIGH |
Human Resources | 11 | % | |||
|
LY, VI VAN |
Information Technology | 11 | % | |||
|
REYNOLDS, CHARLES ERIC |
Information Technology | 11 | % | |||
|
SERR, HUNTER W |
Information Technology | 11 | % | |||
|
SPARKS-ERICKSON, CHERYL |
Information Technology | 11 | % | |||
|
TIPPETT, DAVID WAYNE |
Information Technology | 11 | % | |||
|
WINGERSON JR, DANIEL D |
Information Technology | 11 | % | |||
|
WEAVER, LANCE L |
Investor Relations | 11 | % | |||
|
MURRELL, FRANK |
Land | 9 | % | |||
|
ARD, DEBRA J |
Land Administration | 11 | % | |||
|
BIGHAM, PATRICIA A |
Land Administration | 11 | % | |||
|
BRANDT, MARSHAL STEPHEN |
Land Administration | 11 | % | |||
|
BURNHAM, LINDA G |
Land Administration | 11 | % | |||
|
CATHEY, BELINDA J |
Land Administration | 11 | % | |||
|
EBEN, JOYCE SHARON |
Land Administration | 11 | % | |||
|
GAY, SHERRY ELLEN |
Land Administration | 11 | % | |||
|
GENTRY, CATHERINE O |
Land Administration | 11 | % | |||
|
GREER, SONYA LORRIANE |
Land Administration | 11 | % | |||
|
GRIFFIN, SANDY LYNN |
Land Administration | 11 | % | |||
|
HARRIS, SHERRI LOCHABAY |
Land Administration | 11 | % | |||
|
JOHNSON, KYMBERLEY DIANE |
Land Administration | 11 | % | |||
|
JOHNSON, LINDA JORDAN |
Land Administration | 11 | % | |||
|
JOY, MANDY MICHELLE |
Land Administration | 11 | % | |||
|
KEITH, LA WANDA JEAN |
Land Administration | 11 | % | |||
|
KELLY, LIZBETH |
Land Administration | 11 | % | |||
|
MCCLENDON, NELLIE VIRGINIA |
Land Administration | 11 | % | |||
|
PLEDGER JR, ROBERT ALAN |
Land Administration | 11 | % | |||
|
RAMOS, CHRISTY |
Land Administration | 11 | % | |||
|
RODGERS, BARBARA E |
Land Administration | 11 | % | |||
|
STEELE, CAROL M |
Land Administration | 11 | % | |||
|
TAYLOR, MARK D |
Land Administration | 11 | % | |||
|
VAUGHN, STEPHANIE L |
Land Administration | 11 | % | |||
|
VELTMAN, VANESSA V |
Land Administration | 11 | % | |||
|
WALKER, TIMOTHY NICHOLAS |
Land Administration | 11 | % | |||
|
WESTFAHL, SHARYN KAYE |
Land Administration | 11 | % | |||
|
PHILLIPS, MICHAEL A |
Marketing | 11 | % | |||
|
CUTLER, CATRENA P |
Production | 11 | % | |||
|
HANEY, GERALD ROBERT |
Production | 11 | % | |||
|
LOWMAN, YASAMAN A |
Production | 11 | % | |||
|
SMITH, CURTIS GLEN |
Production | 11 | % | |||
|
STALL, REBECCA |
Production | 11 | % | |||
|
WALTERS, ELISA HUGO |
Production | 11 | % | |||
|
DESCAMP, KAREN ANNETTE |
Purchasing | 11 | % | |||
|
EDWARDS, KRYSTAL MARIE |
Purchasing | 11 | % | |||
|
HEARD, DARAY A |
Purchasing | 11 | % | |||
|
MCKEAN, DANIEL J |
Purchasing | 11 | % | |||
|
MOAK JR, TACITUS WESLEY |
Purchasing | 11 | % | |||
|
NOVAK, JEFFERY |
Purchasing | 11 | % | |||
|
HEBERT, DEBBIE |
Records Management | 11 | % | |||
|
WALKER-OSTERTAG, JENNIFER KATHL |
Records Management | 11 | % | |||
|
ALBERS, JOHN AUGUST |
Reservoir Engineering | 6 | % | |||
|
BRUNS, SIMMONS AARON |
Reservoir Engineering | 6 | % | |||
|
FLORES, TAMI Y |
Reservoir Engineering | 6 | % | |||
|
TURNER, TIM |
Reservoir Engineering | 6 | % | |||
|
JACKSON, SUSAN C |
Risk Management | 11 | % | |||
|
MARTINEZ, RACHEL |
Risk Management | 11 | % | |||
Exhibit 10.10
Execution Version
AMENDED AND RESTATED VOTING AGREEMENT
This AMENDED AND RESTATED VOTING AGREEMENT (this “ Agreement ”) is made and entered into effective as of February 9, 2018 (the “ Effective Date ”) by and among Alta Mesa Holdings GP, LLC, a Delaware limited liability company (the “ General Partner ”), BCE-AMH Holdings, LLC, a Delaware limited liability company (“ BCE-AMH ”), BCE-MESA Holdings, LLC, a Delaware limited liability company (“ BCE-MESA ” and together with BCE-AMH, “ Bayou City ”), (i) Mezzanine Partners II Delaware Subsidiary, LLC, (ii) Offshore Mezzanine Partners Master Fund II, L.P., (iii) Institutional Mezzanine Partners II Subsidiary, L.P., (iv) AP Mezzanine Partners II, L.P., (v) The Northwestern Mutual Life Insurance Company, (vi) The Northwestern Mutual Life Insurance Company For its Group Annuity Separate Account, (vii) Northwestern Mutual Capital Strategic Equity Fund III, LP, (viii) KCK-AMIH, Ltd., (ix) United Insurance Company of America, and (x) Jade Real Assets Fund, L.P. (the entities in clauses (i) through (x), collectively, “ HPS ”), Michael E. Ellis, an individual (“ Ellis ”), Harlan H. Chappelle, an individual (“ Chappelle ”, and together with Bayou City, HPS and Ellis, the “ Existing Owners ”) and SRII Opco, LP, a Delaware limited partnership (“ SRII Opco ”). The General Partner, Bayou City, HPS, Ellis, Chappelle and SRII Opco are each referred to herein individually as a “ Party ” and collectively as the “ Parties ”. Capitalized terms used and not otherwise defined in this Agreement shall have the meanings assigned to them in the LLC Agreement (as defined below).
WHEREAS, prior to the Effective Date, voting control of the General Partner was governed by that certain Voting Agreement dated as of August 16, 2017, by and among the Existing Owners and High Mesa Holdings, LP, a Delaware limited partnership (“ HMH LP ”) (the “ Original Voting Agreement ”);
WHEREAS, SRII Opco and the Existing Owners constitute all of the Class B Members of the General Partner, pursuant to the terms of that certain Sixth Amended and Restated Limited Liability Company Agreement of the General Partner by and between SRII Opco and the Existing Owners, dated February 9, 2018 attached hereto as Exhibit A (as amended or otherwise modified from time to time, the “ LLC Agreement ”);
WHEREAS, pursuant to the LLC Agreement, the holders of the Class B Units collectively have one hundred percent (100%) of the voting power held by the Members of the General Partner;
WHEREAS, SRII Opco holds ninety percent (90%) of Class B Units and the Existing Owners collectively hold ten percent (10%) of the Class B Units;
WHEREAS, the Parties now desire to amend and restate the Original Voting Agreement in its entirety to reflect that voting control of the General Partner will be vested in SRII Opco; and
WHEREAS, the Class B Members desire to enter into this Agreement to form a “group” (within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended) with, and to vest 100% voting control of the General Partner in, SRII Opco.
NOW, THEREFORE, in consideration of the mutual promises contained herein and for other good and valuable consideration, the receipt and sufficiency of which consideration are hereby acknowledged, the Parties hereby agree as follows:
ARTICLE I
VOTING
1.1 Units Subject to Agreement . Each Existing Owner agrees that all Class B Units that the Existing Owner purchases, acquires the right to vote with respect to or otherwise acquires beneficial ownership of, including any equity securities issued on, or in exchange for, any of the Class B Units held by the Existing Owner by reason of any distribution, combination, split, or the like with respect to such Class B Units, after the execution of this Agreement shall be subject to the terms of this Agreement in all respects. In addition, each Existing Owner agrees that should it Transfer to any Person any of its right, title or interest in and to its Class B Units, the right, title or interest to the Class B Units so Transferred shall be subject to this Agreement.
1.2 Agreement to Vote Units . Each Existing Owner hereby agrees, notwithstanding anything to the contrary set forth in the LLC Agreement, to vote each of its Class B Units as directed by SRII Opco at any meeting of Members on each matter with respect to which that Existing Owner’s Class B Units shall be entitled to vote, or in lieu of any such meeting, to give its written consent under the LLC Agreement.
1.3 Irrevocable Proxy . On the Effective Date, each Existing Owner hereby appoints SRII Opco its proxy and attorney-in-fact, with full power of substitution and resubstitution, to vote or act by written consent during the term of this Agreement with respect to its Class B Units in accordance with Section 1.2 . This proxy and power of attorney is given to secure the performance of the duties of each respective Existing Owner under this Agreement. This proxy and power of attorney granted by each respective Existing Owner shall be irrevocable during the term of this Agreement, shall be deemed to be coupled with an interest sufficient in law to support an irrevocable proxy and shall revoke any and all prior proxies granted by an Existing Owner with respect to its Class B Units. The power of attorney granted by each respective Existing Owner herein is a durable power of attorney and shall survive the dissolution, bankruptcy, death or incapacity of the applicable Existing Owner. The proxy and power of attorney granted hereunder shall terminate upon the termination of this Agreement.
1.4 No Voting Trusts or Other Arrangement . Each Existing Owner agrees that it will not, and will not permit any entity under its control to, deposit any of its Class B Units in a voting trust, grant any proxies with respect to its Class B Units or, except as otherwise contemplated by this Agreement, subject any of its Class B Units to any arrangement with respect to the voting of such Class B Units.
2
ARTICLE II
EFFECTIVE; TERMINATION
This Agreement shall become effective as of the Effective Date and this Agreement shall terminate and no longer be of force and effect with respect to an Existing Owner upon the occurrence of any of the following events:
(i) a written notice executed by SRII Opco evidencing its determination to terminate the Agreement; or
(ii) the date the Existing Owners and the entities under their respective control no longer own any Class B Units.
ARTICLE III
MISCELLANEOUS
3.1 Legend . Each Existing Owner agrees that each certificate representing each of its Class B Units shall be inscribed with a legend substantially in the following form:
THE MEMBERSHIP INTERESTS EVIDENCED HEREBY ARE SUBJECT TO AN AMENDED AND RESTATED VOTING AGREEMENT DATED AS OF FEBRUARY 9, 2018, A COPY OF WHICH IS ON FILE AND MAY BE INSPECTED AT THE PRINCIPAL OFFICE OF THE GENERAL PARTNER DURING ITS REGULAR BUSINESS HOURS. ANY PERSON ACCEPTING ANY INTEREST IN SUCH MEMBERSHIP INTEREST SHALL THEREBY BE DEEMED TO HAVE AGREED TO AND SHALL THEREAFTER BE BOUND BY ALL THE PROVISIONS OF SUCH AMENDED AND RESTATED VOTING AGREEMENT.
3.2 Authorization . Each Existing Owner represents and warrants to each of the other Parties that (a) it has not, prior to the date of this Agreement, executed or delivered any proxy or entered into any other agreement or similar arrangement, executed or delivered any proxy or entered into any other voting agreement or similar arrangement with respect to its Class B Units, and (b) it has full power and capacity to execute, deliver and perform this Agreement, which has been duly executed and delivered by, and evidences the valid and binding obligation of, that Existing Owner, enforceable in accordance with its terms.
3.3 Specific Enforcement . Each Party acknowledges and agrees that money damages would not be an adequate remedy for any breach of the provisions of this Agreement and that any Party may, in such Party’s sole discretion and in addition to or in lieu of any other remedies available to such Party at law or in equity, apply to any court of competent jurisdiction for specific performance or injunctive relief in order to enforce or prevent any violation of the provisions of this Agreement.
3.4 Amendments and Waivers . This Agreement or any provision hereof may be amended and the observance of any provision hereof may be waived (either generally or in a particular instance and either retroactively or prospectively) only by an instrument in writing signed by each Party. The failure of any Party to enforce any provision of this Agreement shall in no way be construed as a waiver of such provision and shall not affect the right of such Party thereafter to enforce each and every provision of this Agreement.
3
3.5 Severability . This Agreement is intended to be valid and effective under any applicable law and, to the extent permissible under applicable law, shall be construed to avoid violation of or invalidity under any applicable law. Should any provisions of this Agreement become invalid, illegal, or unforeseeable under any applicable law, the other provisions of this Agreement shall be reformed, construed and enforced so as to give full force and effect to the original intent of the Parties.
3.6 Successor and Assigns . This Agreement, including, without limitation, any amendment or waiver of the observance thereof effected in accordance with Section 3.4 , shall inure, to the benefit of and be binding upon the Parties and their respective heirs, successors, assigns, administrators, executors, and other legal representatives; provided that no Existing Owner may assign, delegate or otherwise transfer this Agreement or any of its rights or obligations hereunder without the prior consent of the General Partner and SRII Opco in writing, and any such purported assignment, delegation or transfer by that Existing Owner without such consent shall be void. Each Existing Owner acknowledges and agrees that the General Partner will not permit the transfer of all or any portion of its Class B Units on its books or the issuance of a new certificate representing all or any portion of its Class B Units unless and until the person to whom such security is to be transferred shall have executed a written agreement, satisfactory in form and substance to the General Partner and SRII Opco, pursuant to which such person agrees to be bound by all the provisions hereof.
3.7 Counterparts . This Agreement may be executed in any number of counterparts with the same effect as if the signatures to each counterpart were upon the same instrument.
3.8 Notice . Any and all notices, requests, consents or other communications permitted or required to be given under the terms of this Agreement shall be in writing and shall be deemed received (a) if given by electronic mail with acknowledgement of receipt requested or received, when transmitted on a business day and during normal business hours of the recipient, and otherwise on the next business day following transmission, (b) if given by certified mail, return receipt requested, postage prepaid, three (3) business days after being deposited in the United States mails and (c) if given by Federal Express service or other means, when received or personally delivered. Notices shall be sent to the addresses and facsimile numbers of the Parties set forth on Exhibit B hereto or at such other address as such Party may designate by advance written notice to the other Parties hereto.
3.9 Additional Documentation . Each Existing Owner agrees to execute and deliver such additional documents and take such additional actions as may be requested by any other Party to carry out the intent of this Agreement.
3.10 Governing Law . This Agreement and any claim, controversy or dispute arising under or related in any way to this Agreement, the transactions leading to this Agreement or contemplated hereby, and/or the interpretation and enforcement of the rights and duties of the Parties or related in any way to the foregoing, shall be governed by and construed in accordance with the internal, substantive laws of the State of Delaware applicable to agreements entered into and to be performed solely within such state without giving effect to the principles of conflict of laws thereof.
4
3.11 CONSENT TO JURISDICTION AND SERVICE OF PROCESS . ANY PROCEEDING ARISING UNDER OR RELATED IN ANY WAY TO THIS AGREEMENT, AND/OR THE INTERPRETATION AND ENFORCEMENT OF THE RIGHTS AND DUTIES OF THE PARTIES HEREUNDER OR RELATED IN ANY WAY TO THE FOREGOING MAY ONLY BE INSTITUTED IN THE STATE OR FEDERAL COURTS OF THE STATE OF DELAWARE AND EACH PARTY WAIVES ANY OBJECTION WHICH SUCH PARTY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING, AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH PROCEEDING. SERVICE OF PROCESS WITH RESPECT THERETO MAY BE MADE UPON A PARTY HERETO BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH PARTY AT ITS ADDRESS AS PROVIDED ON EXHIBIT B HERETO.
3.12 Permitted Holder Representation . Each of HPS and Bayou City hereby represents and warrants that each of HPS and Bayou City is, respectively, a “Permitted Holder” (as such term is defined in the Indenture dated as of December 8, 2016 among Alta Mesa Holdings, LP, Alta Mesa Finance Services Corp., the subsidiary guarantors party thereto and U.S. Bank, National Association as trustee, as amended, restated or modified from time to time (the “ Indenture ”)) pursuant to the terms of the Indenture.
3.13 WAIVER OF JURY TRIAL . EACH PARTY HERETO HEREBY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (B) EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 3.13 .
3.14 No Third Party Beneficiaries . Nothing herein expressed or implied is intended to confer upon any person, other than the Parties hereto or their respective permitted assigns, successors, heirs and legal representatives, any rights, remedies, obligations or liabilities under or by reason of this Agreement.
(Signature page follows)
5
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.
| GENERAL PARTNER: | ||
|
ALTA MESA HOLDINGS GP, LLC , a Delaware limited liability company |
||
| [Solely for purposes of enforcing Sections 3.1 and 3.6 of this Agreement] | ||
| By: |
/s/ Harlan H. Chappelle |
|
| Harlan H. Chappelle, | ||
| President and Chief Executive Officer | ||
| SRII OPCO : | ||
| SRII OPCO, LP | ||
| a Delaware limited partnership | ||
| By: | SRII Opco GP, LLC, | |
| a Delaware limited liability company, | ||
| its General Partner | ||
| By: |
/s/ Stephen S. Coats |
|
| Name: Stephen S. Coats | ||
| Title: Secretary | ||
| HMH LP: | ||
|
HIGH MESA HOLDINGS, LP , a Delaware limited partnership |
||
| [Solely to evidence its approval of this amendment and restatement of the Original Voting Agreement in accordance with Section 3.4 thereof] | ||
| By: | High Mesa Holdings GP, LLC, | |
| a Delaware limited liability company, | ||
| its General Partner | ||
| By: |
/s/ Harlan H. Chappelle |
|
| Harlan H. Chappelle, | ||
| President and Chief Executive Officer | ||
Signature Page to the
A&R Voting Agreement
Signatures Continue on Next Page.
7
Signatures Continue on Next Page.
8
Signatures Continue on Next Page.
9
| KCK-AMIH, LTD. | ||
| By: | HPS Investment Partners, LLC, as attorney in fact | |
| By: |
/s/ Don Dimitrievich |
|
| Name: Don Dimitrievich | ||
| Title: Managing Director | ||
| UNITED INSURANCE COMPANY OF AMERICA | ||
| By: | HPS Investment Partners, LLC, as attorney-in-fact | |
| By: |
/s/ Don Dimitrievich |
|
| Name: Don Dimitrievich | ||
| Title: Managing Director | ||
| JADE REAL ASSETS FUND, L.P. | ||
| By: | HPS Investment Partners, LLC | |
| Its: | Investment manager | |
| By: |
/s/ Don Dimitrievich |
|
| Name: Don Dimitrievich | ||
| Title: Managing Director | ||
| /s/ Michael E. Ellis | ||
|
MICHAEL E. ELLIS |
||
| /s/ Harlan H. Chappelle | ||
|
HARLAN H. CHAPPELLE |
||
End of Signatures.
10
EXHIBIT A
(LLC Agreement)
EXHIBIT B
|
Name |
Address |
|
| Alta Mesa Holdings GP, LLC |
Attn: Michael A. McCabe 15021 Katy Freeway Suite 400 Houston, Texas 77094 Facsimile: (281) 530-5278 Email: mmcabe@altamesa.net |
|
| SRII Opco, LP |
Attn: Harlan H. Chappelle 15021 Katy Freeway Suite 400 Houston, Texas 77094 Facsimile: ________________ Email: hchappelle@altamesa.net |
|
|
BCE-MESA Holdings, LLC BCE-AMH Holdings, LLC |
Attn: William W. McMullen Address: 1201 Louisiana Street Suite 3308 Houston, Texas 77002 Facsimile: (713) 400-8210 Email: will@bayoucityenergy.com |
|
| Mezzanine Partners II Delaware Subsidiary, LLC |
Attn: Faith Rosenfeld c/o HPS Investment Partners, LLC 40 West 57th Street 33rd Floor New York, NY 10019 Facsimile: (646) 955-4419 Email: Faith.Rosenfeld@hpspartners.com |
|
| Offshore Mezzanine Partners Master Fund II, L.P. |
Attn: Faith Rosenfeld c/o HPS Investment Partners, LLC 40 West 57th Street 33rd Floor New York, NY 10019 Facsimile: (646) 955-4419 Email: Faith.Rosenfeld@hpspartners.com |
|
| Institutional Mezzanine Partners II Subsidiary, L.P. |
Attn: Faith Rosenfeld c/o HPS Investment Partners, LLC 40 West 57th Street 33rd Floor New York, NY 10019 Facsimile: (646) 955-4419 Email: Faith.Rosenfeld@hpspartners.com |
|
| AP Mezzanine Partners II, L.P. |
Attn: Faith Rosenfeld c/o HPS Investment Partners, LLC 40 West 57th Street 33rd Floor New York, NY 10019 Facsimile: (646) 955-4419 Email: Faith.Rosenfeld@hpspartners.com |
|
| The Northwestern Mutual Life Insurance Company |
Attn: Securities Department The Northwestern Mutual Life Insurance Company 720 East Wisconsin Avenue Milwaukee, WI 53202 Email: privateinvest@northwesternmutual.com |
|
| The Northwestern Mutual Life Insurance Company For Its Group Annuity Separate Account |
Attn: Securities Department The Northwestern Mutual Life Insurance Company 720 East Wisconsin Avenue Milwaukee, WI 53202 Email: privateinvest@northwesternmutual.com |
|
| Northwestern Mutual Capital Strategic Equity Fund III, LP |
Attn: Securities Department The Northwestern Mutual Life Insurance Company 720 East Wisconsin Avenue Milwaukee, WI 53202 Email: privateinvest@northwesternmutual.com |
|
| KCK-AMIH, Ltd. |
Attn: Jeff Owens DLA Piper LLP (US) 203 LaSalle Street Chicago, IL 60601 USA Facsimile: (312) 630-5384 Email: jeff.owens@dlapiper.com
Attn: Steven Yentzer DLA Piper LLP (US) 701 Fifth Avenue, Suite 7000 Seattle, WA 98104 USA Facsimile: (206) 839-4801 Email: steven.yentzer@dlapiper.com with a cc to kimberley.tibbert@dlapiper.com
Attn: Alan H. Hammerman 2700 Patriot Blvd., Suite 170 Glenview, IL 60026 Facsimile: (847) 729-0704 Email: lawoff@ameritech.net
Attn: Nael Kassar KCK, Ltd. 10 Ulster Terrace London NW1 4PJ, England Email: nael.kassar@kckgroup.net with a cc to sacy.antoine@gmail.com |
|
| United Insurance Company of America |
Attn: Nathan Harnetiaux c/o Kemper Corporation One East Wacker Drive, 9th Floor Chicago, IL 60601 Email: nharnetiaux@kemper.com |
|
| Jade Real Assets Fund, L.P. |
Attn: Faith Rosenfeld c/o HPS Investment Partners, LLC 40 West 57th street 33rd Floor New York, NY 10019 Facsimile: (646) 955-4419 Email: Faith.Rosenfeld@hpspartners.com |
|
| Michael E. Ellis |
c/o Alta Mesa Investment Holdings Inc. 15021 Katy Freeway Suite 400 Houston, Texas 77094 Facsimile: (281) 530-5278 Email: mellis@altamesa.net |
|
| Harlan H. Chappelle |
c/o Alta Mesa Investment Holdings Inc. 15021 Katy Freeway Suite 400 Houston, Texas 77094 Facsimile: (281) 530-5278 Email: hchappelle@altamesa.net |
|
Exhibit 10.11
OPERATING TRANSITION SERVICES AGREEMENT
By and Between:
KINGFISHER MIDSTREAM, LLC,
as the “ Owner ”
and
ASSET RISK MANAGEMENT, LLC,
as the “ Operator ”
February 9, 2018
TABLE OF CONTENTS
| Page | ||||||
| ARTICLE 1 DEFINITIONS | 4 | |||||
| 1.1 |
Defined Terms |
4 | ||||
| 1.2 |
Certain Additional Defined Terms |
8 | ||||
| 1.3 |
Rules of Interpretation |
8 | ||||
| ARTICLE 2 TERMINATION OF OPERATING AGREEMENT; APPOINTMENT AND TERM | 9 | |||||
| 2.1 |
Operating Agreement |
9 | ||||
| 2.2 |
Appointment |
9 | ||||
| 2.3 |
Term |
10 | ||||
| 2.4 |
Termination |
10 | ||||
| 2.5 |
Effect of Termination |
10 | ||||
| 2.6 |
Owner Obligations |
11 | ||||
| 2.7 |
Survival |
11 | ||||
| ARTICLE 3 DUTIES OF THE OPERATOR | 11 | |||||
| 3.1 |
Independent Contractor |
11 | ||||
| 3.2 |
Subcontracting |
11 | ||||
| 3.3 |
Services |
11 | ||||
| 3.4 |
Limitation of Authority of Operator and Approval by Owner |
13 | ||||
| 3.5 |
Owner Responsibilities |
14 | ||||
| ARTICLE 4 BUDGET | 15 | |||||
| 4.1 |
Budget |
15 | ||||
| 4.2 |
Preparation and Approval of Budget Amendments |
15 | ||||
| 4.3 |
Authority for Extra Budget Expenditures |
15 | ||||
| 4.4 |
Funding of the Management Account |
15 | ||||
| 4.5 |
Emergencies |
15 | ||||
| ARTICLE 5 ACCOUNTING AND REPORTING | 16 | |||||
| 5.1 |
Maintenance of Accounts |
16 | ||||
| 5.2 |
Banking |
16 | ||||
| 5.3 |
Owner Funds |
17 | ||||
| 5.4 |
Audits |
17 | ||||
| 5.5 |
Government Reports |
18 | ||||
| 5.6 |
Periodic Reports and Statements |
18 | ||||
| ARTICLE 6 COMPENSATION | 18 | |||||
| 6.1 |
Management Fee |
18 | ||||
| 6.2 |
Reimbursement of Expenses |
18 | ||||
| 6.3 |
Adjustments to Fees and Expenses |
18 | ||||
| 6.4 |
Payment |
18 | ||||
| ARTICLE 7 FORCE MAJEURE | 19 | |||||
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| 7.1 |
Nonperformance |
19 | ||||
| 7.2 |
Duty to Mitigate |
19 | ||||
| ARTICLE 8 RELEASE AND INDEMNIFICATION | 19 | |||||
| 8.1 |
Release and Indemnification by Owner |
19 | ||||
| 8.2 |
Indemnification by Operator |
20 | ||||
| 8.3 |
No Double Recovery |
20 | ||||
| 8.4 |
DISCLAIMER OF LIABILITY |
20 | ||||
| 8.5 |
Indemnification Procedures |
21 | ||||
| 8.6 |
Sole Remedy |
22 | ||||
| ARTICLE 9 CONFIDENTIAL INFORMATION; INSURANCE | 22 | |||||
| 9.1 |
Confidential Information. |
22 | ||||
| 9.2 |
Insurance |
23 | ||||
| ARTICLE 10 MISCELLANEOUS | 23 | |||||
| 10.1 |
Entire Agreement |
23 | ||||
| 10.2 |
Amendment |
23 | ||||
| 10.3 |
Waiver |
23 | ||||
| 10.4 |
Assignability |
23 | ||||
| 10.5 |
Parties in Interest |
24 | ||||
| 10.6 |
Binding Effect |
24 | ||||
| 10.7 |
Section Headings |
24 | ||||
| 10.8 |
Notices |
24 | ||||
| 10.9 |
Severability |
24 | ||||
| 10.10 |
Governing Law |
24 | ||||
| 10.11 |
Consent to Jurisdiction |
25 | ||||
| 10.12 |
WAIVER OF RIGHT TO JURY TRIAL |
25 | ||||
| 10.13 |
Further Assurances |
25 | ||||
| 10.14 |
Counterparts |
25 | ||||
| 10.15 |
Exhibits |
26 | ||||
| 10.16 |
Timing |
26 | ||||
| 10.17 |
Miscellaneous |
26 | ||||
| EXHIBIT A |
BUDGET |
|||||
| EXHIBIT B |
INSURANCE |
|||||
* * * * *
iii
OPERATING TRANSITION SERVICES AGREEMENT
THIS OPERATING TRANSITION SERVICES AGREEMENT (as the same may be amended, restated, or otherwise modified, this “ Agreement ”) is made and entered into as of the 9th day of February, 2018 (the “ Effective Date ”), by and between Kingfisher Midstream, LLC, a Delaware limited liability company (the “ Owner ”), and Asset Risk Management, LLC, a Delaware limited liability company (the “ Operator ”). The Owner and the Operator are referred to herein individually as a “ Party ” and collectively as the “ Parties ”.
RECITALS
A. The Owner is in the business of owning certain gas gathering and processing systems and crude oil gathering facilities in Kingfisher County, Oklahoma (collectively, the “ Systems ”), as such Systems may be acquired, constructed, expanded or modified from time to time by, or on the behalf of, the Owner.
B. The Parties are parties to that certain Second Amended and Restated Operating and Construction Management Agreement by and between the Operator and the Owner, dated August 4, 2017 (the “ Operating Agreement ”).
C. KFM Holdco, LLC, a Delaware limited liability company and parent of the Owner (“ KFM Holdco ”), entered into that certain Contribution Agreement, by and among Silver Run Acquisition Corporation II (“ Silver Run ”) and the other parties thereto, dated August 14, 2017 (the “ Contribution Agreement ”), pursuant to which KFM Holdco contributed all of its equity interests in the Owner to SRII Opco, LP, a Delaware limited partnership (the “ Partnership ”), on the Effective Date (the “ Closing ”).
D. As contemplated by the Contribution Agreement, the Parties desire to (i) terminate the Operating Agreement and (ii) engage the Operator to provide transitional services to design, construct, expand, modify, manage, operate and maintain the Systems, in each case, pursuant to the terms and conditions of this Agreement.
AGREEMENT
NOW, THEREFORE, for in consideration of the foregoing, the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Defined Terms . As used in this Agreement, the following capitalized terms have the meanings set forth below:
“ Affiliate ” means with respect to a Person, any Person which, directly or indirectly, controls, is controlled by or is under common control with such Person or such Person’s members or shareholders. For purposes of this definition, “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such individual or entity, whether through the ownership of voting securities, by contract or otherwise.
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“ Applicable Law ” means any applicable statute, law, principle of common law, rule, regulation, judgment, order, ordinance, requirement, code, writ, injunction, or decree of any Governmental Authority, including the Occupational Safety and Health Administration, the Environmental Protection Agency, the U.S. Federal Energy Regulatory Commission, the U.S. Department of Transportation and the Department of Homeland Security.
“ Bankrupt ” means, with respect to any Person, (a) the filing by such Person of a voluntary petition seeking liquidation, reorganization, arrangement or readjustment, in any form, of its debts under the U.S. Bankruptcy Code (or corresponding provisions of future Laws) or any other insolvency Law, or a Person’s filing an answer consenting to or acquiescing in any such petition, (b) the making by such Person of any assignment for the benefit of its creditors or the admission by a Person of its inability to pay its debts as they mature or (c) the expiration of sixty (60) days after the filing of an involuntary petition under the U.S. Bankruptcy Code (or corresponding provisions of future Laws) seeking an application for the appointment of a receiver for the assets of such Person, or an involuntary petition seeking liquidation, reorganization, arrangement or readjustment of its debts under any other insolvency Law, unless the same shall have been vacated, set aside or stayed within such sixty (60) day period.
“ Business ” means engaging, directly or indirectly, in the acquisition, Design, Construction, Procurement, Management, ownership, operation, upkeep, repair and/or maintenance of the Systems.
“ Business Day ” means any day, other than a Saturday or Sunday, that commercial banks in Houston, Texas are open for business.
“ Change in Control ” means with respect to the Owner, a sale, merger, consolidation, or recapitalization as a result of which the holders of Owner’s issued and outstanding voting securities following the Closing cease to own or Control, directly or indirectly, at least a majority of Owner’s issued and outstanding voting securities immediately after such transaction.
“ Claims ” means any and all demands, claims, judgments, obligations, liabilities, liens, causes of action, lawsuits, arbitrations, mediations, investigations or proceedings (whether at law or in equity).
“ Construction ” and its derivatives mean, with respect to the Systems, all activities relating to the installation, construction and commissioning thereof.
“ Contract ” means a written or oral legally binding contract, agreement, commitment, obligation, lease, license or other arrangement, understanding or undertaking.
“ Control ” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.
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“ Design ” and its derivatives mean, with respect to the Systems, all activities relating to the engineering and design thereof.
“ Force Majeure ” means, with respect to the Party claiming Force Majeure under this Agreement, any natural phenomena that such Party could not reasonably control, or prevent or any human event or a combination of human events that such Party could not reasonably control or prevent, which phenomena or events prevent such Party from performing its obligations under this Agreement. Force Majeure events shall include the following: (a) a failure of performance of any Third Party, (b) acts of a public enemy, war or threat of war (declared or undeclared) occurring in or involving the United States, revolution, riot, rebellion, insurrection, military or usurped power, state of siege, declaration of a state of emergency or martial law (or any of the events or circumstances that will or may result in the declaration of a state of emergency or martial law), civil commotion, act of terrorism, vandalism or sabotage (in each case occurring in or involving the United States), embargo or blockade, declaration of public calamity (or any of the events or circumstances that will or may result in the declaration of public calamity); (c) politically motivated or otherwise widespread strikes, suspensions, interruptions, work slow-downs or other labor disruptions; (d) explosions, chemical or radioactive contamination or ionizing radiation; (e) air crashes, objects falling from aircraft not otherwise attached to a parachute, pressure waves caused by aircraft or aerial devices traveling at supersonic speed; or (f) epidemics, meteorites, fire, lightning, earthquake, cyclone, hurricane, flood, or other unusual or extreme adverse weather or environmental condition or action of the elements. A Party’s inability economically to perform its obligations hereunder does not constitute an event of Force Majeure.
“ GAAP ” means U.S. Generally Accepted Accounting Principles as consistently applied.
“ Governmental Authority ” means any federal, state, county, parish, municipal or other governmental subdivision, or any court or any governmental department, commission, board, bureau, agency or other instrumentality of any federal, state, county, municipal or other governmental subdivision within the United States of America with authority over the Parties and subject matter in question.
“ Lien ” means, with respect to any property or asset, any mortgage, deed of trust, lien, pledge, charge, claim, security interest, restrictive covenant or easement or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under Applicable Law, as well as the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such property or asset.
“ Losses ” means any and all losses, damages, costs, expenses, liabilities, fines, penalties or judgments of whatever kind or character incurred by a Person or Party with respect to a Claim, including reasonable attorneys’ fees, court costs and other reasonable costs and expenses of litigation as such may be awarded by a court.
“ Manage ” or “ Management ” and their respective derivatives mean, with respect to the Systems, (a) the management and administration of the Design, Procurement and Construction of the Systems including any additions, modifications and expansions thereto and (b) the operation, management and contract administration for the operation, upkeep, repair and maintenance of the Systems and any subsequent Design, Procurement and Construction of additions, modifications and extensions of the Systems as may be authorized by the Owner.
6
“ Monthly Funding Amount ” means, with respect to a calendar month, an amount equal to (a) the Monthly Estimate for such calendar month, plus (b) a reasonable contingency amount, which shall not exceed 5% of the Monthly Estimate for such calendar month, less (c) the amounts (if any) by which any prior calendar month’s Monthly Estimate or Shortfall Estimate exceeded the actual expenditures paid in the calendar month to which such prior Monthly Estimate or Shortfall Estimate relates and which excess has not been applied pursuant to this clause (c) to reduce a subsequent calendar month’s Monthly Funding Amount.
“ Overrun ” means, with respect to any calendar month, the excess, if any, of such calendar month’s actual expenditures over such calendar month’s budgeted expenditures as set forth in the then approved Budget (including any approved Budget Amendment).
“ Person ” means any individual, firm, corporation, trust, partnership, limited liability company, association, joint venture, other business enterprise or Governmental Authority.
“ Prime Rate ” means the rate of interest published or announced from time to time as the U.S. “prime rate” in the “Money Rates” section of The Wall Street Journal .
“ Procurement ” and its derivatives mean all activities relating to the procurement and handling of all services, materials, equipment and construction equipment necessary for any Design and Construction of the Systems.
“ Services ” means all the services to be performed by the Operator regarding the acquisition, Design, Construction, Procurement, Management and/or administrative support of the Systems subject to the terms and conditions set forth in this Agreement; provided , however , that “Services” shall not include and the Operator shall have no obligation to provide (a) any Discontinued Service from and after the Service Termination Date for such Discontinued Service or (b) the activities set forth in Section 3.5 .
“ Standard of Care ” means that, in its performance of the Services, the Operator acts in a good and workmanlike manner, in accordance with: (a) reasonable, customary and prudent practices in the oil and gas industry for performing services similar in scope and nature to the Services; and (b) all Applicable Laws; provided , in no event shall the Operator be obligated to comply with the foregoing if such compliance would result in a breach by the Operator of Applicable Law.
“ Subcontract ” means any approved Contract for the supply of goods, work, materials or equipment in connection with rendering the Services provided hereunder entered into between the Operator and any Subcontractor.
“ Subcontractor ” means any Third Party Person party to a Subcontract with the Operator.
“ Third Party ” means any Person that is not a Party.
7
1.2 Certain Additional Defined Terms . In addition to such terms as are defined in Section 1.1 , the following terms are used in this Agreement as defined in the sections or other subdivisions of this Agreement or elsewhere as referenced opposite such terms below:
|
Defined Term |
Reference | |
| “ Agreement ” | Preamble | |
| “ Audit Period ” | Section 5.4(b) | |
| “ Budget Amendment ” | Section 4.2 | |
| “ Claim Notice ” | Section 8.5(a) | |
| “ Closing ” | Recitals | |
| “ Confidential Information ” | Section 9.1(a) | |
| “ Contribution Agreement ” | Recitals | |
| “ Discontinued Service ” | Section 3.3 | |
| “ Effective Date ” | Preamble | |
| “ Emergency Expenditures ” | Section 4.5 | |
| “ Emergency ” | Section 4.5 | |
| “ Indemnified Party ” | Section 8.5 | |
| “ Indemnifying Party ” | Section 8.5 | |
| “ KFM Holdco ” | Recitals | |
| “ Land Rights ” | Section 3.3(c) | |
| “ Management Account ” | Section 5.2 | |
| “ Management Fee ” | Section 6.1 | |
| “ Monthly Estimate ” | Section 4.4(a) | |
| “ Operating Agreement ” | Recitals | |
| “ Operator Indemnitees ” | Section 8.1(a) | |
| “ Operator ” | Preamble | |
| “ Owner Indemnitees ” | Section 8.2 | |
| “ Owner ” | Preamble | |
| “ Parties ” | Preamble | |
| “ Partnership ” | Recitals | |
| “ Party ” | Recitals | |
| “ Service Termination Date ” | Section 3.3 | |
| “ Shortfall Estimate ” | Section 4.4(b) | |
| “ Silver Run ” | Recitals | |
| “ Systems ” | Recitals | |
| “ Term ” | Section 2.3 | |
| “ Third-Party Claim ” | Section 8.5(b) |
1.3 Rules of Interpretation . All references to any agreement or document shall be construed as of the particular time that such agreement or document may then have been executed, amended, varied, supplemented or modified. Terms defined in this Agreement shall have the meanings given therein when used elsewhere in this Agreement. References in the singular shall include the plural, and references to the masculine shall include the feminine, and vice versa. All references herein to any Applicable Law shall be deemed to refer to such Applicable Law as it may be amended, supplemented or modified from time to time. Words denoting natural persons shall include partnerships, firms, companies, corporations, joint
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ventures, trusts, associations, organizations or other entities. References to a particular article, section, subsection, paragraph, subparagraph or exhibit, if any, shall be a reference to such article, section, subsection, paragraph, subparagraph or exhibit in and to this Agreement. The words “include” and “including” shall include the phrase “but not limited to.” All exhibits are fully incorporated and made part of this Agreement. The exhibits shall be read in conjunction with the provisions of the body of this Agreement, and the exhibits and the body of this Agreement shall be interpreted to give effect to the intent of the Parties as evidenced by their terms when taken as a whole, provided , however , that in the event of an express and irreconcilable conflict between the terms of an exhibit and the provisions of the body of this Agreement, the provisions of the body of this Agreement shall control. Capitalized terms appearing in an exhibit shall have the meanings set forth in Section 1.1 or 1.2 , unless the context requires otherwise.
ARTICLE 2
TERMINATION OF OPERATING AGREEMENT;
APPOINTMENT AND TERM
2.1 Operating Agreement . Effective as of the Closing, the Operating Agreement is hereby terminated and of no further force and effect except for those provisions which expressly survive the termination of the Operating Agreement as set forth therein; provided , that, notwithstanding the foregoing, from and after the Closing the Owner shall have no liability or obligation with respect to the Operating Agreement other than with respect to:
(a) the reimbursement of expenses payable by the Operator to any Third Party for services performed by such Third Party prior to the Closing to the extent that any such expenses were included as Current Liabilities (as defined in the Contribution Agreement) and taken into account in the calculation of Net Working Capital (as defined in the Contribution Agreement); and
(b) rights of the Operator under the Operating Agreement for indemnification relating to Losses (as defined in the Operating Agreement) or Claims (as defined in the Operating Agreement) asserted by a Third Party with respect to the period prior to the Closing (other than claims with respect to the reimbursement of expenses, which are addressed in clause (a) above), provided that the Owner shall not have any liability to the Operator under this clause (b) until the aggregate amount of Losses for which the Operator is entitled to indemnification equals or exceeds $5,000,000, in which event the Owner shall be liable for Losses only to the extent they are in excess of $5,000,000. The Owner shall not have any liability for a claim made by the Operator under this clause (b) unless a written notice of such claim is provided to the Owner prior to the Expiration Date (as defined in the Contribution Agreement). The Operator shall use commercially reasonable efforts to pursue recovery for any such Losses or defense of such Claims from any available insurance policy, and any obligation of the Owner to make a payment pursuant to this clause (b) shall be net of any recovery by the Operator under any such insurance policy.
2.2 Appointment . Subject to the terms of this Agreement, the Operator is hereby engaged to perform, or cause to be performed, the Services.
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2.3 Term . This Agreement shall commence on the Effective Date and shall continue for an initial period ending on the earlier of (a) the date that is six (6) months after the Effective Date or (b) the termination of this Agreement pursuant to Section 2.4 below (the “ Term ”); provided , that the provision by the Operator of any particular Service may be discontinued during the Term as provided in Section 3.3 .
2.4 Termination . Notwithstanding Section 2.3 , this Agreement shall terminate upon the earliest to occur of the following:
(a) The mutual written agreement of the Parties, effective as of the date so mutually agreed.
(b) The election of the Owner to remove the Operator as operator and terminate this Agreement made by delivering at least sixty (60) days’ prior written notice thereof to the Operator.
(c) The election of the Owner to remove the Operator as operator and terminate this Agreement made by delivering written notice thereof to the Operator if: (i) the Operator has defaulted in a material respect in the performance or observance of any material agreement, covenant, term, condition or obligation hereunder which has not been cured within thirty (30) days after receipt by the Operator of written notice from the Owner of such default,; (ii) the Operator assigns or purports to assign its rights or ability to conduct the Services in contravention of Section 10.4 ; (iii) the Operator becomes insolvent or Bankrupt; or (iv) the Operator dissolves, liquidates or terminates its existence.
(d) The election of the Operator to resign as operator and terminate this Agreement made by delivering written notice thereof to the Owner if: (i) the Owner has defaulted in a material respect in the performance or observance of any material agreement, covenant, term, condition or obligation hereunder which has not been cured within thirty (30) days after receipt by the Owner of written notice from the Operator of such default; (ii) the Owner assigns or purports to assign its rights or obligations hereunder in contravention of Section 10.4 ; (iii) the Owner becomes insolvent or Bankrupt; (iv) the Owner dissolves, liquidates or terminates its existence; or (v) there has been a Change in Control.
(e) The election of either Party to cancel this Agreement made by delivering thirty (30) days prior written notice thereof to the other Party following the occurrence and continuation of an event of Force Majeure that results in the failure or non-performance of the Systems for a period of sixty (60) consecutive days.
2.5 Effect of Termination . The termination or expiration of this Agreement shall in no way affect or impair any right which has accrued to either Party hereto prior to the date when such termination or expiration became effective, or the right to audit, or deprive a non-defaulting Party of any right or remedy otherwise available to it consistent with the terms of this Agreement. Upon the effective date of any termination or expiration of this Agreement, the Operator shall immediately cease performing the Services.
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2.6 Owner Obligations . In the event this Agreement is terminated pursuant to Section 2.4(b) or Section 2.4(d) , the Owner shall be obligated for all reasonable wind-down and reasonable severance costs and expenses of the Operator’s employees arising from the Owner’s termination, including relocation or reassignment costs and expenses incurred by the Operator to mitigate severance costs and expenses.
2.7 Survival . Upon the termination or expiration of this Agreement, all compensation or other amounts payable to the Operator pursuant to Section 6.1 (other than interest that accrues on unpaid amounts pursuant to Section 6.4 ) shall cease to accrue. The provisions of this Section 2.7 , Sections 2.1 , 2.5 , 2.6 , 5.1 , 5.4 and 9.1 , and ARTICLE 8 and ARTICLE 10 shall survive any termination, cancellation or expiration of this Agreement indefinitely unless such provision provides for a specific survival.
ARTICLE 3
DUTIES OF THE OPERATOR
3.1 Independent Contractor . In the performance of any Services by or through the Operator for the Owner pursuant to this Agreement, the Operator conclusively shall be deemed an independent contractor, with the right and authority to direct and control all services and other work being performed by the employees of the Operator and all Subcontractors. The Owner shall have no right or authority to supervise or give instructions to any such Persons and such Persons at all times shall be under the direct and sole supervision and control of the Operator. It is the understanding and intention of the Parties that no relationship of master and servant or principal and agent shall exist between the Owner, on the one hand, and the employees, agents or representatives of the Operator or its Affiliates, on the other hand. Except with acquisition of Land Rights in accordance with the limited power of attorney under Section 3.3(c) and administration of Management Accounts under Section 5.2 , neither the Operator nor the Owner shall represent to a Third Party that the Operator is other than an independent contractor of the Owner.
3.2 Subcontracting . With the prior consent of Owner (such consent not to be unreasonably withheld, conditioned or delayed), the Operator may subcontract any part of the Services; provided , however , that notwithstanding any Subcontract entered into by the Operator for all or any part of the Services, the Operator shall not be relieved of or released from any of its obligations or responsibilities under this Agreement. For the purposes of this Agreement, Services performed by Subcontractors shall be deemed to be Services performed by the Operator.
3.3 Services . From and after the Effective Date, the Operator shall perform the Services for the sole benefit of (and on behalf of) the Owner and at all times in accordance with the Standard of Care and in good faith. The Owner hereby delegates to Operator and authorizes Operator to, and Operator shall, perform each of the Services set forth in this Section 3.3 or elsewhere in this Agreement in accordance with the Standard of Care, subject to the limitations contained in this Agreement; provided , however , that the Owner shall be permitted to terminate any Service during the Term by providing prior written notice to the Operator (such Service so terminated, a “ Discontinued Service ”, and the date such notice in respect of a Discontinued Service is received by the Operator, the “ Service
Termination Date ” for such Discontinued Service); and provided further , that the Operator shall have no obligation to perform any Discontinued Services from and after the Service Termination Date for such Discontinued Service.
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(a) General . The Operator shall perform any and all acts and things necessary, requisite or proper for (i) the efficient and safe Management, Design, Procurement and Construction of the Systems as contemplated in the Budget and (ii) the administrative support of the Systems, including, in each case, entering into (or causing the Owner to enter into) any Contract with respect to the Systems or the Business or incurring any expense, in each case, to the extent authorized in an approved Budget or as otherwise permitted hereunder; provided that Operator shall not enter into (or cause the Owner to enter into) any Contract in which Owner is anticipated to incur expenses or receive revenues in excess of $1,000,000 annually without the prior written consent of the Owner unless such Contract is specifically itemized in an approved Budget.
(b) Personnel; Leave Employees .
(i) The Operator shall employ such personnel as the Operator may deem reasonably necessary or beneficial with respect to (or in connection with its performance of) the Services. Also, the Operator may utilize its employees to provide all or any portion of the Services. The Operator shall maintain the number of personnel performing services for the Owner at the optimum level and to keep them organized in a manner which will afford cost effective and efficient day-to-day operation of the Business. The Operator shall ensure that all such personnel expenses incurred in connection with its obligations under this Agreement are paid, including compensation, salary, wages, overhead and administrative expenses incurred by the Operator and if applicable, social security, taxes, workers compensation insurance, benefits and other such expenses. Notwithstanding anything to the contrary in the provisions of ARTICLE 8 , the Operator shall indemnify and save harmless the Owner from all claims of liability for wages, salary, taxes or benefits in respect of the Operator’s personnel, provided that, for the avoidance of doubt, the Operator shall be entitled to obtain reimbursement from the Owner for such wages, salary, taxes or benefits to the extent, but only to the extent, provided in ARTICLE 6 .
(ii) Notwithstanding anything to the contrary set forth herein, all Leave Employees (as defined in the Contribution Agreement) who are on an approved leave of absence as of the Effective Date shall be employed by the Operator until the earliest of (A) such Leave Employee’s termination for reasons unrelated to such employee’s leave of absence ( e.g. , for cause); (B) six (6) months following the Effective Date or such later time as Operator may be required by Applicable Law to restore such Leave Employee to the same or equivalent job; (C) such time as the Leave Employee returns to service with the Operator; and (D) the termination of this Agreement. For the avoidance of doubt, the Operator will not be entitled to obtain reimbursement under this Agreement from the Owner for wages, salary, taxes or benefits of any Leave Employee.
(c) Land Rights . The Operator shall survey, as necessary, the routes for the Systems and, to the fullest extent permitted by Applicable Law to the extent not already held in the name of Owner, the Operator is granted a limited power of attorney to acquire in the name of Owner and properly record in the applicable official public records all necessary rights of way,
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easements, leases, fee titles, permits, surveys and other interests in land required for the Construction, operation and maintenance of the Systems (the “ Land Rights ”); provided that Operator shall not acquire (or cause the Owner to acquire) any Land Rights anticipated to cost in excess of $1,000,000 and/or to have terms that could materially and adversely impact the development or operation of the Systems without the prior written consent of the Owner. The Owner shall bear the entire cost of obtaining or enforcing such Land Rights, whether by voluntary conveyance, condemnation or other civil proceedings (and whether by judgment or settlement).
(d) Payment of Expenses . In addition to its other payment and reimbursement obligations set forth in this Agreement, the Owner shall be responsible for payment of the Operator’s fees and expenses as set out in ARTICLE 6 of this Agreement. Notwithstanding anything herein to the contrary, in no event shall the Operator be liable in connection with the failure to perform its services hereunder if the Operator fails, or is otherwise unable, to perform any of such services or its other obligations hereunder due to the failure of the Owner to pay when due any amounts payable hereunder by the Owner.
(e) Liens . The Operator shall keep the Systems and the other assets of the Owner free and clear of all Liens on account of any Claims arising as a result of the performance of the Services or the Operator’s engagement or employment of any Subcontractor other than inchoate Liens that arise in the ordinary course of carrying out the Services and that the Operator shall diligently prosecute and contest in consultation with the Owner.
(f) Environmental, Health and Safety . During the term of this Agreement, the Operator shall comply with any then-existing, business-wide emergency response plan.
(g) Fines and Reports . The Operator shall promptly notify the Owner of any and all material fines and/or citations that relate in any way to the Systems of which the Operator becomes aware.
3.4 Limitation of Authority of Operator and Approval by Owner . Except in the case of Emergencies, but otherwise notwithstanding anything in this Agreement to the contrary, the Operator shall obtain the prior written consent of the Owner prior to taking any of the following actions:
(a) except with respect to the limited powers of attorney granted for the Procurement of Land Rights in accordance with Section 3.3(c) , the granting of powers of attorney with respect to the Management, Design, Procurement, Construction, operation, maintenance and/or ownership of the Systems; or
(b) agree to any changes with respect to the Construction of the Systems, including in scope, schedule, design or cost of the Systems, that could increase the cost to Construct the Systems in excess of the amount reflected on the Budget or have a material impact on the Construction, ownership or operation of the Systems; or
(c) incur any expense not included in the then applicable Budget (subject to Section 4.3) for which reimbursement from the Owner would be sought, except for any Emergency Expenditure.
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3.5 Owner Responsibilities . The Owner shall perform and be responsible for the following ongoing activities:
(a) in addition to the obligations set forth in Section 9.2 , providing and maintaining insurance for the Systems as is customary;
(b) assisting the Operator, if requested, in performing all necessary public relations activities with the local community and other Governmental Authorities;
(c) paying the Operator the amounts owed under this Agreement;
(d) complying, subject to and with the Operator’s assistance, with all the Owner requirements in Government Approvals;
(e) employing such personnel as the Owner may deem reasonably necessary or beneficial with respect to (or in connection with its performance of) the operation, maintenance, upkeep and repair of the Systems (such personnel to include, for the avoidance of doubt, any Leave Employee after the end of their employment by Operator as provided in Section 3.3(b)(ii) ), and ensuring that all such personnel expenses incurred in connection with Owner’s obligations under this Agreement are paid, including compensation, salary, wages, overhead and administrative expenses and, if applicable, social security, taxes, workers compensation insurance, benefits and other such expenses; and notwithstanding anything to the contrary in the provisions of ARTICLE 8 , the Owner shall indemnify and save harmless the Operator from all claims of liability for wages, salary, taxes or benefits in respect of the Owner’s personnel;
(f) conducting title and environmental due diligence with respect to Land Rights acquired for Construction, operation and maintenance of the Systems;
(g) preparing the Systems environmental compliance policies and procedures, including preparing a business-wide emergency response plan, each of which Owner shall provide to Operator when prepared;
(h) promptly responding to any accidents and environmental incidents;
(i) complying with any then-existing, business-wide emergency response plan;
(j) paying or otherwise settling any fines and/or citations that relate in any way to the Systems; and
(k) performing any Discontinued Service from and after the Service Termination Date for such Discontinued Service.
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ARTICLE 4
BUDGET
4.1 Budget . The Budget shall be as set forth on Exhibit A attached hereto.
4.2 Preparation and Approval of Budget Amendments . At any time, the Operator may, and at Owner’s request shall, propose amendments to the Budget if the Operator believes that the Budget no longer reflects the actual costs that will be incurred to provide the Services by presenting a written budget amendment for approval by the Owner (a “ Budget Amendment ”). The Owner shall have five (5) days from the date the Operator submits a Budget Amendment to approve or reject such Budget Amendment in whole or in part. Any part of any Budget Amendment which is rejected shall either be deleted or resubmitted at the direction of the Owner. The Operator shall then have ten (10) days to resubmit (if it so elects) any Budget Amendment for approval. The Owner shall have five (5) days from the date the Operator resubmits any such Budget Amendment for approval to approve or reject such re-submitted Budget Amendment. Failure of the Owner to timely respond to any proposed Budget Amendment shall be deemed to be a rejection of such Budget Amendment.
4.3 Authority for Extra Budget Expenditures . Except for Emergency Expenditures, the Operator shall have the right and authority with respect to the Budget (as such Budget may be amended by any approved Budget Amendment), to make expenditures up to (a) one hundred ten percent (110%) of the aggregate amount of the Budget and (b) one hundred fifteen percent (115%) of any particular line item of the Budget. In the event of an Overrun, the Operator shall notify the Owner of the amount of such Overrun as soon as possible after the end of the calendar month in which the Overrun occurred.
4.4 Funding of the Management Account .
(a) At least five (5) Business Days prior to the commencement of each calendar month, the Operator shall prepare and deliver to the Owner, a notice of (i) the estimated amount of expenditures projected to be paid in such calendar month pursuant to the then applicable Budget (or otherwise pursuant to this Agreement, including, for the avoidance of doubt, in connection with any Emergency) (the “ Monthly Estimate ”), and (ii) the Monthly Funding Amount for such calendar month. The Owner shall cause the Monthly Funding Amount to be deposited in the Management Account on or before the first (1 st ) day of the applicable calendar month.
(b) If the Operator reasonably believes that the deposits made pursuant to Section 4.4(a) will be insufficient to satisfy the projected costs and expenses to be paid during the then current calendar month pursuant to the then applicable Budget (or this Agreement, including for the avoidance of doubt, in connection with any Emergency), then the Operator shall prepare and deliver to the Owner, a notice of the estimated amount of the shortfall for such calendar month (a “ Shortfall Estimate ”). The Owner shall cause the Shortfall Estimate to be deposited in the Management Account within five (5) Business Days of the day the Owner received notice thereof from the Operator.
4.5 Emergencies . In the event of an Emergency, the Operator shall promptly (a) make all notifications required under Applicable Law to the appropriate Governmental Authorities, (b) implement emergency response and mitigation measures as are required by Applicable Law or are deemed advisable by the Operator to respond to or mitigate the Emergency, including to protect human health and the environment, (c) commence any required remediation, maintenance or repair work necessary for the Systems and/or the Owner to comply
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with all Applicable Law and (d) notify the Owner, as soon as practicable after the occurrence of the event of such Emergency but in any event within twenty four (24) hours. The Operator’s notification of the Owner may be made by any method deemed appropriate by the Operator under the circumstances and does not have to comply with Section 10.8 . Subject to Section 6.3 , the Owner shall reimburse the Operator for any costs and/or expenses incurred by the Operator in connection with any Emergency (any such costs and expenditures, “ Emergency Expenditures ”), within fifteen (15) days of its receipt of an invoice therefor. For purposes of this Agreement, an “ Emergency ” shall mean a sudden or unexpected event which causes, or risks causing, (i) substantial damage to any part of the Systems or the property of a Third Party, (ii) death of or injury to any Person, (iii) damage or substantial risk of damage to natural resources (including wildlife) or the environment, (iv) safety concerns associated with continued operations, (v) imminent failure or unplanned shutdown of a System or (vi) non-compliance with any Applicable Law, in each case, which event is of such a nature that a response cannot reasonably await the decision of the Owner. For the avoidance of doubt, an “Emergency” shall include any release or threatened release of hazardous substances into the environment that requires notification to any Governmental Authority under Applicable Law. The Operator will not issue public statements or communicate with any Governmental Authority regarding any Emergency unless , in the reasonable opinion of the Operator, it is necessary and time does not allow the Owner to issue such public statement or undertake such communication.
ARTICLE 5
ACCOUNTING AND REPORTING
5.1 Maintenance of Accounts . The Operator shall maintain true and accurate accounts of all expenses, disbursements, costs and liabilities chargeable to the Owner pursuant to this Agreement, and all revenue accrued and invoiced in connection with the ownership and operation of the Systems and the running of the Business, all of which shall be charged or credited to the Owner, all in accordance with GAAP and in accordance with the system of accounts prescribed by any Governmental Authority having regulatory jurisdiction over the Owner or the Systems, consistently applied. In connection with the foregoing, the Operator shall receive all invoices and statements in connection with the Construction and operation of the Systems and shall approve or disapprove them. The Operator shall maintain such books of account at its principal place of business and such books of account shall be open to inspection and examination at reasonable times by the Owner. The Operator shall provide all such books and records maintained by the Operator pursuant to the terms of this Agreement to the Owner as promptly as possible but in any event within thirty (30) days following the termination of this Agreement.
5.2 Banking . The Operator will establish, in the Owner’s name and under the Owner’s control, a bank account or accounts (the “ Management Account ”). The Owner will designate the Operator, and such officers of Operator as reasonably requested by the Operator and approved by the Owner, as authorized signatories to the Management Account, and all withdrawals by the Operator from the Management Account will be made only by the Operator or such designated Persons approved by the Owner and only for the express purposes as are provided for herein. All funds of the Owner will be used solely for the Business, and all interest and other benefits pertaining to such account belong to the Owner. At no time may the Operator commingle the funds in the Management Account with the Operator’s funds or the funds of any other Person, and such funds may not be subject to the Liens or Claims of any kind in favor of the Operator or its creditors.
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5.3 Owner Funds . The Operator shall keep funds belonging to the Owner on deposit in the Management Account and, at Owner’s direction, invest such funds. All interest paid on such funds shall be for the account of the Owner.
5.4 Audits .
(a) The Owner shall have the right to audit costs charged to the Owner’s accounts and other accounting records maintained for the Owner by the Operator under this Agreement.
(b) Upon not less than ten (10) Business Days’ prior written notice to the Operator, the Owner shall have the right to audit (or cause to be audited) the Operator’s books and records maintained hereunder (the “ Audit Period ”). The Owner may provide Operator a written notice of any claims for all discrepancies disclosed by said audit and related to the Audit Period. The cost of each such audit shall be borne by the Owner. Any such audit shall be conducted in a manner reasonably designed to limit inconvenience and disruption to the operations of the Operator. Unless otherwise mutually agreed, any audit shall be conducted at the principal office of the Operator or at such other place as the books and records of the Operator related to the Services are maintained. In furtherance of any audit conducted by the Owner pursuant to this Section 5.4(b) , the Operator hereby agrees to exercise on behalf of the Owner any audit rights granted in favor of the Operator under any Subcontract between Operator and any Subcontractor.
(c) At the conclusion of an audit, the Parties shall endeavor to settle outstanding matters expeditiously. To this end, the Owner will make a reasonable effort to prepare and distribute a written report to the Operator as soon as reasonably practicable and in any event within thirty (30) days after the conclusion of an audit. The report shall include all Claims arising from such audit together with comments pertinent to the operation of the accounts and records. The Operator shall make a reasonable effort to reply to the report in writing as soon as possible and in any event no later than thirty (30) days after delivery of the report.
(d) All adjustments resulting from an audit agreed to between the Parties shall be reflected promptly in the Operator’s books and records. If any dispute shall arise in connection with an audit, it shall be reported to and discussed by the Parties within thirty (30) days.
(e) The Owner and its representatives shall have the right at any reasonable time to inspect and/or observe Operator’s Services and the Systems. Any representative of the Owner conducting a site visit shall observe the Operator’s safety regulations and standards during any such visit.
(f) This Section 5.4 shall survive any termination of this agreement until the later of (i) one (1) year following the termination of this Agreement and (ii) the resolution of any audit or dispute related thereto that was initiated prior to one (1) year following the termination of this Agreement.
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5.5 Government Reports . The Operator shall prepare and file any reports required by any commission or Governmental Authority having jurisdiction over the Systems, including all reports, right-of-way alignment maps, field inventories and valuation reports and statements of reconciliation as may be required by Governmental Authorities, in each case, in the correct number of copies required
5.6 Periodic Reports and Statements . The Operator will analyze operating costs for control purposes, prepare cash and movements forecasts, and will furnish to the Owner, monthly, unaudited financial statements and such other reports, statistics, and statements relative to the Business as the Owner may reasonably request or as may be required by its financial commitments now in existence or hereafter entered into.
ARTICLE 6
COMPENSATION
6.1 Management Fee . During the term of this Agreement, the Operator shall be entitled to a management fee of $10,000 per month (the “ Management Fee ”). The Management Fee will be prorated for the calendar month in which the Effective Date occurs. The Management Fee shall be deposited into the Management Account on or before the first (1 st ) day of each calendar month as part of the Monthly Funding Amount.
6.2 Reimbursement of Expenses . In addition to paying the Operator the Management Fee, the Owner shall, as part of the Monthly Funding Amount, reimburse the Operator for all of the costs and expenses incurred by it in providing the Services, including: (a) for any direct operating and any other out-of-pocket costs and expenses incurred by it on behalf of the Owner; (b) for the portion of the fully-burdened costs and expenses (as reasonably allocated by the Operator) of any other employees of the Operator who provide services to (or on behalf of) the Owner; (c) all direct expenses incurred by the Operator in providing the Services and payable to Third Parties; and (d) for any other costs and expenses required to be reimbursed to the Operator by the Owner pursuant to this Agreement in connection with its provision of the Services, in each case, in accordance with and subject to the Annual Budget then in effect or in connection with an Emergency. These expenses shall be included in the Monthly Estimate and shall be funded by the Owner in accordance with Section 4.4 .
6.3 Adjustments to Fees and Expenses . Notwithstanding anything to the contrary herein and except with respect to reimbursements for Emergency Expenditures, payments and reimbursements to the Operator for its costs and expenses pursuant to this Agreement (including, for the avoidance of doubt, this ARTICLE 6 ) shall only be made to the extent such costs and expenses are included in the Budget (as the same may be amended by a Budget Amendment). Notwithstanding the foregoing, the Operator shall not be entitled to reimbursement for any costs and expenditures (including Emergency Expenditures) to the extent that the circumstance giving rise to such costs and expenditures resulted from the Operator’s gross negligence or willful misconduct.
6.4 Payment . To the extent funds are available in the Management Account, the Operator shall withdraw the Management Fee and any uncontested amounts from the Management Account when such amounts first become due. The Owner agrees to pay interest at the rate equal to the Prime Rate plus two percent per annum (or the maximum rate permitted by Applicable Law, whichever is less) for all amounts not paid within thirty (30) days from the due date thereof.
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ARTICLE 7
FORCE MAJEURE
7.1 Nonperformance . In the event that either Party is rendered unable, by reason of an event of Force Majeure, to perform, wholly or in part, any obligation under this Agreement, then upon such Party’s giving notice and full particulars of such event as soon as practicable after the occurrence thereof to the other Party, the obligations of both Parties, to the extent they are affected by such event of Force Majeure, except for obligations to pay money then or thereafter due hereunder and except for the Operator’s obligation to take steps to deal with any Emergency in the Systems, shall be suspended to the extent and for the period of such Force Majeure condition.
7.2 Duty to Mitigate . The Party affected by an event of Force Majeure shall:
(a) use all reasonable efforts to continue to perform its obligations hereunder;
(b) take all reasonable action to correct or cure the event or condition constituting the Force Majeure;
(c) use all reasonable efforts to mitigate or limit the adverse effects of the event of Force Majeure and damages to the other Party, to the extent such action would not adversely affect its own interests; and
(d) provide prompt notice to the other Party of the cessation of the event of Force Majeure.
ARTICLE 8
RELEASE AND INDEMNIFICATION
8.1 Release and Indemnification by Owner .
(a) Notwithstanding anything in this Agreement to the contrary (including, for the avoidance of doubt, any failure by the Operator to act in accordance with the Standard of Care), the Owner hereby releases the Operator and its Affiliates and their respective partners, members, directors, officers, managers, employees, agents, representatives and invitees of any of the foregoing (the “ Operator Indemnitees ”) from and against all Losses and Claims arising out of, attributable to, in connection with or incidental to any act or omission of any Operator Indemnitees in carrying out the Services (including the administration, operation or maintenance of any of the Systems) INCLUDING AS A RESULT OF THE NEGLIGENCE (WHETHER SOLE, CONCURRENT, ACTIVE OR PASSIVE) AND ANY OTHER LEGAL FAULT, INCLUDING STRICT LIABILITY, OF ANY OPERATOR INDEMNITEES, THE OWNER OR ANY THIRD PARTY; provided , however , that the Owner will not be required to release any Operator Indemnitees from any Losses or Claims to the extent such Losses or Claims arise out of or in connection with or are attributable or incident to the gross negligence, willful misconduct or fraud of any Operator Indemnitee or as set forth in Section 3.3(b)(i) .
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(b) Notwithstanding anything in this Agreement to the contrary (including, for the avoidance of doubt, any failure by the Operator to act in accordance with the Standard of Care), the Owner shall be responsible for, pay on a current basis, defend, indemnify and hold harmless the Operator Indemnitees from and against all Losses and Claims asserted by a Third Party and arising out of, attributable to, in connection with or incidental to any act or omission of any Operator Indemnitees in carrying out the Services (including the administration, operation or maintenance of any of the Systems) INCLUDING AS A RESULT OF THE NEGLIGENCE (WHETHER SOLE, CONCURRENT, ACTIVE OR PASSIVE) AND ANY OTHER LEGAL FAULT, INCLUDING STRICT LIABILITY, OF ANY OPERATOR INDEMNITEES, THE OWNER OR ANY THIRD PARTY; provided , however , that the Owner will not be required to indemnify any Operator Indemnitees from any Losses or Claims to the extent such Losses or Claims arise out of or in connection with or are attributable or incident to the gross negligence, willful misconduct or fraud of any Operator Indemnitee.
8.2 Indemnification by Operator . Except as provided in Section 8.4 , but otherwise notwithstanding anything herein to the contrary, the Operator shall be responsible for, shall pay on a current basis and hereby releases, defends, indemnifies and holds harmless the Owner and its respective partners, members, directors, officers, managers, employees, agents, representatives and invitees of any of the foregoing (the “ Owner Indemnitees ”) from and against all Losses and Claims to the extent arising out of or in connection with or attributable or incidental to the gross negligence, willful misconduct or fraud of any Operator Indemnitee; provided that, notwithstanding the forgoing, the Operator shall have no obligation to the Owner Indemnitees under this Section 8.2 for any Losses or Claims to the extent arising out of or in connection with or attributable or incidental to the Operator ceasing to perform any Discontinued Service from and after the Service Termination Date in respect of such Discontinued Service.
8.3 No Double Recovery . Notwithstanding anything to the contrary herein, nothing shall prohibit the Operator from pursuing its indemnity rights under this ARTICLE 8 against the Owner for any Losses and Claims suffered or incurred by the Operator in excess of the insurance coverages required to be maintained by the Owner pursuant to this Agreement. In calculating any amount to be paid by an Indemnifying Party by reason of the provisions of this ARTICLE 8 , the amount shall be reduced by all cash tax benefits and other cash reimbursements (including net insurance proceeds) actually received (directly or indirectly, including by virtue of the Indemnified Party’s direct or indirect ownership interest in the Owner) by the Indemnified Party with respect to the applicable Claim or Loss.
8.4 DISCLAIMER OF LIABILITY . SUBJECT TO THE LAST SENTENCE OF THIS SECTION 8.4 , BUT OTHERWISE NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, AS BETWEEN THE PARTIES, A PARTY’S DAMAGES RESULTING FROM A BREACH OR VIOLATION OF ANY COVENANT, AGREEMENT OR CONDITION CONTAINED HEREIN OR ANY ACT OR OMISSION ARISING FROM OR RELATED TO THIS AGREEMENT SHALL BE LIMITED TO ACTUAL DAMAGES AND NONE OF THE OPERATOR INDEMNITEES OR THE OWNER INDEMNITEES SHALL BE ENTITLED TO RECOVER FROM THE OPERATOR OR THE OWNER OR
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THEIR RESPECTIVE AFFILIATES ANY INDIRECT, SPECIAL, CONSEQUENTIAL, INCIDENTAL, EXEMPLARY OR PUNITIVE DAMAGES. EACH PARTY EXPRESSLY RELEASES THE OTHER PARTY FROM ALL SUCH CLAIMS FOR DAMAGES OTHER THAN ACTUAL DAMAGES. IF A PARTY BECOMES OBLIGATED TO PAY A THIRD PARTY ANY INDIRECT, SPECIAL, CONSEQUENTIAL, INCIDENTAL, EXEMPLARY OR PUNITIVE DAMAGES, AND SUCH PARTY IS ENTITLED TO INDEMNIFICATION UNDER THE TERMS OF THIS AGREEMENT, THEN SUCH PARTY’S INDEMNIFICATION RIGHT SHALL INCLUDE ALL INDIRECT, SPECIAL, CONSEQUENTIAL, INCIDENTAL, EXEMPLARY AND PUNITIVE DAMAGES IT IS OBLIGATED TO PAY TO SUCH THIRD PARTY.
8.5 Indemnification Procedures . For purposes of this ARTICLE 8 , the term “ Indemnifying Party ”, when used in connection with particular Losses, shall mean the party or parties having an obligation to indemnify another party or parties with respect to such Losses pursuant to this ARTICLE 8 , and the term “ Indemnified Party ”, when used in connection with particular Losses, shall mean the party or parties having the right to be indemnified with respect to such Losses by another party or parties pursuant to this ARTICLE 8 .
(a) To make a claim for indemnification under Section 8.1(b) or 8.2 (as applicable), an Indemnified Party shall notify the Indemnifying Party of its claim under this Section 8.5 , including specific details, underlying facts and the specific basis under this Agreement for its claim (the “ Claim Notice ”).
(b) In the event that the claim for indemnification is based upon a claim by a Third Party against the Indemnified Party (a “ Third-Party Claim ”), the Indemnified Party shall provide its Claim Notice promptly after the Indemnified Party has actual knowledge of the Third-Party Claim and shall enclose a copy of all papers (if any) served with respect to the Third-Party Claim; provided , however , that the failure of any Indemnified Party to give notice of a Third-Party Claim as provided in this Section 8.5 shall not relieve the Indemnifying Party of its obligations under Section 8.1(b) or 8.2 (as applicable) except to the extent such failure results in insufficient time being available to permit the Indemnifying Party to effectively defend against the Third-Party Claim or otherwise prejudices the Indemnifying Party’s ability to defend against the Third-Party Claim.
(c) In the case of a claim for indemnification based upon a Third-Party Claim, the Indemnifying Party shall have thirty (30) days from its receipt of the Claim Notice to notify the Indemnified Party whether it shall assume the defense of such Third-Party Claim. The Indemnified Party is authorized, prior to and during such thirty (30) day period, to file any motion, answer or other pleading that it shall deem necessary or appropriate to protect its interests or those of the Indemnifying Party and that is not prejudicial to the Indemnifying Party.
(d) If the Indemnifying Party shall have assumed the defense of the Third-Party Claim, the Indemnifying Party shall have full control of such defense and proceedings, including any compromise or settlement thereof. If requested by the Indemnifying Party, the Indemnified Party shall cooperate in contesting any Third-Party Claim that the Indemnifying Party elects to contest. The Indemnified Party may participate in, but not control, any defense or settlement of any Third-Party Claim controlled by the Indemnifying Party pursuant to this
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Section 8.5(d) . An Indemnifying Party shall not, without the written consent of the Indemnified Party, (i) settle any Third-Party Claim or consent to the entry of any judgment with respect thereto that does not include an unconditional release of the Indemnified Party from all liability in respect of such Third-Party Claim or (ii) settle any Third-Party Claim or consent to the entry of any judgment with respect thereto in any manner that may materially and adversely affect the Indemnified Party (other than as a result of money damages covered by the indemnity).
(e) If the Indemnifying Party does not assume the defense of the Third-Party Claim, then the Indemnified Party shall have the right to defend against the Third-Party Claim at the cost and expense of the Indemnifying Party, with counsel reasonably satisfactory to the Indemnifying Party. Any settlement of the Third-Party Claim shall require the consent of the Indemnifying Party.
8.6 Sole Remedy . Other than the removal of the Operator as the operator of the Systems pursuant to Section 2.4 , the Parties agree that the right of the Owner to receive indemnification pursuant to Section 8.2 shall be the sole and exclusive remedy of the Owner for any breach by the Operator of any provision of this Agreement.
ARTICLE 9
CONFIDENTIAL INFORMATION; INSURANCE
9.1 Confidential Information .
(a) The Operator agrees that information related to confidential shipper information, pricing, cost data and other commercially or operationally sensitive information relating to the Business, including information that is typically considered confidential, shall be considered “ Confidential Information ” hereunder, shall be kept confidential and shall not be disclosed by Operator during the term of this Agreement and during the three year period following any termination of this Agreement to any Third Party, except:
(i) to an Affiliate of the Operator;
(ii) to the extent any Confidential Information is required to be furnished in compliance with Applicable Law, or pursuant to any legal proceedings or because of any order of any Governmental Authority that is binding upon a Party;
(iii) to prospective or actual attorneys engaged by Operator where disclosure of such Confidential Information is essential to such attorney’s work for such Party;
(iv) to prospective or actual contractors and consultants engaged by Operator where disclosure of such Confidential Information is essential to such contractor’s or consultant’s work for such Party;
(v) to its respective employees, subject to Operator taking customary precautions to ensure such Confidential Information is kept confidential; and
(vi) any Confidential Information which, through no fault of or breach of this Agreement by Operator, becomes a part of the public domain.
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(b) Disclosure pursuant to Section 9.1(a)(iv) shall not be made unless prior to such disclosure the Operator has obtained a written undertaking from the recipient to keep the Confidential Information strictly confidential for the term of this Agreement and to use the Confidential Information for the sole purpose described in Section 9.1(a)(iv) , whichever is applicable, with respect to the Operator.
(c) Notwithstanding anything to the contrary in this Section 9.1 , Operator or Affiliate of Operator may disclose information regarding the Business that is not Confidential Information in investor presentations, industry conference presentations or similar disclosures.
9.2 Insurance .
(a) The Parties shall, during the term of this Agreement, obtain and maintain the kinds of insurance and amounts of coverage set forth on Exhibit B . On the Effective Date, each Party shall provide to the other Party evidence that the insurance contemplated by this Section 9.2(a) has been obtained, such evidence being in the form of certificates of insurance.
(b) The Operator shall require that each Subcontractor obtains and maintains insurance which is customarily provided by Persons providing similar services as such Subcontractor.
(c) The cost of obtaining and maintaining the insurance policies required by this Section 9.2 are operating expenses of the Owner and shall be included in the Budget for each fiscal year.
ARTICLE 10
MISCELLANEOUS
10.1 Entire Agreement . This Agreement constitutes the complete and exclusive statement of agreement among, and replaces and supersedes all prior written and oral agreements or statements by and among the Parties with respect to the subject matter herein. There are no representations, agreements, arrangements or understandings, oral or written, by the Parties with respect to the subject matter hereof that are not fully expressed in this Agreement.
10.2 Amendment . This Agreement may not be amended or modified except by a written instrument specifically referring to this Agreement and executed by all of the Parties hereto.
10.3 Waiver . The failure of either Party hereto at any time or from time to time to require performance of the other Party’s obligations under this Agreement shall in no manner affect the right to enforce any provision of this Agreement at a subsequent time, and the waiver of any rights arising out of any breach shall not be construed as a waiver of any rights arising out of any subsequent breach.
10.4 Assignability . Neither Party may assign, delegate or transfer (by merger, operation of law or otherwise) its respective rights or delegate its respective obligations under this Agreement without the express prior written consent of the other Party. Any purported assignment, delegation, or transfer in contravention of this Section 10.4 shall be void and unenforceable.
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10.5 Parties in Interest . Except as provided in ARTICLE 8 , the provisions of this Agreement are solely for the benefit of the Parties hereto and their respective successors and permitted assigns, and are not intended to confer upon any other person any third party beneficiary rights under this Agreement.
10.6 Binding Effect . Except as otherwise specifically provided herein, this Agreement shall inure to the benefit of and shall be binding upon the Parties hereto and their respective permitted successors and permitted assigns.
10.7 Section Headings . Article, section and paragraph headings and a table of contents have been inserted in this Agreement as a matter of convenience for reference only, such headings are not a part of this Agreement and shall not be used in the interpretation of any provision of this Agreement.
10.8 Notices . All notices, requests, demands or other communications provided for hereunder shall be in writing. Notices may be given by personal delivery, by overnight courier, by facsimile transmission, or by certified or registered United Sates mail, return receipt requested. Except as otherwise expressly provided herein, notice shall be deemed to have been given (a) if by personal delivery, on the date of delivery; (b) if by overnight courier, on the earlier of the date delivery is first attempted or the next Business Day after the same has been delivered to a reputable commercial overnight courier; (c) if by facsimile transmission, on the date of such transmission if sent by 3:00 p.m. (Houston time) on a Business Day, or if sent thereafter, on the next Business Day; provided , however , that (i) evidence of a successful transmission shall be retained by the Party sending the same and (ii) a copy of such notice shall also be sent on the same day as the facsimile transmission using another means for giving notice permitted herein; and (d) if by certified or registered United States Mail, on the earlier of the date delivery is first attempted or two (2) Business Days after delivery to the United States Post Office, postage prepaid, return receipt requested. Notices shall be sent to the intended recipient at the addresses set forth below its signature on the signature page, or to the most recent addresses which the intended recipient has provided to the other parties for purposes of, and in accordance with, this Section 10.8 .
10.9 Severability . In the event any provision of this Agreement is determined to be invalid or unenforceable, such provision shall be deemed severed from the remainder of this Agreement and replaced with a valid and enforceable provision as similar in intent as reasonably possible to the provision so severed and shall not cause the invalidity or unenforceability of the remainder of this Agreement.
10.10 Governing Law . This Agreement, and any instrument or agreement required hereunder (to the extent not expressly provided for therein), shall be governed by, and construed under, the internal laws of the State of Texas, without reference to conflicts of laws rules or principles that might refer construction to the laws of another jurisdiction.
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10.11 Consent to Jurisdiction . Each Party irrevocably consents and agrees that any action, proceeding, or other litigation by or against any other party or parties with respect to any claim or cause of action based upon or arising out of or related to this Agreement or the transactions contemplated hereby, shall be brought and tried exclusively in the federal or state courts located in the City of Houston, County of Harris, in the State of Texas, and any such legal action or proceeding may be removed to the aforesaid courts. By execution and delivery of the Agreement, each Party accepts, for itself and in respect of its property, generally and unconditionally, the exclusive jurisdiction of the aforesaid courts. Each Party hereby irrevocably waives (a) any objection which it may now or hereafter have to the laying of venue with respect any such action, proceeding, or litigation arising out of or in connection with this Agreement or the transactions contemplated hereby brought in the aforesaid courts, and (b) any right to stay or dismiss any such action, proceeding, or litigation brought before the aforesaid courts on the basis of forum non-conveniens . Each Party further agrees that personal jurisdiction over it may be affected by service of process by certified mail, postage prepaid, addressed as provided in Section 10.8 of this Agreement, and when so made shall be as if served upon it personally within the State of Texas.
10.12 WAIVER OF RIGHT TO JURY TRIAL . TO THE EXTENT PERMITTED BY LAW, EACH PARTY HEREBY WAIVES ITS RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES OR THEIR RESPECTIVE INDEMNITEES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. EACH PARTY HEREBY AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT, OR ANY PROVISION HEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.
10.13 Further Assurances . The Parties agree to execute such additional instruments, agreements and documents, and to take such other actions, as may be necessary to effect the purposes of this Agreement.
10.14 Counterparts . This Agreement may be executed in any number of counterparts and, when so executed, all of such counterparts shall constitute a single instrument binding upon all parties notwithstanding the fact that all parties are not signatory to the original or to the same counterpart. This Agreement may be executed and delivered by facsimile, or by email in portable document format (.pdf) and delivery of the executed signature page by such method will be deemed to have the same effect as if the original signature had been delivered to other the parties.
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10.15 Exhibits . All Exhibits attached to this Agreement are incorporated and shall be treated as if set forth herein.
10.16 Timing . All dates and times specified in this Agreement are of the essence and shall be strictly enforced. Except as otherwise specifically provided in this Agreement, all actions that occur after the 5:00 p.m. local time on a given day shall be deemed for purposes of this Agreement to have occurred at 9:00 a.m. on the following day. In the event that the last day for the exercise of any right or the discharge of any duty under this Agreement would otherwise be a day that is not a Business Day, the period for exercising the right or discharging such duty shall be extended until the 5:00 p.m. local time on the next succeeding Business Day.
10.17 Miscellaneous . No failure or delay by any Party in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof; any actual waiver shall be contained in a writing signed by the Party against whom enforcement of such waiver is sought. This Agreement shall not be construed for or against any Party by reason of the authorship or alleged authorship of any provisions hereof or by reason of the status of the respective Parties.
[SIGNATURES TO FOLLOW]
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IN WITNESS WHEREOF, the Parties have caused this Operating Transition Services Agreement to be executed by a duly authorized officer as of the date first written above.
| ASSET RISK MANAGEMENT, LLC, | ||
| a Delaware limited liability company | ||
| By: |
/s/ Zachary D. Lee |
|
| Name: | Zachary D. Lee | |
| Title: | Chief Executive Officer | |
| Address : | 20329 State Highway 249 | |
| Suite 450 | ||
| Houston, TX 77070 | ||
| Attn: Zachary D. Lee | ||
| Phone: (281) 664-0041 | ||
| Fax: (281) 664-0029 | ||
| Email: zachlee@asset-risk.com |
| KINGFISHER MIDSTREAM, LLC, | ||
| a Delaware limited liability company | ||
| By: KFM Holdco, LLC | ||
| By: |
/s/ Michael Christopher |
|
| Name: Michael Christopher | ||
| Title: Secretary and Chief Financial Officer | ||
| Address : | 20329 State Highway 249 | |
| Suite 450 | ||
| Houston, TX 77070 | ||
| Attn: Michael Christopher | ||
| Phone: (281) 655-3200 | ||
| Fax: (281) 664-0029 | ||
| Email: mchristopher@asset-risk.com |
SIGNATURE PAGE
TO THE
OPERATING TRANSITION SERVICES AGREEMENT
EXHIBIT A
BUDGET
(as attached)
EXHIBIT B
INSURANCE
Without limiting any of the obligations and liabilities of either Party at law or in equity, the Parties shall carry, or cause to be carried and maintained for the duration of this Agreement, the insurance outlined in this Exhibit B and any additional insurance as may be required by Applicable Law or as may be otherwise either (i) specified by the Owner, provided that any such additional insurance shall be at the sole cost and expense of the Owner, or (ii) mutually agreed upon by the Owner and the Operator from time to time:
Operator’s Insurance . The Operator shall maintain insurance specified in items 1 through 6 below which shall be at the sole cost and expense of Operator:
| 1. | Commercial General Liability Insurance with an inclusive bodily injury, death, and property damage limit not less than One Million Dollars ($1,000,000) per occurrence. This policy shall include coverage for products and completed operations, severability of interests and cross liability and shall include contractual liability addressing indemnification under this Agreement. The policy shall include the Owner as an additional insured. |
| 2. | Statutory Worker’s Compensation in accordance with all applicable statutory requirements of the state(s) in which the work is performed, in all state(s) where employees are domiciled or reside, including Alternate Employers Endorsement and shall waive insurer’s rights of recovery or subrogation against the Owner. |
| 3. | Employer’s Liability Insurance with a limit of One Million Dollars ($1,000,000) each accident, One Million Dollars ($1,000,000) by disease each employee, and One Million Dollars ($1,000,000) by disease policy limit. |
| 4. | Automobile Liability Insurance covering all licensed motor vehicles or snowcraft and all-terrain vehicles, which are owned, non-owned, leased or operated by the Operator and used in connection with this Agreement with an inclusive bodily injury, death and property damage limit of One Million Dollars ($1,000,000) per accident. Such insurance shall include a waiver of insurer’s right of recovery or subrogation against the Owner and shall add the Owner as an additional insured. |
| 5. | The Operator shall provide to the Owner on the Effective Date and upon annual renewal thereafter, evidence of compliance with this exhibit in the form of certificates of insurance. The amounts of insurance and coverage required in this section may be satisfied by multiple policies which, when combined together, provide the total limits of insurance specified. |
| 6. | Umbrella and/or Excess Liability Insurance written on a “Following Form” basis and providing coverage excess of operational insurance for Employer’s Liability, Automobile Liability and Commercial General Liability required under this exhibit, with a combined single limit of at least Ten Million Dollars ($10,000,000) per occurrence and in aggregate. |
| EXHIBIT B | Page 1 |
Owner’s Insurance Requirements . The Owner shall maintain at its sole cost and expense, on behalf of the Owner, the following insurance:
| 1. | Construction Insurance for Systems . For any construction for the Systems that commences after the Effective Date of this Agreement, commencing with, and during the term of said construction for the Systems, the Owner shall obtain and maintain construction-specific insurance in such limits and with such extensions as would be maintained by reasonable and prudent operators during similar construction activities, including: |
| • | Construction Liability Insurance, also known as General Liability Insurance, with a limit to be reasonably determined by the Owner, but in any case not less than Thirty Million Dollars ($30,000,000) for each occurrence or accident, including property damage, bodily injury (including death at any time resulting therefrom) and personal injuries sustained by any Third Party (other than, with respect to the Operator, a Third Party that controls or is controlled by the Operator) because of bodily injury or destruction of property arising from construction activities. Such coverage shall include Non-owned Automobile Liability, Contractual Liability and Sudden and Accidental Pollution Liability. Coverage shall extend to include the Owner, the Operator, contractors and subcontractors as additional insureds, in connection with the work and shall waive subrogation against such additional insureds. The policy shall provide for coverage during the term of construction, and include products and completed operations coverage following commissioning of the Systems. For purposes of this paragraph, “control” or “is controlled by” shall mean the possession, whether direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise. |
| • | Builder’s Risk Insurance The Owner, shall obtain and maintain builder’s all-risk insurance on a completed value form with “extended coverage” (including earthquake, flood, collapse, and sinkhole) to the full insurable value of the work on a replacement costs basis (excepting customary sub-limits and aggregate sub-limits), in an amount not less than, $74,000,000 with coverage for debris removal, increased cost of construction, expediting expense, the Operator’s continuing hire and wage expense (allowing reasonable overheads), concealed damage 50/50 clause, and pollution clean-up following a loss. Such policy shall commence on or before the Effective Date and provide coverage for physical damage to the Systems including, during inland transit, or at an offsite storage/laydown area, property removed for repair, normal and customary perils insurable during commissioning and testing. The Owner shall also maintain or cause to be maintained with respect to the Systems delay-in-start-up insurance on an “all risk” basis to cover expenses. Any associated delayed-start claims (or claims to the Owner-furnished property prior to handing over care, custody and control to the Operator), shall be adjusted directly between the Owner and insurers of this builder’s all-risk insurance. |
| EXHIBIT B | Page 2 |
Coverage shall remain in effect until replaced by permanent property insurance to be obtained by the Owner. If any damage or loss occurs that is covered by the builder’s all-risk policy or other property insurance applicable to the work, or other property at or adjacent to the work site, (a) the Operator shall be responsible for the payment of deductible amounts under the applicable policy if the damage or loss is caused by the acts or omissions of the Operator or its subcontractors (of any tier), not to exceed, in each instance, $100,000; and (b) the Owner shall be responsible for the payment of all other deductible amounts.
| • | Delay In Completion Coverage – For construction projects commencing after the Effective Date, Owner shall obtain and maintain Delay in Completion Coverage in the amount of $20,000,000, covering direct physical loss or damage to the Systems containing terms, sub-limits and extensions of coverage applicable to the Systems. This insurance policy will be written on an “all-risk basis”. |
| • | Any other insurance reasonably determined to be necessary by the Owner. |
| • | The amounts of insurance and coverage required in this section may be satisfied by multiple policies which, when combined together, provide the total limits of insurance specified. |
Additional Owner Insurance . The Owner shall maintain at its sole cost and expense, on behalf of the Owner, the following insurance:
| • | Commercial General Liability Insurance with an inclusive bodily injury, death, and property damage limit to be reasonably determined by the Owner, but in any case not less than One Million Dollars ($1,000,000) per occurrence. This policy shall include coverage for products and completed operations, severability of interests and cross liability and shall include contractual liability addressing indemnification under this Agreement. The policy shall include the Operator as named insured and shall waive all rights of subrogation or recovery against the Operator and the Owner. |
| • | Statutory Worker’s Compensation in accordance with all applicable statutory requirements of the state(s) in which the work is performed, in all state(s) where employees are domiciled or reside, including Alternate Employers Endorsement and shall waive insurer’s rights of recovery or subrogation against the Operator. |
| • | Employer’s Liability Insurance with a limit of One Million Dollars ($1,000,000) each accident, One Million Dollars ($1,000,000) by disease each employee, and One Million Dollars ($1,000,000) by disease policy limit. Such insurance shall include a waiver of insurer’s right of recovery or subrogation against the Operator and shall add the Operator as an alternative employer. |
| • | Automobile Liability Insurance covering all licensed motor vehicles or snowcraft and all-terrain vehicles, which are owned, non-owned, leased or operated by the Owner and used in connection with this Agreement with an inclusive bodily injury, death and property damage limit of One Million Dollars ($1,000,000) per accident. Such insurance shall include a waiver of insurer’s right of recovery or subrogation against the Operator and shall add the Operator as an additional insured. |
| EXHIBIT B | Page 3 |
| • | Umbrella and/or Excess Liability Insurance written on a “Following Form” basis and providing coverage excess of operational insurance for Employer’s Liability, Worker’s Compensation, Automobile Liability and Commercial General Liability required under this exhibit, with a combined single maximum limit of Twenty Five Million Dollars ($25,000,000) per occurrence and in aggregate. |
| • | Property Insurance with a limit to be determined by the Owner, but in any case not less than, $147,766,064, with an additional $70,000,000 for Business Interruption , covering direct physical loss or damage to the Systems containing terms, sub-limits and extensions of coverage applicable to the Systems. This insurance policy will be written on an “all-risk basis” form with “extended coverage” (including earthquake, flood, collapse, and sinkhole) to the full insurable value of the Systems on a replacement cost basis (excepting customary sub-limits and aggregate sub-limits). |
| • | Any other insurance reasonably determined to be necessary by the Owner. |
| • | The amounts of insurance and coverage required in this section may be satisfied by multiple policies which, when combined together, provide the total limits of insurance specified. |
Other Insurance Items .
| 2. | The insurance maintained pursuant to this exhibit shall: (a) be with insurance companies authorized to do business in the state(s) where activities under the Agreement will occur and shall be rated at least A-VII by AM Best or A by Standard & Poors; (b) be endorsed to show, or shall otherwise contain language that such insurance will be primary to and not contributory with any other insurance available to the Operator and the Owner. In the case of construction activities, any construction insurance obtained and maintained under this Agreement shall be endorsed to be primary with respect to any other insurance available to the Owner and the Operator; (c) provide thirty (30) days’ advance notice of cancellation to the Owner and the Operator; and (d) include a provision that such policy shall survive the default or bankruptcy of the insured for claims arising out of an event before such default or bankruptcy. |
| 3. | In the event that any insurance described within this exhibit other than insurance required by Applicable Law, shall, in the reasonable opinion of the Party obligated to obtain and maintain such insurance, be unavailable on commercially reasonable terms, then the such Party shall promptly notify the other Party; however , the Parties will remain obligated to maintain such insurance up to the level, if any, at which such insurance can be maintained on commercially reasonable terms in the commercial insurance market for systems similar to the Systems. |
| 4. | Each Party shall ensure that the insurance required to be obtain and maintain by such Party hereunder be obtained on, and shall include terms and conditions which are, in such Party’s reasonable opinion, the best available from the marketplace on reasonable terms and ordinary or appropriate. |
| EXHIBIT B | Page 4 |
| 5. | If the Operator makes any payments with respect to any losses, damages, claims or liabilities arising out of this Agreement which are covered by insurance policies maintained by the Owner hereunder with the approval of the insurers thereof such payments shall be reimbursed by the Owner to the Operator. |
| 6. | The Operator and the Owner shall cooperate and shall provide each other with such assistance and materials as is required to support the placement of insurance and to substantiate such damages or losses for the purposes of claim recoveries sought under insurance coverage required by this exhibit. |
| 7. | All of the Operator’s coverages shall stipulate that the Operator’s insurance will be primary to and non-contributory with any other insurance carried by the Owner. Similarly, all of the Owner’s coverage shall stipulate that the Owner’s insurance will be primary to and non-contributory with any other insurance carried by the Operator. Each policy insuring against liability to third parties shall contain a severability of interests or cross liability provision where applicable. |
| 8. | Any insurance carried hereunder that is written to cover more than one insured, shall provide that all terms, conditions, insuring agreements and endorsements, shall operate in the same manner as if there were a separate policy covering such insured. |
| 9. | Before permitting any subcontractors to perform any work with respect to the Systems, the Operator shall obtain a certificate of insurance from each such subcontractor evidencing that such subcontractor has obtained the required insurance. The Operator shall be responsible for ensuring that policies of subcontractors insurance name the Owner as an additional insured. The Operator shall be responsible for ensuring that all policies of subcontractors’ insurance include a waiver of any right of subrogation of the insurers thereunder against the Owner. |
| EXHIBIT B | Page 5 |
Exhibit 10.12
February 9, 2018
James T. Hackett
c/o Alta Mesa Resources, Inc.
1000 Louisiana Street, Suite 1450
Houston, Texas 77002
Re: Vesting Provisions
Dear Jim:
In connection with your employment by Alta Mesa Resources, Inc. (known prior to the consummation of its initial business combination as Silver Run Acquisition Corporation II) or any of its subsidiaries (together, the “ Company ”), you will be eligible to participate in the Alta Mesa Resources, Inc. 2018 Long Term Incentive Plan (the “ LTIP ”) or any other incentive plan sponsored by the Company which provides for equity grants of incentive awards.
This letter is to inform you that, notwithstanding anything in the LTIP or any award agreement thereunder (an “ Award Agreement ”) to the contrary, in the event you are involuntarily terminated by the Company other than for Cause (and not including death or termination due to Disability), or if you terminate your employment for Good Reason, you will become immediately 100% vested in any outstanding awards of restricted stock, stock options and any other equity incentive awards granted to you prior to the third anniversary of closing of the Company’s initial business combination under the LTIP (or any other equity incentive plan of the Company) that vest solely based on the passage of time (with any such awards that vest based on the attainment of performance-based vesting conditions vesting at the target level).
For purposes of this letter, “ Cause ” means any of the following: (a) your final conviction by a court of competent jurisdiction of a felony involving moral turpitude, or entering the plea of nolo contendere to such felony by you; (b) the commission by you of a demonstrable act of material fraud, or a proven and material misappropriation of funds or other property, of or upon the Company or any affiliate thereof; (c) the engagement by you, without the written approval of the Company, in any material activity which directly competes with the business of the Company or any affiliate thereof, or which would directly result in a material injury to the business or reputation of the Company or any affiliate thereof; or (d) the breach by you of any material provision of this letter agreement or any other written employment or consulting agreement with the Company. With respect to items (c) and (d) above, in order to constitute “Cause” hereunder, you must also fail to cure such breach within a reasonable time period set by the Company but in no event less than twenty (20) calendar days after your receipt of such notice.
For purposes of this letter, “ Disability ” means that (a) you are unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or last for a continuous period of not less than 12 months, or (b) by reason of any medically determinable physical or mental impairment which can be expected to result in death or to last for a continuous period of not less than 12 months, you are receiving income replacement for a period of not less than three months under an accident and health plan covering employees of the Company. Evidence of such Disability shall be certified by a physician acceptable to both the Company and you. In the event that the parties hereto are not able to agree on the choice of a physician, each shall select one physician who, in turn, shall select a third physician to render such certification. All reasonable costs directly relating to the determination of whether you have incurred a Disability for purposes of this letter shall be paid by the Company. You agree to submit to any examinations that are reasonably required by the attending physician or other healthcare service providers to determine whether you have a Disability.
For purposes of this letter, “ Good Reason ” means the occurrence of any of the following without your prior written consent, if not cured and corrected by the Company or its successor, within 60 days after written notice thereof is provided by you to the Company or its successor, provided such notice is delivered within 90 days after the occurrence of the applicable condition or event and that you resign from employment with the Company within 90 days following expiration of such 60-day cure period: (a) the demotion or reduction in your title or rank, or the assignment to you of duties that are materially inconsistent with your positions, duties and responsibilities with the Company, or any removal of you from, or any failure to nominate for your re-election to, any of such positions (other than a change due to your Disability or as an accommodation under the American with Disabilities Act), except for any such demotion, reduction, assignment, removal or failure that occurs in connection with your termination of employment for Cause, Disability or death; (b) the reduction of your annual base salary and/or target bonus opportunity, as compared to your aggregate base salary and target bonus opportunity as effective immediately prior to such reduction, if such reduction of base salary and/or target bonus opportunity, on an aggregated basis, is five percent (5%) or greater of the aggregate base salary and target bonus opportunity as effective immediately prior to such reduction; (c) a relocation of your principal work location to a location in excess of 50 miles from its then current location; or (d) failure to nominate you to be re-elected to the board of directors of the Company. For the avoidance of doubt, the closing of the transactions contemplated by that certain Contribution Agreement by and among High Mesa Holdings, LP, High Mesa Holdings GP, LLC, Alta Mesa Holdings GP, LLC, the Company and certain other parties thereto, dated as of August 16, 2017, as the same may be amended from time to time, will not by itself be deemed to provide a basis for you to resign for Good Reason.
This letter may not be altered or otherwise amended except pursuant to an instrument in writing executed and delivered by each of the parties hereto. This letter, together with the LTIP and any award agreement thereunder, each as amended from time to time, constitutes the entire agreement between the parties with respect to the matters covered hereby and thereby and supersedes all prior agreements and understandings, both oral and written, between the parties with respect thereto. For the avoidance of doubt, in the event of any conflict between the terms of this letter and the LTIP or any award agreement thereunder, this letter shall control.
We appreciated your service to the Company.
| Sincerely, | ||
| ALTA MESA RESOURCES, INC. | ||
| a Delaware corporation | ||
| By: | /s/ Harlan H. Chappelle | |
| Name: | Harlan H. Chappelle | |
| Title: | Chief Executive Officer | |
Acknowledged and Agreed:
| /s/ James T. Hackett |
| James T. Hackett |
2
Exhibit 10.13
Execution Copy
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the “ Agreement ”), is made and entered into as of February 9, 2018 (the “ Effective Date ”), by and between Alta Mesa Services, LP, a Texas limited partnership (the “ Company ”), Harlan H. Chappelle (hereafter “ Executive ”) and, solely with respect to Section 41, Alta Mesa Holdings, LP, a Texas limited partnership (“ Alta Mesa ”). The Company and Executive may sometimes hereafter be referred to singularly as a “ Party ” or collectively as the “ Parties .”
WITNESSETH:
WHEREAS , Alta Mesa Holdings, L.P. (the “ Parent ”), has entered into a Contribution Agreement by and among High Mesa Holdings, LP, High Mesa Holdings GP, LLC, Alta Mesa Holdings GP, LLC, Silver Run and certain other parties thereto, dated as of August 16, 2017, as the same may be amended from time to time, pursuant to which Silver Run will acquire certain of the outstanding equity interests in Parent (the “ Transaction ”); and
WHEREAS , the Company desires to continue to secure the employment services of Executive subject to the terms and conditions hereafter set forth;
NOW, THEREFORE, in consideration of Executive’s continued employment with the Company, and the premises and mutual covenants contained herein, the Parties hereto agree as follows:
1. Employment Position and Defined Terms . During the Employment Period (as defined in Section 4 ), the Company shall employ Executive, and Executive shall serve, as President and Chief Executive Officer of the Company. During the Employment Period, Executive shall also serve in the same positions of employment with Silver Run as he does with the Company for no additional compensation. Executive’s principal place of employment shall be at the main business offices of the Company in Houston, Texas. Defined terms used in the Agreement that are not otherwise defined herein when first used are defined in Sections 6(d) and 10(d) .
2. Compensation .
(a) Base Salary. The Company shall pay to Executive during the Employment Period a base salary of Eight Hundred Thirty Thousand dollars ($830,000) per year, as adjusted pursuant to the subsequent provisions of this paragraph (the “ Base Salary ”). The Base Salary shall be payable in accordance with the Company’s normal payroll schedule and procedures for its executives. Nothing contained herein shall preclude the payment of any other compensation to Executive at any time as determined by the Board.
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(b) Annual Bonus.
(1) In addition to the Base Salary in Section 2(a) , for each annual fiscal year of the Company during the Employment Period (each such annual period being referred to as a “ Bonus Period ”), Executive will be eligible to participate in an annual bonus program established by the Board, under which Executive shall receive a bonus equal to a percentage of Executive’s Base Salary paid during each such one-year period (referred to herein as the “ Annual Bonus ”), such percentage to be established by the Board in its sole discretion; provided, however, that the payment of any Annual Bonus will be subject to the Board’s discretion and made only if Executive has met the pre-established performance criteria set by the Board for the Bonus Period.
(2) In the event that the Employment Period ends before the end of the Bonus Period, Executive shall be entitled to a pro rata portion of the Annual Bonus for that year (based on the number of days in which Executive was employed during the year divided by 365), as determined based on satisfaction of the performance criteria for that Bonus Period on a pro rata basis (calculated as if the final day of the Employment Period were the final day of the applicable Bonus Period), unless Executive was terminated for Cause or terminated voluntarily without Good Reason, in any of which events Executive shall not be entitled to any Annual Bonus for that year.
(3) If Executive successfully meets the performance criteria for a Bonus Period, the Company shall pay Executive the Annual Bonus amount determined by the Board within the earlier of: (A) sixty days (60) days after the end of the Bonus Period or (B) sixty days (60) after the end of the Employment Period.
(c) Compensation in Event of Injury or Sickness. In the event that Executive becomes injured or suffers a medically determinable physical or mental illness, as determined by a physician acceptable to both the Company and Executive in the same manner as provided in the definition of Disability in Section 6(d) , during the Employment Period, Executive shall be entitled to receive continued Base Salary (as set forth in Section 2(a) ) for a period of six (6) months following the occurrence of such injury or sickness; provided, however, such Base Salary shall be reduced by any short-term and/or long-term disability income benefits that are received by Executive under such programs sponsored by the Company (or an Affiliate) during such 6-month period.
3. Duties and Responsibilities of Executive . During the Employment Period, Executive shall devote his full working time to (a) the business of the Company and its Affiliates and (b) performance of the duties and responsibilities assigned to Executive by the Board to the best of Executive’s ability and with reasonable diligence. In determining Executive’s duties and responsibilities, Executive shall not be assigned duties and responsibilities that are materially inconsistent with Executive’s position. This Section 3 shall not be construed as preventing Executive from (a) engaging in reasonable volunteer services for charitable, educational or civic organizations, or (b) investing personal assets in such a manner that will not require a material amount of the Executive’s time or services in the operation of the businesses in which such investments are made; provided, however, no such other activity shall conflict or materially interfere with Executive’s loyalties, duties or responsibilities to the Company and its Affiliates. Executive shall at all times use his best efforts to comply in good faith with United States laws applicable to Executive’s actions on behalf of the Company and its Affiliates. Executive understands and agrees that Executive may be required to travel from time to time for purposes of the Company’s business. The Parties agree that Executive’s principal work location cannot be relocated further than 50 miles from Executive’s principal work location on the Effective Date, except as mutually agreed by the Parties.
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4. Term of Employment . Executive’s term of employment with the Company under this Agreement shall be for the period from the Effective Date through the date that is three (3) years from the Effective Date, unless earlier terminated in accordance with this Agreement, and if not earlier terminated, this Agreement will expire upon the date that is three (3) years from the Effective Date.
The period from the Effective Date through the earlier of the third (3rd) anniversary of the Effective Date and the date of Executive’s termination of employment with the Company and its Affiliates for whatever reason (the “ Termination Date ”) shall be referred to herein as the “ Employment Period .” Notwithstanding the above, Executive agrees to remain available beyond the Employment Period to provide assistance to the Company or its Affiliate in the event that the Company or an Affiliate become involved in litigation (or another type of dispute or controversy) regarding matters of which Executive has relevant knowledge resulting from Executive’s employment with the Company or an Affiliate. Such post-termination assistance shall be provided by Executive in the capacity of an independent contractor at an agreed-upon, reasonable consulting fee, and shall not be deemed to create or continue an employee-employer or fiduciary relationship, or to represent a continuation of this Agreement.
5. Benefits . Subject to the terms and conditions of this Agreement, during the Employment Period, Executive shall be entitled to all of the following:
(a) R eimbursement of Business Expenses. The Company shall pay or reimburse Executive for all reasonable travel, entertainment and other business expenses paid or incurred by Executive in the performance of duties hereunder. The Company shall also provide Executive with suitable office space, including staff support, paid parking, and necessary equipment, including but not limited to, cellular telephone and laptop computer.
(b) Other Employee Benefits. Executive shall be entitled to participate in any pension, retirement, 401(k), profit-sharing, and other employee benefits plans or programs of the Company to the same extent as available to other senior management employees of the Company under the terms of such plans or programs. Executive shall also be entitled to participate in any group insurance, hospitalization, medical, dental, health, life, accident, disability and other employee benefits plans or programs of the Company to the extent available to other senior management employees of the Company, and their spouses and eligible dependents, under the terms of such plans or programs including any medical expense reimbursement account and post-retirement medical program as made available to other senior management employees of the Company.
(c) Vacation and Holidays . Executive shall be entitled to five (5) weeks of paid vacation per calendar year (prorated in any calendar year during which Executive is employed for less than the entire year based on the number of days in such calendar year in which Executive was employed). Executive shall also be entitled to all paid holidays and personal days provided by the Company for its key management employees under the Company’s personnel policy as then effective. Unused vacation shall not carry over to the following year unless specifically approved by the Company.
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(d) Equity Incentive Awards. Executive shall be eligible to participate in the Alta Mesa Resources, Inc. 2018 Long Term Incentive Plan (the “ LTIP ”) or any other incentive plan sponsored by the Company which provides for equity grants of incentive awards. The terms and conditions of any equity incentive award granted to Executive shall be set forth in the incentive plan document and award agreement governing such award.
(e) Annual Physical. Executive shall be entitled to be reimbursed by the Company for the full cost of an annual physical examination by a physician (1) selected by the Company or (2) selected by Executive and approved by the Company.
(f) Key Man or Company-Owned Life Insurance. The Company may, at any time during the term of this Agreement, apply for and procure as owner, and for its sole benefit, life insurance on the Executive’s life in such amounts and in such forms as the Company may select. Executive hereby acknowledges that he will have no interest whatsoever in any such insurance policy. Executive shall submit to such medical examinations, supply such information, and execute such documents as may be reasonably requested by the insurer to obtain any such key man policy.
(g) Tax Planning, Preparation and Advice. Executive shall be entitled to be reimbursed by the Company for the cost of tax preparation and planning by a certified financial planner or certified public accountant (1) selected by the Company or (2) selected by Executive and approved by the Company, provided that such annual reimbursement shall not exceed $5,000.00.
6. Rights and Payments upon Termination . The Executive’s right to compensation and benefits for periods after the Termination Date shall be determined in accordance with this Section 6 . Except as otherwise expressly required by law or as specifically provided in an employee benefit plan or this Agreement, all of Executive’s rights to salary, severance, benefits, bonuses and other compensatory amounts under this Agreement shall cease upon the Termination Date.
(a) Minimum Payments and Vesting. Executive shall be entitled to the following minimum payments under this Section 6(a) , in addition to any other payments or benefits which Executive is entitled to receive under the terms of any employee benefit plan or program or Section 6(b) :
(1) unpaid salary for the full calendar month in which the Termination Date occurs; provided, however, if Executive is terminated for Cause or terminates his employment voluntarily without Good Reason, Executive shall only be entitled to receive accrued but unpaid salary through the Termination Date;
(2) unpaid vacation days for that year which have accrued through the Termination Date;
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(3) reimbursement of reasonable business expenses that were incurred but unpaid as of the Termination Date; and
(4) to the extent Executive participated in any nonqualified deferred compensation plan or program with vesting criteria, or received any equity incentive grant that is not fully vested, as of the Termination Date, Executive will automatically vest as of the Termination Date as follows:
(A) subject to Section 6(c) , if Executive is involuntarily terminated by the Company other than for Cause (and not including death or termination due to Disability), or if the Executive terminates his employment for Good Reason, Executive shall become immediately 100% vested in (i) any outstanding awards of restricted stock, stock options and any other equity incentive awards granted under the LTIP (or any other equity incentive plan of the Company or Silver Run) that vest solely based on the passage of time (with any such awards that vest based on the attainment of performance-based vesting conditions vesting at the target level); and (ii) any nonqualified deferred compensation account balance or benefit; and
(B) if Executive is terminated by the Company for Cause, or voluntarily terminates his employment without Good Reason, all unvested equity incentive awards shall be treated in accordance with the terms of the outstanding award agreement or plan document, as applicable.
Salary and accrued vacation days under this Section 6(a) shall be paid to Executive within five (5) business days following the Termination Date in a cash lump sum payment, less applicable withholdings. Business expenses shall be reimbursed in accordance with the Company’s normal procedures.
(b) Other Severance Payments. In the event that during the Employment Period (i) Executive’s employment is involuntarily terminated by the Company (except due to a No Severance Benefits Event), (ii) Executive’s employment is terminated due to death or Disability, or (iii) Executive terminates his employment for Good Reason; then in any such event under clause (i), (ii), or (iii), subject to Section 6(c) , the following severance benefits shall be provided to Executive or, in the event of his death before receiving all such benefits, to Executive’s Designated Beneficiary following his death:
(1) Additional Payment . The Company shall pay additional compensation as described in this Section 6(b )( 1) (the “ Additional Payment ”). Subject to Section 6(c) , the Company shall make the Additional Payment to Executive in a cash lump sum, net of applicable withholdings.
(A) Termination Not Following Change in Control . If the Termination Date does not occur within the 21-month period immediately following a Change in Control, the Additional Payment shall be (i) an amount equal to two (2) years of Executive’s Base Salary in effect as of the Termination Date, (ii) an amount equal to two times (2x) the greater of (x) 100% of the “target” bonus for
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Executive for the year containing the Termination Date or (y) the amount of the Annual Bonus paid to the Executive for the year immediately preceding the year containing the Termination Date, and (iii) an additional $40,000 lump sum cash payment for outplacement services. In such event, the Additional Payments described in Section 6(b)(1)(C) following a Change in Control shall be inapplicable for Executive.
(B) Anticipatory Termination . If the Executive incurs an Anticipatory Termination, he shall be entitled to receive, in addition to the payment described in Section 6(b)(1)(A) above, an additional amount equal to the sum of (i) one year of Executive’s Base Salary in effect as of the Termination Date, plus (ii) the greater of (x) 100% of the “target” bonus for Executive for the year containing the Termination Date or (y) the amount of the Annual Bonus paid to the Executive for the year immediately preceding the year containing the Termination Date (the “ Anticipatory Termination Payment ”). In such event, the Additional Payments described in Section 6(b)(1)(C) following a Change in Control shall be inapplicable for Executive. The Anticipatory Termination Payment shall be subject to the Executive executing a second release agreement, as described in Section 6(c) , but covering only the period from the Termination Date until the date immediately following the Change in Control.
(C) Termination Following Change in Control . If the Termination Date occurs within the 21-month period immediately following a Change in Control, the Additional Payment shall be (i) an amount equal to three (3) years of Executive’s Base Salary in effect as of the Termination Date, (ii) an amount equal to three times (3x) the greater of (x) 100% of the “target” bonus for Executive for the year containing the Termination Date or (y) the amount of the Annual Bonus paid to the Executive for the year immediately preceding the year containing the Termination Date, and (iii) an additional $40,000 lump sum cash payment for outplacement services. In such event, the Additional Payments described in Sections 6(b )( 1)(A) and 6(b)(1)(B) above shall be inapplicable for Executive.
(2) COBRA Coverage .
(A) In the event that Executive timely elects continuation coverage under any of the Company’s “group health plans” within the meaning of Treasury Regulations Section 54.4980B-2 Q/A-1 (collectively, the “ Health Plan ”) on behalf of himself and any of his eligible covered dependents (including his spouse) pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“ COBRA ”), following the Termination Date, the Company shall pay directly or reimburse Executive for an amount equal to the monthly premium for such COBRA coverage for each month during which such COBRA coverage is in effect during the period commencing on the Termination Date and ending upon the earliest of (x) the date that is eighteen (18) months following the Termination Date, (y) the date that Executive and Executive’s covered dependents become no longer eligible for COBRA coverage or (z) the date Executive becomes eligible to receive group healthcare coverage from a subsequent employer (and Executive agrees to promptly notify the Company of such eligibility). In all other respects, Executive and his dependents shall be treated the same as any other qualified beneficiaries under the Health Plan and COBRA.
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(B) If Executive’s eligibility for continued COBRA coverage under the Health Plan ends due to expiration of the “maximum coverage period” under and within the meaning of 26 C.F.R. 54.4980B-7 Q/A-4(b), Executive shall be entitled to continue coverage for himself and his eligible covered dependents (including his spouse), if any, under the Health Plan (Executive and each such covered dependent being referred to herein as a “ Qualified Beneficiary ”) for the period beginning on the first day following such expiration of eligibility for COBRA coverage and ending on the third anniversary of the Termination Date or the earlier date that Executive becomes eligible to receive group healthcare coverage from a subsequent employer (and Executive agrees to promptly notify the Company of such eligibility) (the “ Extended Coverage ”), subject to the Company or an Affiliate continuing to sponsor a Health Plan for the benefit of the Company’s employees generally. In order for Executive to be eligible to receive the Extended Coverage on behalf of himself and any other Qualified Beneficiaries, Executive and any other Qualified Beneficiary must first exhaust such individual’s rights to any COBRA coverage available under the Health Plan. The Parties acknowledge that following expiration of the Extended Coverage, neither Executive nor any other Qualified Beneficiary will have any right to elect coverage under the Health Plan. Executive shall, on a monthly after-tax basis, pay to the Company (or its delegate) the COBRA rate, as then effective, for each month during the period of Extended Coverage. For purposes of Code Section 409A, the benefits provided under this Section 6(b )( 2)(B) shall be provided as separate monthly in-kind payments of those benefits, and to the extent those benefits are subject to and not otherwise excepted from Section 409A, the provision of in-kind benefits during one calendar year shall not affect in-kind benefits to be provided in any other calendar year.
(C) Executive and Executive’s spouse, if applicable, consent and agree to acquire and maintain any and all coverage that either or both of them are entitled to at any time during their lives under the Medicare program or any similar program of the United States or any agency thereof. Executive and Executive’s spouse further agree to pay any required premiums for Medicare coverage from their personal funds.
(D) Notwithstanding Section 6(b)(2)(A) or (B) to the contrary, the Company may alter the manner in which health benefits are provided to Executive under such sections following termination of Executive’s employment to the extent the Company reasonably determines is necessary for purposes of satisfying Code Section 105(h)(2) or avoiding the imposition of an excise tax on the Company or any of its Affiliates, provided that such alterations do not materially decrease coverage or increase the after-tax cost to Executive of such benefits.
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(3) Code Section 280G Tax Gross-up . If the Termination Date occurs within three (3) years after the Effective Date, the Accounting Firm shall determine if any of the payments or benefits received or to be received by Executive (including, without limitation, any payment or benefits received in connection with a Change in Control or Executive’s termination of employment, whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement), constitute “parachute payments” within the meaning of Code Section 280G as a result of a “change in ownership or control,” under and within the meaning of Treasury Regulation Section 1.280G-1, of Silver Run or any of its subsidiaries, including the Company, but excluding as a result of the closing of the Transaction (all such payments and benefits collectively referred to herein as the “ 280G Payments ”) that are subject to the excise tax imposed under Code Section 4999 (the “ Excise Tax ”). If the Accounting Firm determines any of the 280G Payments are subject to the Excise Tax, the Company shall pay to Executive, as soon as reasonably practicable following such determination but in any event no later than the end of the year following the year in which the Executive pays the relevant taxes, an additional amount equal to the sum of the Excise Tax payable by Executive plus the amount that the Accounting Firm determines is necessary to put Executive in the same after-tax position (taking into account all applicable federal, state and local excise, income and other taxes) as if no Excise Tax had been imposed.
All determinations required to be made under this Section 6(b)(3) , including whether a payment would result in an “excess parachute payment” within the meaning of Code Section 280G and the assumptions utilized in arriving at such determination, shall be made by the Accounting Firm. All fees and expenses of the Accounting Firm shall be paid solely by the Company. The final determination by the Accounting Firm shall be binding on the Parties absent manifest error.
Executive agrees to reasonably cooperate with the Company to minimize the amount of any excess parachute payments, including, without limitation, assisting the Company in establishing that some or all of the payments received by Executive which are “contingent on a change”, as described in Code Section 280G(b)(2)(A), are reasonable compensation for personal services actually rendered by Executive before the date of such change or to be rendered by Executive on or after the date of such change. Notwithstanding the foregoing, Executive shall not be required to take any action which his attorney or tax advisor advises him in writing exposes the Executive to material personal liability.
(4) Other Termination of Employment . For purposes of clarity, in the event that (i) Executive voluntarily resigns or otherwise voluntarily terminates employment, except due to death, Disability or for Good Reason, or (ii) Executive’s employment is terminated due to a No Severance Benefits Event then, in any such event under clause (i) or (ii), the Company shall have no obligation to provide the severance benefits described in paragraphs (1), (2) and (3) (above) of this Section 6(b) , except to offer COBRA coverage (as required by COBRA law) but not at the rate described in paragraph (2). However, Executive shall still be entitled to the minimum benefits provided under Section 6(a) .
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(5) No Duplication of Severance Benefits . The severance payments provided under Section 6(b) shall supersede and replace any severance payments under any severance pay plan or similar agreement that the Company or any Affiliate maintains for key management employees or employees generally.
(c) Release Agreement. Notwithstanding any provision of the Agreement to the contrary, in order to receive the vesting acceleration provided under Section 6(a)(4)(A) or the severance benefits provided under Section 6(b)(1) , (2) , or (3) , the Executive must first execute an appropriate release agreement (on a form provided by the Company) whereby the Executive agrees to release and waive, in return for such vesting acceleration or severance benefits, any claims that Executive may have against the Company or any of its Affiliates including, without limitation, for unlawful discrimination ( e.g. , Title VII of the Civil Rights Act); provided, however, such release agreement shall not release any claim or cause of action by or on behalf of the Executive for (a) any payment or benefit that may be due or payable under this Agreement or any vested benefits under any employee benefit plan or program or (b) non-payment of salary or benefits to which Executive is entitled from the Company as of the Termination Date. The release agreement must be provided to Executive within five (5) days following the Termination Date, and signed by Executive and returned to the Company, and any applicable revocation period must have expired, no later than sixty (60) days following the Termination Date; provided, however, the second release agreement required for an Anticipatory Termination Payment under Section 6(b)(1)(B) must be provided to Executive within five (5) days following the Change in Control Date, and signed by Executive and returned to the Company, and any applicable revocation period must have expired, no later than sixty (60) days following the Change in Control Date. Any payments to which Executive becomes entitled pursuant to Section 6(b)(1) , shall be paid within ten (10) days after the executed release agreement (or executed second release agreement with respect to an Anticipatory Termination Payment) has been timely returned to the Company for counter-signature and become effective and non-revocable by Executive under the terms of the release agreement. Notwithstanding anything in this Agreement to the contrary, to the extent that any severance payments or benefits provided under Section 6(a )( 4)(A) or Section 6(b) are deferred compensation under Code Section 409A, and are not otherwise exempt from the application of Section 409A, then, if the period during which Executive may consider and sign the release agreement spans two calendar years, the severance payments or benefits will not be made or begin until the later calendar year.
(d) Definitions.
(1) “ Accounting Firm ” means any nationally recognized, certified public accounting firm selected by the Company and reasonably acceptable to the Executive; provided, however, the firm selected must be within the top 20 in the United States at such time based on annual revenues for certified public accounting firms in the immediately preceding year.
(2) “ Affiliate ” means any parent or subsidiary entity of the Company, or any other entity in whatever form, of which the Company has any direct or indirect controlling ownership interest or management control, or vice-versa, as determined by the Company. For purposes of clarity and not limitation, (i) Riverstone Investment Group LLC, Bayou City Energy Management, LLC, HPS Investment Partners, LLC, or High Mesa Inc., and their affiliates (other than Silver Run or any of its subsidiaries, to the extent considered an affiliate of any such entity) are not Affiliates for purposes of this Agreement, and (ii) Silver Run is an Affiliate of the Company.
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(3) “ Anticipatory Termination ” means a termination of the Executive’s employment within the three (3) month period ending immediately prior to the Change in Control Date (in which the Change in Control is a “change in control event” within the meaning of Code Section 409A), but only if (a) the Executive’s employment with the Company was (i) terminated by the Company without Cause or (ii) terminated by the Executive for Good Reason, and (b) it is reasonably demonstrated by the Executive that such termination of employment (1) was at the request of a third party who has taken steps reasonably calculated to effect such Change in Control or (2) otherwise arose in connection with or anticipation of such Change in Control.
(4) “ Board ” means the then-current Board of Directors of the Company or, following the closing of the Transaction, the then-current Board of Directors of Silver Run, in each case, including the Compensation Committee (the “ Compensation Committee ”) or another authorized committee thereof.
(5) “ Cause ” means any of the following: (A) the Executive’s final conviction by a court of competent jurisdiction of a felony involving moral turpitude, or entering the plea of nolo contendere to such felony by the Executive; (B) the commission by the Executive of a demonstrable act of material fraud, or a proven and material misappropriation of funds or other property, of or upon the Company or any Affiliate; (C) the engagement by the Executive, without the written approval of the Company, in any material activity which directly competes with the business of the Company or any Affiliate, or which would directly result in a material injury to the business or reputation of the Company or any Affiliate; or (D) the breach by Executive of any material provision of this Agreement. With respect to items (C) and (D) above, in order to constitute “Cause” hereunder, Executive must also fail to cure such breach within a reasonable time period set by the Company but in no event less than twenty (20) calendar days after Executive’s receipt of such notice.
(6) “ Change in Control ” means and includes each of the following:
(A) A transaction or series of transactions (other than an offering of Common Stock to the general public through a registration statement filed with the Securities and Exchange Commission or a transaction or series of transactions that meets the requirements of clauses (1) and (2) of subsection (C) below) whereby any “person” or related “group” of “persons” (as such terms are used in Sections 13(d) and 14(d)(2) of the Exchange Act) (other than Silver Run, any of its subsidiaries, an employee benefit plan maintained by Silver Run or any of its subsidiaries or a “person” that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common control with, Silver Run) directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of securities of Silver Run possessing more than 50% of the total combined voting power of Silver Run’s securities outstanding immediately after such acquisition; or
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(B) During any period of two consecutive years, individuals who, at the beginning of such period, constitute the Board together with any new Director(s) (other than a Director designated by a person who shall have entered into an agreement with Silver Run to effect a transaction described in subsections (A) or (C)) whose election by the Board or nomination for election by Silver Run’s stockholders was approved by a vote of at least two-thirds of the Directors then still in office who either were Directors at the beginning of such two-year period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or
(C) The consummation by Silver Run (whether directly involving Silver Run or indirectly involving Silver Run through one or more intermediaries) of (x) a merger, consolidation, reorganization, or business combination or (y) a sale or other disposition of all or substantially all of Silver Run’s assets in any single transaction or series of related transactions, or (z) the acquisition of assets or stock of another entity, in each case other than a transaction:
(1) which results in Silver Run’s voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of Silver Run or the person that, as a result of the transaction, controls, directly or indirectly, Silver Run or owns, directly or indirectly, all or substantially all of Silver Run’s assets or otherwise succeeds to the business of Silver Run (Silver Run or such person, the “ Successor Entity ”)) directly or indirectly, at least a majority of the combined voting power of the Successor Entity’s outstanding voting securities immediately after the transaction; and
(2) after which no person or group beneficially owns voting securities representing 50% or more of the combined voting power of the Successor Entity; provided, however, that no person or group shall be treated for purposes of this clause (2) as beneficially owning 50% or more of the combined voting power of the Successor Entity solely as a result of the voting power held in Silver Run prior to the consummation of the transaction.
Notwithstanding the foregoing, in no event shall the following constitute a Change in Control: (i) the Transaction or any transactions occurring in connection therewith, or (ii) any initial public offering of any subsidiary of Silver Run that owns all or part of Silver Run’s Midstream Assets (as defined in Section 10(d)(1) ) or any other sale or disposition of such Midstream Assets directly or indirectly by Silver Run in connection with such initial public offering.
If a Change in Control constitutes a payment event with respect to any amount, benefit or award (or portion of any amount, benefit or award) that provides for the deferral of compensation that is subject to Section 409A, to the extent required to avoid the imposition of additional taxes under Section 409A, the transaction or event described
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in subsection (A), (B) or (C) above with respect to such amount, benefit or award (or portion thereof) shall only constitute a Change in Control for purposes of the payment timing of such amount, benefit or award if such transaction also constitutes a “change in control event,” as defined in Treasury Regulation Section 1.409A- 3(i)(5).
The Board as in effect immediately prior to the occurrence of a Change in Control shall have full and final authority, which shall be exercised in its discretion, to determine conclusively whether a Change in Control has occurred pursuant to the above definition, the date of the occurrence of such Change in Control and any incidental matters relating thereto; provided that any exercise of such authority in conjunction with a determination regarding whether a Change in Control is a “change in control event” (as defined in Treasury Regulation Section 1.409A-3(i)(5)) shall be determined on a basis consistent with such regulation.
(7) “ Change in Control Date ” means the effective date of the occurrence of a Change in Control.
(8) “ Code ” means the Internal Revenue Code of 1986, as amended or its successor. References herein to any Section of the Code shall include any successor provisions of the Code.
(9) “ Common Stock ” means the Class A common stock of Silver Run, $0.0001 par value per share, and any class of common stock into which such common shares may hereafter be converted, reclassified or recapitalized.
(10) “ Designated Beneficiary ” means the Executive’s surviving spouse, if any. If there is no such surviving spouse at the time of Executive’s death, then the Designated Beneficiary hereunder shall be Executive’s estate after the legal representative of such estate provides satisfactory evidence thereof to the Company (or its delegate).
(11) “ Director ” means a Board member.
(12) “ Disability ” shall mean that (a) Executive is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or last for a continuous period of not less than 12 months, or (b) by reason of any medically determinable physical or mental impairment which can be expected to result in death or to last for a continuous period of not less than 12 months, Executive is receiving income replacement for a period of not less than three months under an accident and health plan covering employees of the Company. Evidence of such Disability shall be certified by a physician acceptable to both the Company and Executive. In the event that the Parties are not able to agree on the choice of a physician, each shall select one physician who, in turn, shall select a third physician to render such certification. All reasonable costs directly relating to the determination of whether Executive has incurred a Disability for purposes of this Agreement shall be paid by the Company. Executive agrees to submit to any examinations that are reasonably required by the attending physician or other healthcare service providers to determine whether Executive has a Disability.
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(13) “ Dispute ” means any dispute, disagreement, claim, or controversy arising from, in connection with, or relating to (a) the employment, or termination of employment, of Executive, or (b) the Agreement, or the validity, interpretation, performance, breach or termination of the Agreement.
(14) “ Exchange Act ” means the Securities Exchange Act of 1934, as amended.
(15) “ Good Reason ” means the occurrence of any of the following without the Executive’s prior written consent, if not cured and corrected by the Company or Silver Run, or either of their successor(s), within 60 days after written notice thereof is provided by Executive to the Company or its successor, provided such notice is delivered within 90 days after the occurrence of the applicable condition or event and that Executive resigns from employment with the Company within 90 days following expiration of such 60-day cure period: (a) the demotion or reduction in title or rank of Executive with the Company or Silver Run, or the assignment to Executive of duties that are materially inconsistent with Executive’s positions, duties and responsibilities with the Company or Silver Run, or any removal of the Executive from, or any failure to nominate for re-election the Executive to, any of such positions (other than a change due to the Executive’s Disability or as an accommodation under the American with Disabilities Act), except for any such demotion, reduction, assignment, removal or failure that occurs in connection with Executive’s termination of employment for Cause, Disability or death; (b) the reduction of the Executive’s annual base salary and/or target bonus opportunity, as compared to his aggregate base salary and target bonus opportunity as effective immediately prior to such reduction, if such reduction of base salary and/or target bonus opportunity, on an aggregated basis, is five percent (5%) or greater of the aggregate base salary and target bonus opportunity as effective immediately prior to such reduction; (c) a relocation of Executive’s principal work location to a location in excess of 50 miles from its then current location; or (d) failure to nominate the Executive to be re-elected to the Board. For the avoidance of doubt, the closing of the Transaction will not by itself be deemed to provide a basis for the Executive to resign for Good Reason.
(16) “ No Severance Benefits Event ” means termination of Executive’s employment by the Company for Cause.
(17) “ Silver Run ” means Silver Run Acquisition Corporation II, a Delaware corporation (whose name will change to Alta Mesa Resources, Inc. at the closing of the Transaction), or its successor in interest.
7. Notice of Termination . Any termination of Executive’s employment by the Company or the Executive other than for death shall be communicated by Notice of Termination to the other Party hereto. For purposes of this Agreement, the term “ Notice of Termination ” means a written notice which indicates the specific termination provision of this Agreement relied upon, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated and specifies a Termination
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Date which, if submitted by Executive, shall be at least thirty (30) days following the date of such Notice of Termination unless such termination is for Good Reason (in which case the requirements for a termination due to Good Reason shall apply); provided, however, that in the event that Executive delivers a Notice of Termination to the Company, the Company may, in its sole discretion, change the Date of Termination to any date that occurs following the date of receipt of such Notice of Termination and is prior to the date specified in such Notice of Termination. A Notice of Termination submitted by the Company may provide for a Termination Date on the date Executive receives the Notice of Termination, or any date thereafter elected by the Company in its sole discretion. The failure by the Company or Executive to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Cause or Good Reason shall not waive any right of such Party hereunder or preclude such Party from asserting such fact or circumstance in enforcing such Party’s rights hereunder.
8. No Mitigation . Except as provided in Section 6(b)(2) for continued Health Plan coverage or Section 6(b)(3) regarding excess parachute payments, Executive shall not be required to mitigate the amount of any payment or other benefits provided under this Agreement by seeking other employment or in any other manner.
9. Restrictive Covenants . As an inducement to the Company to enter into this Agreement, Executive represents to, and covenants with or in favor of, the Company that Executive will comply with all of the restrictive covenants in Sections 9 through 17 , as a condition to the Company’s obligation to provide any benefits to Executive under this Agreement.
10. Trade Secrets .
(a) Access to Trade Secrets. As of the Effective Date and on an ongoing basis, the Company agrees to give Executive access to Trade Secrets which the Executive did not have access to, or knowledge of, before Executive’s commencement of employment with the Company.
(b) Agreement Not to Use or Disclose Trade Secrets. In exchange for the Company’s promises to provide Executive with access to Trade Secrets, and the other consideration and benefits provided to Executive under this Agreement, Executive agrees, during the Employment Period, and any time thereafter, not to disclose to anyone, including, without limitation, any person, firm, corporation or other entity, or publish or use for any purpose, any Trade Secrets, except (1) as required in the ordinary course of the business of the Company or an Affiliate or (2) as authorized by the Company or Affiliate, as applicable. Executive acknowledges that Trade Secrets (A) have been and will be developed or acquired by the Company (or an Affiliate) through the expenditure of substantial time, effort and money and (B) provide the Company (or an Affiliate) with an advantage over competitors who do not know or use Trade Secrets.
Executive shall hold in a fiduciary capacity for the benefit of the Company (or its Affiliate, as applicable) any Trade Secret relating to the Company or any of its Affiliates, and their respective businesses, which (a) has been obtained by Executive during his employment by the Company (or any Affiliate) and (b) is not public knowledge other than via an unauthorized disclosure made by Executive in violation of this Agreement. Executive acknowledges and agrees that all Trade Secrets are, and will continue to be, the exclusive property of the Company or Affiliate, as applicable.
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Executive shall not at any time disclose to any person or entity, or publish, or use for any unauthorized purpose, any Trade Secret, except as the Company directs or under compulsion of law. Executive agrees to give notice to the Company of any attempt to compel disclosure of any Trade Secret within five (5) business days after Executive is informed that such disclosure is being, or will be, compelled. Any such notice shall contain a copy of the subpoena, order or other process used to compel disclosure.
The agreements and covenants in this Section 10(b) apply to all Trade Secrets, whether now known or later to become known to Executive. In addition, these provisions shall be in addition to, and not limit or restrict in any way, any other confidentiality agreement or covenant between the Executive and the Company or any of its Affiliates.
(c) Agreement to Refrain from Defamatory Statements. Executive shall refrain, both during the Employment Period and thereafter, from publishing any oral or written statements about any directors, partners, officers, employees, agents, investors or representatives of the Company or any Affiliate that are (1) slanderous, libelous, or defamatory; (2) disclose private or confidential information about the business affairs, directors, partners, officers, employees, agents, investors or representatives of the Company or any Affiliate; (3) constitute an intrusion into the seclusion or private lives of any such person; (4) give rise to unreasonable publicity about the private life of any such person; (5) place any such person in a false light before the public; or (6) constitute a misappropriation of the name or likeness of any such person. A violation or threatened violation of these restrictive covenants may be enjoined by a court of law notwithstanding the arbitration provisions of Section 31 .
(d) Definitions. The following terms, when used in this Agreement, are defined below:
(1) “ Restricted Territory ” means any county, or equivalent political or governmental subdivision, of any state, district, or territory of North America in which the Company or any of its Affiliates conducts its business; and any area adjacent to such counties, or equivalent political or governmental subdivision, to the extent such adjacent areas are within a 50-mile radius of any (x) producing property or leasehold of the Company or any of its Affiliates or (y) assets relating to the gathering, processing, storage, treating or transmission of oil or natural gas or otherwise generally considered “midstream” in nature in accordance with generally accepted U.S. oil and gas industry practices and customs (“ Midstream Assets ”) of the Company or any of its Affiliates.
(2) “ Trade Secrets ” means any and all information and materials (in any form or medium) that are proprietary to the Company or an Affiliate, or are treated as confidential by the Company or an Affiliate as part of, or relating to, any portion of its or their businesses (whether or not owned or developed by the Company or an Affiliate) and that are not generally known by other persons or entities in the same type of business.
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For purposes of the Agreement, Trade Secrets include, without limitation, the following: all of the Company’s or Affiliate’s research, technical and business information, whether patentable or not, which is of a confidential, trade secret or proprietary character, and which is either developed by the Executive alone, or with others or by others; all non-public information that the Company or an Affiliate has marked as confidential or has otherwise described to Executive (either in writing or orally) as confidential; all non-public information concerning the Company’s or Affiliate’s products, services, prospective products or services, research, prospects, leases, surveys, seismic data, drilling data, designs, prices, costs, marketing plans, marketing techniques, studies, test data, leasehold and royalty owners, investors, suppliers and contracts; all business records and plans; all personnel files; all financial information of or concerning the Company or an Affiliate; all information relating to the Company’s operating system software, application software, software and system methodology, hardware platforms, technical information, inventions, computer programs and listings, source codes, object codes, copyrights and other intellectual property; all technical specifications; any proprietary information belonging to the Company or an Affiliate; all computer hardware or software manuals of the Company or an Affiliate; all Company or Affiliate training or instruction manuals; all Company or Affiliate electronic data; and all computer system passwords and user codes.
11. Duty to Return Company Documents and Property . Upon the Termination Date, Executive shall immediately return and deliver to the Company any and all papers, books, records, documents, memoranda and manuals, e-mail, electronic or magnetic recordings or data, including all copies thereof, belonging to the Company or relating to its business, in Executive ’ s possession, whether prepared by Executive or others. If at any time after the Termination Date, Executive determines that Executive has any Trade Secrets in Executive ’ s possession or control, Executive shall immediately return them to the Company, including all copies thereof.
12. Best Efforts and Disclosure . Executive agrees that, while employed with the Company under this Agreement, Executive’s services shall be devoted on a full time basis to the Company’s business, and Executive shall use best efforts to promote its success. Further, Executive shall promptly disclose to the Company all ideas, inventions, computer programs, and discoveries, whether or not patentable or copyrightable, which Executive may conceive or make, alone or with others, during Executive’s period of employment with the Company or its Affiliates, whether or not during working hours, and which directly or indirectly:
| (a) | relate to a matter within the scope, field, duties or responsibility of Executive’s employment with the Company or within the scope or field of the Company’s or an Affiliate’s business; or |
| (b) | are based on any knowledge of the actual or anticipated business or interests of the Company; or |
| (c) | are aided by the use of time, materials, facilities or information of the Company or an Affiliate. |
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Executive assigns to the Company, without further compensation, any and all rights, titles and interest in all such ideas, inventions, computer programs and discoveries in all countries of the world. Executive recognizes that all ideas inventions, computer programs and discoveries of the type described above, conceived or made by Executive alone or with others within 12 months after the Termination Date (voluntary or otherwise), are likely to have been conceived in significant part either while employed by the Company or as a direct result of knowledge Executive had of proprietary information or Trade Secrets. Accordingly, Executive agrees that such ideas, inventions or discoveries shall be presumed to have been conceived during Executive’s period of employment with the Company or its Affiliates, unless and until the contrary is clearly established by the Executive.
13. Inventions and Other Works . Any and all writings, computer software, inventions, improvements, processes, procedures and/or techniques which Executive may make, conceive, discover, or develop, either solely or jointly with any other person or persons, at any time during Executive’s period of employment with the Company or its Affiliates, whether at the request or upon the suggestion of the Company or otherwise, which relate to or are useful in connection with any business now or hereafter carried on or contemplated by the Company, including developments or expansions of its present fields of operations, shall be the sole and exclusive property of the Company. Executive agrees to take any and all actions necessary or appropriate so that the Company can prepare and present applications for copyright or letters patent therefor, and secure such copyright or letters patent wherever possible, as well as reissue renewals, and extensions thereof, and obtain the record title to such copyright or patents. Executive shall not be entitled to any additional or special compensation or reimbursement regarding any such writings, computer software, inventions, improvements, processes, procedures and techniques. Executive acknowledges that the Company from time to time may have agreements with other persons or entities which impose obligations or restrictions on the Company regarding inventions made during the course of work thereunder or regarding the confidential nature of such work. Executive agrees to be bound by all such obligations and restrictions, and to take all action necessary to discharge the obligations of the Company.
14. Non-Solicitation Restriction . Executive hereby agrees that in order to protect Trade Secrets, it is necessary to enter into the following restrictive covenant, which is ancillary to the enforceable promises between the Company and Executive in Sections 9 through 13 and other provisions of this Agreement. During the Executive ’ s employment and for a period of one (1) year following the Termination Date (regardless of the reason for termination), Executive hereby covenants and agrees that he will not, directly or indirectly, without obtaining the express written consent of the Board, either individually or as a principal, partner, agent, consultant, contractor, employee, or as a director or officer of any entity, or in any other manner or capacity whatsoever, except on behalf of the Company, solicit business, attempt to solicit business, or conduct business, in products or services competitive with any products or services offered or performed by the Company or its Affiliates in any business which the Company or any of its Affiliates does business, prepared to conduct business as of the Termination Date (or if the applicable activity occurs before the Termination, Date, then as of the date on which such activity occurs), or has any business interest within the Restricted Territory as of the Termination Date (or if the applicable activity occurs before the Termination, Date, then as of the date on which such activity occurs), (a) from those individuals or entities with whom the Company or Affiliate conducted or prepared to conduct business in the Restricted Territory during the
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Executive ’ s employment with the Company or (b) with respect to any assets or holdings in which the Company or Affiliate had any interest in the Restricted Territory at any time during the two-year period ending on the earlier of the Termination Date or the date on which such activity occurs.
15. Non-Competition Restriction . Executive hereby agrees that in order to protect Trade Secrets, it is necessary to enter into the following restrictive covenant, which is ancillary to the enforceable promises between the Company and Executive in Sections 9 through 14 and other provisions of this Agreement. Executive hereby covenants and agrees that during Executive’s period of employment with the Company or its Affiliates, and for a period of one (1) year following the Termination Date (regardless of the reason for termination), Executive will not, without obtaining the express written consent of the Company, engage in any capacity, directly or indirectly (whether as proprietor, stockholder, director, partner, employee, agent, independent contractor, consultant, trustee, or in any other capacity), with respect to any entity engaged or preparing to engage in the business of oil and gas exploration and production, the acquisition, development or operation of Midstream Assets or any other aspect of the Company’s or an Affiliate’s business, in each case, within the Restricted Territory (a “ Competing Enterprise ”); provided, however, Executive shall not be deemed to be participating or engaging in a Competing Enterprise solely by virtue of the ownership of not more than one percent (1%) of any class of stock or other securities which are publicly traded on a national securities exchange or in a recognized over-the-counter market.
16. No Recruitment Restriction . Executive agrees that during Executive’s period of employment with the Company or its Affiliates, and for a period of one (1) year following the Termination Date (regardless of the reason for termination), without obtaining the express written consent of the Company, Executive shall not, either directly or indirectly, or by acting in concert with another person or entity, (a) hire any employee or independent contractor performing services for the Company or any Affiliate, or any such individual who performed services for the Company or any Affiliate at any time during the one-year period ending on the earlier of the Termination Date or the date on which such hiring occurs, or (b) solicit or influence or seek to solicit or influence, any employee or independent contractor performing services for the Company or any Affiliate, or any such individual who performed services for the Company or any Affiliate at any time during the one-year period ending on the earlier of the Termination Date or the date on which such activity occurs, to terminate, reduce or otherwise adversely affect such individual’s employment or other relationship with the Company or any Affiliate.
17. Business Opportunities . During Executive’s period of employment with the Company or its Affiliates and for a period of one (1) year following the Termination Date (regardless of the reason for termination), the Executive assigns and agrees to assign without further compensation to the Company, its Affiliates and its successors, assigns or designees, all of the Executive’s right, title and interest in and to all Business Opportunities (defined below), and further acknowledges and agrees that all Business Opportunities constitute the exclusive property of the Company. The Executive shall present all Business Opportunities to the Company, and shall not exploit a Business Opportunity. For purposes of this Agreement, “ Business Opportunities ” means all business ideas, prospects, or proposals pertaining to oil and gas exploration and production, the acquisition, development or operation of Midstream Assets or any other aspect of the Company’s or an Affiliate’s business, and any business the Company or any Affiliate
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prepared to conduct, or contemplated conducting during Executive’s employment with the Company, which are developed by the Executive or originated by any third party and brought to the attention of the Executive, together with information relating thereto; provided however, that for the one (1) year period following the Termination Date, “Business Opportunities” shall be limited to those Business Opportunities in the Restricted Territory. For the avoidance of doubt, this Section 17 is not intended to limit or narrow the Executive’s duties or obligations under federal or state law with respect to corporate opportunities.
18. Tolling . If Executive violates any of the restrictions contained in Sections 9 through 17 , then notwithstanding any provision hereof to the contrary, the restrictive period will be suspended and will not run in favor of Executive from the time of the commencement of any such violation, unless and until such time when the Executive cures the violation to the reasonable satisfaction of the Company.
19. Reformation . If a court or arbitrator rules that any time period or the geographic area specified in any restrictive covenant in Sections 9 through 17 is unenforceable, then the time period will be reduced by the number of months, or the geographic area will be reduced by the elimination of such unenforceable portion, or both, so that the restrictions may be enforced in the geographic area and for the time to the full extent permitted by law.
20. No Previous Restrictive Agreements . Executive represents that, except as disclosed in writing to the Company as of the Effective Date, Executive is not bound by the terms of any agreement with any previous employer or other third party to (a) refrain from using or disclosing any confidential or proprietary information in the course of Executive ’ s employment by the Company or (b) refrain from competing, directly or indirectly, with the business of such previous employer or any other person or entity. Executive further represents that Executive ’ s performance under this Agreement and work duties for the Company do not, and will not, breach any agreement to keep in confidence any proprietary information, knowledge or data acquired by Executive in confidence or in trust prior to Executive ’ s employment with the Company, and Executive will not disclose to the Company or induce the Company to use any confidential or proprietary information or material belonging to any previous employer or others.
21. Conflicts of Interest . In keeping with Executive’s fiduciary duties to the Company, Executive hereby agrees that Executive shall not become involved in a conflict of interest, or upon discovery thereof, allow such a conflict to continue at any time during Executive’s period of employment with the Company or its Affiliates. In this respect, Executive agrees to fully comply with the conflict of interest agreement entered into by Executive as an employee, officer or director of the Company or an Affiliate. In the instance of a violation of the conflict of interest agreement to which Executive is a party, it may be necessary for the Company to terminate Executive’s employment for Cause.
22. Remedies . Executive acknowledges that the restrictions contained in Sections 9 through 21 of this Agreement, in view of the nature of the Company’s business, are reasonable and necessary to protect the Company’s legitimate business interests, and that any violation of this Agreement would result in irreparable injury to the Company. Notwithstanding the arbitration provisions in Section 31 , in the event of a breach or a threatened breach by Executive of any provision of Sections 9 through 21 of this Agreement, the Company shall be entitled to a
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temporary restraining order and injunctive relief restraining Executive from the commission of any breach, and to recover the Company’s attorneys’ fees, costs and expenses related to the breach or threatened breach. Nothing contained in this Agreement shall be construed as prohibiting the Company from pursuing any other remedies available to it for any such breach or threatened breach, including, without limitation, the recovery of money damages, attorneys’ fees, and costs. These covenants and agreements shall each be construed as independent of any other provisions in this Agreement, and the existence of any claim or cause of action by Executive against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of such covenants and agreements.
23. No Interference . Notwithstanding any other provision of this Agreement, (a) Executive may disclose confidential information when required to do so by a court of competent jurisdiction, by any governmental agency having authority over Executive or the business of the Company or by any administrative body or legislative body (including a committee thereof) with jurisdiction to order Executive to divulge, disclose or make accessible such information, in each case, subject to Executive’s obligations to notify the Company under Section 10(b) ; and (b) nothing in this Agreement is intended to interfere with Executive’s right to (1) report possible violations of state or federal law or regulation to any governmental or law enforcement agency or entity; (2) make other disclosures that are protected under the whistleblower provisions of state or federal law or regulation (including the right to receive an award for information provided to any such government agencies); (3) file a claim or charge any governmental agency or entity; or (4) testify, assist, or participate in an investigation, hearing, or proceeding conducted by any governmental or law enforcement agency or entity, or any court. For purposes of clarity, in making or initiating any such reports or disclosures or engaging in any of the conduct outlined in subsection (b) above, Executive may disclose confidential information to the extent necessary to such governmental or law enforcement agency or entity or such court, need not seek prior authorization from the Company, and is not required to notify the Company of any such reports, disclosures or conduct.
24. Defend Trade Secrets Act . Executive is hereby notified in accordance with the Defend Trade Secrets Act of 2016 that Executive will not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that (a) is made (1) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (2) solely for the purpose of reporting or investigating a suspected violation of law; or (b) is made in a complaint or other document that is filed under seal in a lawsuit or other proceeding. If Executive files a lawsuit for retaliation against the Company for reporting a suspected violation of law, Executive may disclose the Company’s trade secrets to Executive’s attorney and use the trade secret information in the court proceeding if Executive files any document containing the trade secret under seal, and does not disclose the trade secret, except pursuant to court order.
25. Withholdings; Right of Offset . The Company may withhold and deduct from any benefits and payments made or to be made pursuant to this Agreement (a) all federal, state, local and other taxes as may be required pursuant to any law or governmental regulation or ruling, (b) all other normal employee deductions made with respect to Company’s employees generally, and (c) any advances made to Executive and owed to Company.
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26. Nonalienation . The right to receive payments under this Agreement shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge or encumbrance by Executive, dependents or beneficiaries of Executive, or to any other person who is or may become entitled to receive such payments hereunder. The right to receive payments hereunder shall not be subject to or liable for the debts, contracts, liabilities, engagements or torts of any person who is or may become entitled to receive such payments, nor may the same be subject to attachment or seizure by any creditor of such person under any circumstances, and any such attempted attachment or seizure shall be void and of no force and effect.
27. Incompetent or Minor Payees . Should the Company determine, in its discretion, that any person to whom any payment is payable under this Agreement has been determined to be legally incompetent or is a minor, any payment due hereunder, notwithstanding any other provision of this Agreement to the contrary, may be made in any one or more of the following ways: (a) directly to such minor or person; (b) to the legal guardian or other duly appointed personal representative of the person or estate of such minor or person; or (c) to such adult or adults as have, in the good faith knowledge of the Company, assumed custody and support of such minor or person; and any payment so made shall constitute full and complete discharge of any liability under this Agreement in respect to the amount paid.
28. Severability . It is the desire of the Parties hereto that this Agreement be enforced to the maximum extent permitted by law, and should any provision contained herein be held unenforceable by a court of competent jurisdiction or arbitrator (pursuant to Section 31 ), the Parties hereby agree and consent that such provision shall be reformed to create a valid and enforceable provision to the maximum extent permitted by law; provided, however, if such provision cannot be reformed, it shall be deemed ineffective and deleted herefrom without affecting any other provision of this Agreement. This Agreement should be construed by limiting and reducing it only to the minimum extent necessary to be enforceable under then applicable law.
29. Title and Headings; Construction . In the interpretation of the Agreement, except where the context clearly otherwise requires:
(a) “including” or “include” does not denote or imply any limitation;
(b) “or” has the inclusive meaning “and/or”;
(c) the singular includes the plural, and vice versa, and each gender includes each of the others;
(d) captions or headings are only for reference and are not to be considered in interpreting the Agreement;
(e) “Section” refers to a Section of the Agreement, unless otherwise stated in the Agreement;
(f) the words “herein”, “hereof”, “hereunder” and other compounds of the word “here” shall refer to the entire Agreement and not to any particular provision; and
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(g) a reference to any statute, rule, or regulation includes any amendment thereto or any statute, rule, or regulation enacted or promulgated in replacement thereof or as the successor thereto.
30. Governing Law; Jurisdiction . All matters or issues relating to the interpretation, construction, validity, and enforcement of this Agreement shall be governed by the laws of the State of Texas, without giving effect to any choice-of-law principle that would cause the application of the laws of any jurisdiction other than Texas. Jurisdiction and venue of any action or proceeding relating to this Agreement or any Dispute (to the extent arbitration is not required under Section 31 ) shall be exclusively in Harris County, Texas.
31. Mandatory Arbitration . Except as provided in subsection (h) of this Section 31 , any Dispute must be resolved by binding arbitration in accordance with the following:
(a) Either Party may begin arbitration by filing a demand for arbitration in accordance with the Commercial Arbitration Rules of the AAA (the “ Arbitration Rules ”) and concurrently notifying the other Party of that demand. If the Parties are unable to agree upon a panel of three neutral arbitrators within twenty days after the demand for arbitration was filed (the Parties agree to a reasonable, one-time extension of that twenty-day period), either Party may request the Houston, Texas office of the American Arbitration Association (“ AAA ”) to appoint the arbitrator or arbitrators necessary to complete the panel in accordance with the Arbitration Rules. Each arbitrator so appointed shall be deemed accepted by the Parties as part of the panel. Notwithstanding the foregoing, the Parties, by mutual consent, may agree to a single arbitrator instead of a panel of three arbitrators and, in such event, references herein to “panel” shall refer to the single appointed arbitrator.
(b) The arbitration shall be conducted in the Houston, Texas metropolitan area at a place and time agreed upon by the Parties with the panel, or if the Parties cannot agree, as designated by the panel. The panel may, however, call and conduct hearings and meetings at such other places as the Parties may agree or as the panel may, on the motion of one Party, determine to be necessary to obtain significant testimony or evidence.
(c) The panel may authorize any and all forms of discovery upon a Party’s showing of need that the requested discovery is likely to lead to material evidence needed to resolve the Dispute and is not excessive in scope, timing, or cost.
(d) The arbitration shall be subject to the Federal Arbitration Act and conducted in accordance with the Arbitration Rules to the extent that they do not conflict with this Section 31 . The Parties and the panel may, however, agree to vary to provisions of this Section 31 or the matters otherwise governed by the Arbitration Rules as permitted by law.
(e) The arbitration hearing shall be held within 60 days after the appointment of the panel. The panel’s final decision or award shall be made within 30 days after the hearing. That final decision or award shall be made by unanimous or majority vote or consent of the arbitrators constituting the panel, and shall be deemed issued at the place of arbitration. The panel’s final decision or award shall be based on the terms and conditions of this Agreement and applicable law.
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(f) The panel’s final decision or award may include injunctive relief in response to any actual or impending breach of this Agreement or any other actual or impending action or omission of a Party under or in connection with this Agreement.
(g) The panel’s final decision or award shall be final and binding upon the Parties, and judgment upon that decision or award may be entered in any court having jurisdiction. The Parties waive any right to apply or appeal to any court for relief from the preceding sentence or from any decision of the panel that is made before the final decision or award.
(h) Nothing in this Section 31 limits the right of either Party to apply to a court having jurisdiction to (i) enforce the agreement to arbitrate in accordance with this Section 31 , (ii) seek provisional or temporary injunctive relief, in response to an actual or impending breach of the Agreement or otherwise so as to avoid an irreparable damage or maintain the status quo, until a final arbitration decision or award is rendered or the Dispute is otherwise resolved, or challenge or vacate any final arbitration decision or award that does not comply with this Section 31 . In addition, nothing in this Section 31 prohibits the Parties from resolving any Dispute (in whole or in part) at any time by mutual agreement or compromise. This Section 31 shall also not preclude the Parties at any time from mutually agreeing to pursue non-binding mediation of the Dispute.
(i) The panel may proceed to an award notwithstanding the failure of any Party to participate in such proceedings. The prevailing Party in the arbitration proceeding may be entitled to an award of reasonable attorneys’ fees incurred in connection with the arbitration in such amount, if any, as determined by the panel in its discretion. The costs of the arbitration shall be borne equally by the Parties unless otherwise determined by the panel in its award.
(j) The panel shall be empowered to impose sanctions and to take such other actions as it deems necessary to the same extent a judge could impose sanctions or take such other actions pursuant to the Federal Rules of Civil Procedure and applicable law. Each Party agrees to keep all Disputes and arbitration proceedings strictly confidential except for disclosure of information required by applicable law which cannot be waived.
32. Binding Effect; Third Party Beneficiaries . Subject to Section 37 , this Agreement shall be binding upon and inure to the benefit of the Parties hereto, and to their respective heirs, executors, beneficiaries, personal representatives, successors and permitted assigns hereunder; otherwise this Agreement shall not be for the benefit of any third parties.
33. Entire Agreement; Amendment and Termination . This Agreement contains the entire agreement of the Parties hereto with respect to the matters covered herein; moreover, this Agreement supersedes all prior and contemporaneous agreements and understandings, oral or written, between the Parties concerning the subject matter hereof, including the Amended and Restated Employment Agreement between the Company and Executive dated as of March 25, 2014, as amended from time to time. This Agreement may be amended, waived or terminated only by a written instrument that is identified as an amendment, waiver or termination hereto, and is executed on behalf of both Parties. Executive hereby acknowledges and represents that in executing this Agreement, he did not rely on, has not relied on, and specifically disavows any reliance on any communications, promises, statements, inducements, or representation(s), oral or written, by the Company, except as expressly contained in this Agreement. The Parties represent that they relied on their own judgment in entering into this Agreement.
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34. Section 409A .
(a) General . Any provisions of the Agreement that are subject to Section 409A of the Code and the regulations and other authoritative guidance issued thereunder (“ Section 409A ”), are intended to comply with all applicable requirements of Section 409A, or an exemption from the application of Section 409A, and shall be interpreted and administered accordingly. Notwithstanding any provision of this Agreement to the contrary, a termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amount or benefit that constitutes “non-qualified deferred compensation” (within the meaning of Section 409A) upon or following a termination of the Executive’s employment unless such termination is also a “separation from service” (as defined under Section 409A) (a “ Separation from Service ”) and, for purposes of any such provision, references herein to a “termination,” “termination of employment” or like terms shall mean a Separation from Service, if applicable. Each payment under this Agreement shall be treated as a separate payment for purposes of Section 409A. In no event may the Executive, directly or indirectly, designate the calendar year of any payment to be made under this Agreement.
(b) Specified Employee . Notwithstanding any provision of this Agreement to the contrary, if any payment or other benefit provided hereunder would be subject to additional taxes and interest under Section 409A because the timing of such payment is not delayed as required by Section 409A for a “specified employee” (as defined under Section 409A), then if the Executive is on the date of Executive ’ s Separation from Service a specified employee, any such payment or benefit that Executive would otherwise be entitled to receive during the first six months following the Separation from Service shall be accumulated and paid in a lump sum within ten (10) days after the date that is six months following the date of the Separation from Service, or such earlier date upon which such amount can be paid under Section 409A without being subject to such additional taxes and interest such as, for example, upon the Executive’s death. Any remaining payments due to Executive under this Agreement shall be paid as otherwise provided in this Agreement.
(c) Reimbursements and In-Kind Benefits . Notwithstanding any provision of this Agreement to the contrary, any reimbursements or in-kind benefits provided under this Agreement that constitute “nonqualified deferred compensation” within the meaning of Section 409A shall be paid to Executive no later than December 31 of the year following the year in which the expense was incurred, the amount of expenses reimbursed in one year shall not affect the amount eligible for reimbursement in any subsequent year, other than medical expenses referred to in Section 105(b) of the Code, and Executive ’ s right to reimbursement under this Agreement will not be subject to liquidation or exchange for other benefits.
(d) No Section 409A Representations. Notwithstanding the foregoing, the Company makes no representations, warranties, or guarantees regarding the tax consequences of this Agreement, or any payments made hereunder, under Section 409A or otherwise, and has advised the Executive to consult with Executive ’ s own tax advisor.
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35. Survival of Certain Provisions . Provisions of this Agreement which by their terms must survive the termination of this Agreement shall survive any such termination or expiration of this Agreement or termination of Executive’s employment, as applicable, including, without limitation, Executive’s obligations under Sections 9 through 18 and the Company’s obligations under Section 6 .
36. Waiver of Breach . No waiver by any party hereto of a breach of any provision of this Agreement by any other party, or of compliance with any condition or provision of this Agreement to be performed by such other party, will operate or be construed as a waiver of any subsequent breach by such other party or any similar or dissimilar provision or condition at the same or any subsequent time. The failure of any party hereto to take any action by reason of any breach will not deprive such party of the right to take action at any time while such breach continues.
37. Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of the Company and its Affiliates (and its and their successors), as well as upon any person or entity acquiring, whether by merger, consolidation, purchase of assets, dissolution or otherwise, all or substantially all of the capital stock, business and/or assets of the Company (or its successor) regardless of whether the Company is the surviving or resulting entity. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation, dissolution or otherwise) to all or substantially all of the capital stock, business or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had occurred; provided, however, no such assumption shall relieve the Company or any of its Affiliates (or any successor thereof) of any of its duties or obligations hereunder unless otherwise agreed, in writing, by Executive.
This Agreement shall inure to the benefit of and be enforceable by Executive’s personal or legal representative, executors, administrators, successors, and heirs. In the event of the death of Executive while any amount is payable hereunder, all such amounts shall be paid to the Designated Beneficiary.
38. Notice . Each notice or other communication required or permitted under this Agreement shall be in writing and transmitted, delivered, or sent by personal delivery, prepaid courier or messenger service (whether overnight or same-day), or prepaid certified United States mail (with return receipt requested), addressed (in any case) to the other party at the address for that party set forth below that party’s signature on this Agreement, or at such other address as the recipient has designated by Notice to the other party, by electronic mail, delivery and read receipt required, or by facsimile, confirmation of delivery required.
Each notice or communication so transmitted, delivered, or sent (a) in person, by courier or messenger service, or by certified United States mail shall be deemed given, received, and effective on the date delivered to or refused by the intended recipient (with the return receipt, or the equivalent record of the courier or messenger, being deemed conclusive evidence of delivery or refusal), or (b) by telecopy or facsimile shall be deemed given received) and effective on the date of actual receipt (with the confirmation of transmission being deemed conclusive evidence of receipt, except where the intended recipient has promptly notified the other party that the transmission is illegible). Nevertheless, if the date of delivery or transmission is not a business day, or if the delivery or transmission is after 5:00 p.m. (local time) on a business day, the notice or other communication shall be deemed given, received, and effective on the next business day.
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39. Executive Acknowledgment . Executive acknowledges (a) being knowledgeable and sophisticated as to business matters, including the subject matter of this Agreement, (b) having read this Agreement and understanding its terms and conditions, (c) having been given an ample opportunity to discuss this Agreement with his personal legal counsel prior to execution, and (d) that no strict rules of construction shall apply for or against the drafter or any other party. Executive hereby represents that he is free to enter into this Agreement including, without limitation, that he is not subject to any covenant not to compete or confidentiality agreement that conflicts with this Agreement.
40. Counterparts . This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute one and the same instrument. Each counterpart may consist of a copy hereof containing multiple signature pages, each signed by one party hereto, but together signed by both Parties.
41. Parent Acknowledgment and Guarantee . Alta Mesa is the direct or indirect parent of the Company. Alta Mesa hereby unconditionally guarantees full and timely performance of the obligations of the Company and its Affiliates under this Agreement. The foregoing guarantee shall include the guarantee of the payment of all benefits and payments due Executive hereunder as a result of the nonperformance of any of such obligations or agreements so guaranteed or as a result of the nonperformance of this guarantee. Executive may, at his option, proceed against Alta Mesa for damages for default in the performance thereof, without first proceeding against the Company or against any of its properties or Affiliates. Alta Mesa further agrees that its guarantee shall be an irrevocable guarantee and shall continue in effect notwithstanding any extension or modification of any guaranteed obligation, any assumption of any such guaranteed obligation by any other party, or any other act or thing which might otherwise operate as a legal or equitable discharge of a guarantor, and Alta Mesa hereby waives all special suretyship defenses and notice requirements. This guarantee shall also be binding upon all successors and assigns of all of substantially all of the business or assets of Alta Mesa. Section 31 shall apply to Disputes between Alta Mesa and Executive mutatis mutandis .
[ Signature pages follow .]
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IN WITNESS WHEREOF , Executive has executed this Agreement, the Company has caused this Agreement to be executed in its name and on its behalf by its duly authorized officer, and Alta Mesa has caused this Agreement to be executed in its name and on its behalf by its duly authorized officer solely for purposes of Section 41 of the Agreement, to be effective as of the Effective Date.
| EXECUTIVE: |
|
/s/ Harlan H. Chappelle |
| Harlan H. Chappelle |
| Address for Notices: |
| Most recent mailing address for Executive in the Company’s personnel files |
[ Signature pages continue .]
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[ Signature pages continue .]
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[End of Signatures.]
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Exhibit 10.14
Execution Copy
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the “ Agreement ”), is made and entered into as of February 9, 2018 (the “ Effective Date ”), by and between Alta Mesa Services, LP, a Texas limited partnership (the “ Company ”), Michael E. Ellis (hereafter “ Executive ”) and, solely with respect to Section 41 , Alta Mesa Holdings, LP, a Texas limited partnership (“ Alta Mesa ”). The Company and Executive may sometimes hereafter be referred to singularly as a “ Party ” or collectively as the “ Parties .”
WITNESSETH:
WHEREAS , Alta Mesa Holdings, L.P. (the “ Parent ”), has entered into a Contribution Agreement by and among High Mesa Holdings, LP, High Mesa Holdings GP, LLC, Alta Mesa Holdings GP, LLC, Silver Run and certain other parties thereto, dated as of August 16, 2017, as the same may be amended from time to time, pursuant to which Silver Run will acquire certain of the outstanding equity interests in Parent (the “ Transaction ”); and
WHEREAS , the Company desires to continue to secure the employment services of Executive subject to the terms and conditions hereafter set forth;
NOW, THEREFORE, in consideration of Executive’s continued employment with the Company, and the premises and mutual covenants contained herein, the Parties hereto agree as follows:
1. Employment Position and Defined Terms . During the Employment Period (as defined in Section 4 ), the Company shall employ Executive, and Executive shall serve, as Chief Operating Officer of the Company. During the Employment Period, Executive shall also serve in the same position of employment with Silver Run as he does with the Company for no additional compensation. Executive’s principal place of employment shall be at the main business offices of the Company in Houston, Texas. Defined terms used in the Agreement that are not otherwise defined herein when first used are defined in Sections 6(d) and 10(d) .
2. Compensation .
(a) Base Salary . The Company shall pay to Executive during the Employment Period a base salary of Five Hundred Twenty Thousand dollars ($520,000) per year, as adjusted pursuant to the subsequent provisions of this paragraph (the “ Base Salary ”). The Base Salary shall be payable in accordance with the Company’s normal payroll schedule and procedures for its executives. Nothing contained herein shall preclude the payment of any other compensation to Executive at any time as determined by the Board.
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(b) Annual Bonus .
(1) In addition to the Base Salary in Section 2(a) , for each annual fiscal year of the Company during the Employment Period (each such annual period being referred to as a “ Bonus Period ”), Executive will be eligible to participate in an annual bonus program established by the Board, under which Executive shall receive a bonus equal to a percentage of Executive’s Base Salary paid during each such one-year period (referred to herein as the “ Annual Bonus ”), such percentage to be established by the Board in its sole discretion; provided, however, that the payment of any Annual Bonus will be subject to the Board’s discretion and made only if Executive has met the pre-established performance criteria set by the Board for the Bonus Period.
(2) In the event that the Employment Period ends before the end of the Bonus Period, Executive shall be entitled to a pro rata portion of the Annual Bonus for that year (based on the number of days in which Executive was employed during the year divided by 365), as determined based on satisfaction of the performance criteria for that Bonus Period on a pro rata basis (calculated as if the final day of the Employment Period were the final day of the applicable Bonus Period), unless Executive was terminated for Cause or terminated voluntarily without Good Reason, in any of which events Executive shall not be entitled to any Annual Bonus for that year.
(3) If Executive successfully meets the performance criteria for a Bonus Period, the Company shall pay Executive the Annual Bonus amount determined by the Board within the earlier of: (A) sixty days (60) days after the end of the Bonus Period or (B) sixty days (60) after the end of the Employment Period.
(c) Compensation in Event of Injury or Sickness . In the event that Executive becomes injured or suffers a medically determinable physical or mental illness, as determined by a physician acceptable to both the Company and Executive in the same manner as provided in the definition of Disability in Section 6(d) , during the Employment Period, Executive shall be entitled to receive continued Base Salary (as set forth in Section 2(a) ) for a period of six (6) months following the occurrence of such injury or sickness; provided, however, such Base Salary shall be reduced by any short-term and/or long-term disability income benefits that are received by Executive under such programs sponsored by the Company (or an Affiliate) during such 6-month period.
3. Duties and Responsibilities of Executive . During the Employment Period, Executive shall devote his full working time to (a) the business of the Company and its Affiliates and (b) performance of the duties and responsibilities assigned to Executive to the best of Executive’s ability and with reasonable diligence. In determining Executive’s duties and responsibilities, Executive shall not be assigned duties and responsibilities that are materially inconsistent with Executive’s position. This Section 3 shall not be construed as preventing Executive from (a) engaging in reasonable volunteer services for charitable, educational or civic organizations, or (b) investing personal assets in such a manner that will not require a material amount of the Executive’s time or services in the operation of the businesses in which such investments are made; provided, however, no such other activity shall conflict or materially interfere with Executive’s loyalties, duties or responsibilities to the Company and its Affiliates. Executive shall at all times use his best efforts to comply in good faith with United States laws applicable to Executive’s actions on behalf of the Company and its Affiliates. Executive understands and agrees that Executive may be required to travel from time to time for purposes of the Company’s business. The Parties agree that Executive’s principal work location cannot be relocated further than 50 miles from Executive’s principal work location on the Effective Date, except as mutually agreed by the Parties.
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4. Term of Employment . Executive’s term of employment with the Company under this Agreement shall be for the period from the Effective Date through the date that is three (3) years from the Effective Date, unless earlier terminated in accordance with this Agreement, and if not earlier terminated, this Agreement will expire upon the date that is three (3) years from the Effective Date.
The period from the Effective Date through the earlier of the third (3 rd ) anniversary of the Effective Date and the date of Executive’s termination of employment with the Company and its Affiliates for whatever reason (the “ Termination Date ”) shall be referred to herein as the “ Employment Period .” Notwithstanding the above, Executive agrees to remain available beyond the Employment Period to provide assistance to the Company or its Affiliate in the event that the Company or an Affiliate become involved in litigation (or another type of dispute or controversy) regarding matters of which Executive has relevant knowledge resulting from Executive’s employment with the Company or an Affiliate. Such post-termination assistance shall be provided by Executive in the capacity of an independent contractor at an agreed-upon, reasonable consulting fee, and shall not be deemed to create or continue an employee-employer or fiduciary relationship, or to represent a continuation of this Agreement.
5. Benefits . Subject to the terms and conditions of this Agreement, during the Employment Period, Executive shall be entitled to all of the following:
(a) Reimbursement of Business Expenses . The Company shall pay or reimburse Executive for all reasonable travel, entertainment and other business expenses paid or incurred by Executive in the performance of duties hereunder. The Company shall also provide Executive with suitable office space, including staff support, paid parking, and necessary equipment, including but not limited to, cellular telephone and laptop computer.
(b) Other Employee Benefits . Executive shall be entitled to participate in any pension, retirement, 401(k), profit-sharing, and other employee benefits plans or programs of the Company to the same extent as available to other senior management employees of the Company under the terms of such plans or programs. Executive shall also be entitled to participate in any group insurance, hospitalization, medical, dental, health, life, accident, disability and other employee benefits plans or programs of the Company to the extent available to other senior management employees of the Company, and their spouses and eligible dependents, under the terms of such plans or programs including any medical expense reimbursement account and post-retirement medical program as made available to other senior management employees of the Company.
(c) Vacation and Holidays . Executive shall be entitled to five (5) weeks of paid vacation per calendar year (prorated in any calendar year during which Executive is employed for less than the entire year based on the number of days in such calendar year in which Executive was employed). Executive shall also be entitled to all paid holidays and personal days provided by the Company for its key management employees under the Company’s personnel policy as then effective. Unused vacation shall not carry over to the following year unless specifically approved by the Company.
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(d) Equity Incentive Awards . Executive shall be eligible to participate in the Alta Mesa Resources, Inc. 2018 Long Term Incentive Plan (the “ LTIP ”) or any other incentive plan sponsored by the Company which provides for equity grants of incentive awards. The terms and conditions of any equity incentive award granted to Executive shall be set forth in the incentive plan document and award agreement governing such award.
(e) Annual Physical . Executive shall be entitled to be reimbursed by the Company for the full cost of an annual physical examination by a physician (1) selected by the Company or (2) selected by Executive and approved by the Company.
(f) Key Man or Company-Owned Life Insurance . The Company may, at any time during the term of this Agreement, apply for and procure as owner, and for its sole benefit, life insurance on the Executive’s life in such amounts and in such forms as the Company may select. Executive hereby acknowledges that he will have no interest whatsoever in any such insurance policy. Executive shall submit to such medical examinations, supply such information, and execute such documents as may be reasonably requested by the insurer to obtain any such key man policy.
(g) Tax Planning, Preparation and Advice . Executive shall be entitled to be reimbursed by the Company for the cost of tax preparation and planning by a certified financial planner or certified public accountant (1) selected by the Company or (2) selected by Executive and approved by the Company, provided that such annual reimbursement shall not exceed $5,000.00.
6. Rights and Payments upon Termination . The Executive’s right to compensation and benefits for periods after the Termination Date shall be determined in accordance with this Section 6 . Except as otherwise expressly required by law or as specifically provided in an employee benefit plan or this Agreement, all of Executive’s rights to salary, severance, benefits, bonuses and other compensatory amounts under this Agreement shall cease upon the Termination Date.
(a) Minimum Payments and Vesting . Executive shall be entitled to the following minimum payments under this Section 6(a) , in addition to any other payments or benefits which Executive is entitled to receive under the terms of any employee benefit plan or program or Section 6(b) :
(1) unpaid salary for the full calendar month in which the Termination Date occurs; provided, however, if Executive is terminated for Cause or terminates his employment voluntarily without Good Reason, Executive shall only be entitled to receive accrued but unpaid salary through the Termination Date;
(2) unpaid vacation days for that year which have accrued through the Termination Date;
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(3) reimbursement of reasonable business expenses that were incurred but unpaid as of the Termination Date; and
(4) to the extent Executive participated in any nonqualified deferred compensation plan or program with vesting criteria, or received any equity incentive grant that is not fully vested, as of the Termination Date, Executive will automatically vest as of the Termination Date as follows:
(A) subject to Section 6(c) , if Executive is involuntarily terminated by the Company other than for Cause (and not including death or termination due to Disability), or if the Executive terminates his employment for Good Reason, Executive shall become immediately 100% vested in (i) any outstanding awards of restricted stock, stock options and any other equity incentive awards granted under the LTIP (or any other equity incentive plan of the Company or Silver Run) that vest solely based on the passage of time (with any such awards that vest based on the attainment of performance-based vesting conditions vesting at the target level); and (ii) any nonqualified deferred compensation account balance or benefit; and
(B) if Executive is terminated by the Company for Cause, or voluntarily terminates his employment without Good Reason, all unvested equity incentive awards shall be treated in accordance with the terms of the outstanding award agreement or plan document, as applicable.
Salary and accrued vacation days under this Section 6(a) shall be paid to Executive within five (5) business days following the Termination Date in a cash lump sum payment, less applicable withholdings. Business expenses shall be reimbursed in accordance with the Company’s normal procedures.
(b) Other Severance Payments . In the event that during the Employment Period (i) Executive’s employment is involuntarily terminated by the Company (except due to a No Severance Benefits Event), (ii) Executive’s employment is terminated due to death or Disability, or (iii) Executive terminates his employment for Good Reason; then in any such event under clause (i), (ii), or (iii), subject to Section 6(c) , the following severance benefits shall be provided to Executive or, in the event of his death before receiving all such benefits, to Executive’s Designated Beneficiary following his death:
(1) Additional Payment . The Company shall pay additional compensation as described in this Section 6(b )( 1) (the “ Additional Payment ”). Subject to Section 6(c) , the Company shall make the Additional Payment to Executive in a cash lump sum, net of applicable withholdings.
(A) Termination Not Following Change in Control . If the Termination Date does not occur within the 15-month period immediately following a Change in Control, the Additional Payment shall be (i) an amount equal to one hundred fifty percent (150%) of Executive’s Base Salary in effect as of the Termination Date, (ii) an amount equal to one hundred fifty percent (150%) of the greater of
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(x) 100% of the “target” bonus for Executive for the year containing the Termination Date or (y) the amount of the Annual Bonus paid to the Executive for the year immediately preceding the year containing the Termination Date, and (iii) an additional $24,000.00 lump sum cash payment for outplacement services. In such event, the Additional Payments described in Section 6(b)(1)(C) following a Change in Control shall be inapplicable for Executive.
(B) Anticipatory Termination . If the Executive incurs an Anticipatory Termination, he shall be entitled to receive, in addition to the payment described in Section 6(b)(1)(A) above, an additional amount equal to the sum of (i) fifty percent (50%) of Executive’s Base Salary as in effect as of the Termination Date, plus (ii) fifty percent (50%) times the greater of (x) 100% of the “target” bonus for Executive for the year containing the Termination Date or (y) the amount of the Annual Bonus paid to the Executive for the year immediately preceding the year containing the Termination Date (the “ Anticipatory Termination Payment ”). In such event, the Additional Payments described in Section 6(b)(1)(C) following a Change in Control shall be inapplicable for Executive. The Anticipatory Termination Payment shall be subject to the Executive executing a second release agreement, as described in Section 6(c) , but covering only the period from the Termination Date until the date immediately following the Change in Control.
(C) Termination Following Change in Control . If the Termination Date occurs within the fifteen (15) month period immediately following a Change in Control, the Additional Payment shall be (i) an amount equal to two hundred percent (200%) of Executive’s Base Salary in effect as of the Termination Date, (ii) an amount equal to two hundred percent (200%) times the greater of (x) 100% of the “target” bonus for Executive for the year containing the Termination Date or (y) the amount of the Annual Bonus paid to the Executive for the year immediately preceding the year containing the Termination Date, and (iii) an additional $24,000.00 lump sum cash payment for outplacement services. In such event, the Additional Payments described in Sections 6(b )( 1)(A) and 6(b)(1)(B) above shall be inapplicable for Executive.
(2) COBRA Coverage .
(A) In the event that Executive timely elects continuation coverage under any of the Company’s “group health plans” within the meaning of Treasury Regulations Section 54.4980B-2 Q/A-1 (collectively, the “ Health Plan ”) on behalf of himself and any of his eligible covered dependents (including his spouse) pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“ COBRA ”), following the Termination Date, the Company shall pay directly or reimburse Executive for an amount equal to the monthly premium for such COBRA coverage for each month during which such COBRA coverage is in effect during the period commencing on the Termination Date and ending upon the earliest of (x) the date that is eighteen (18) months following the Termination Date, (y) the date that Executive and Executive’s covered dependents
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become no longer eligible for COBRA coverage or (z) the date Executive becomes eligible to receive group healthcare coverage from a subsequent employer (and Executive agrees to promptly notify the Company of such eligibility). In all other respects, Executive and his dependents shall be treated the same as any other qualified beneficiaries under the Health Plan and COBRA.
(B) If Executive’s eligibility for continued COBRA coverage under the Health Plan ends due to expiration of the “maximum coverage period” under and within the meaning of 26 C.F.R. 54.4980B-7 Q/A-4(b), Executive shall be entitled to continue coverage for himself and his eligible covered dependents (including his spouse), if any, under the Health Plan (Executive and each such covered dependent being referred to herein as a “ Qualified Beneficiary ”) for the period beginning on the first day following such expiration of eligibility for COBRA coverage and ending on the second anniversary of the Termination Date or the earlier date that Executive becomes eligible to receive group healthcare coverage from a subsequent employer (and Executive agrees to promptly notify the Company of such eligibility) (the “ Extended Coverage ”), subject to the Company or an Affiliate continuing to sponsor a Health Plan for the benefit of the Company’s employees generally. In order for Executive to be eligible to receive the Extended Coverage on behalf of himself and any other Qualified Beneficiaries, Executive and any other Qualified Beneficiary must first exhaust such individual’s rights to any COBRA coverage available under the Health Plan. The Parties acknowledge that following expiration of the Extended Coverage, neither Executive nor any other Qualified Beneficiary will have any right to elect coverage under the Health Plan. Executive shall, on a monthly after-tax basis, pay to the Company (or its delegate) the COBRA rate, as then effective, for each month during the period of Extended Coverage. For purposes of Code Section 409A, the benefits provided under this Section 6(b )( 2)(B) shall be provided as separate monthly in-kind payments of those benefits, and to the extent those benefits are subject to and not otherwise excepted from Section 409A, the provision of in-kind benefits during one calendar year shall not affect in-kind benefits to be provided in any other calendar year.
(C) Executive and Executive’s spouse, if applicable, consent and agree to acquire and maintain any and all coverage that either or both of them are entitled to at any time during their lives under the Medicare program or any similar program of the United States or any agency thereof. Executive and Executive’s spouse further agree to pay any required premiums for Medicare coverage from their personal funds.
(D) Notwithstanding Section 6(b)(2)(A) or (B) to the contrary, the Company may alter the manner in which health benefits are provided to Executive under such sections following termination of Executive’s employment to the extent the Company reasonably determines is necessary for purposes of satisfying Code Section 105(h)(2) or avoiding the imposition of an excise tax on the Company or any of its Affiliates, provided that such alterations do not materially decrease coverage or increase the after-tax cost to Executive of such benefits.
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(3) Code Section 280G Tax Gross-up . If the Termination Date occurs within three (3) years after the Effective Date, the Accounting Firm shall determine if any of the payments or benefits received or to be received by Executive (including, without limitation, any payment or benefits received in connection with a Change in Control or Executive’s termination of employment, whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement), constitute “parachute payments” within the meaning of Code Section 280G as a result of a “change in ownership or control,” under and within the meaning of Treasury Regulation Section 1.280G-1, of Silver Run or any of its subsidiaries, including the Company, but excluding as a result of the closing of the Transaction (all such payments and benefits collectively referred to herein as the “ 280G Payments ”) that are subject to the excise tax imposed under Code Section 4999 (the “ Excise Tax ”). If the Accounting Firm determines any of the 280G Payments are subject to the Excise Tax, the Company shall pay to Executive, as soon as reasonably practicable following such determination but in any event no later than the end of the year following the year in which the Executive pays the relevant taxes, an additional amount equal to the sum of the Excise Tax payable by Executive plus the amount that the Accounting Firm determines is necessary to put Executive in the same after-tax position (taking into account all applicable federal, state and local excise, income and other taxes) as if no Excise Tax had been imposed.
All determinations required to be made under this Section 6(b)(3) , including whether a payment would result in an “excess parachute payment” within the meaning of Code Section 280G and the assumptions utilized in arriving at such determination, shall be made by the Accounting Firm. All fees and expenses of the Accounting Firm shall be paid solely by the Company. The final determination by the Accounting Firm shall be binding on the Parties absent manifest error.
Executive agrees to reasonably cooperate with the Company to minimize the amount of any excess parachute payments, including, without limitation, assisting the Company in establishing that some or all of the payments received by Executive which are “contingent on a change”, as described in Code Section 280G(b)(2)(A), are reasonable compensation for personal services actually rendered by Executive before the date of such change or to be rendered by Executive on or after the date of such change. Notwithstanding the foregoing, Executive shall not be required to take any action which his attorney or tax advisor advises him in writing exposes the Executive to material personal liability.
(4) Other Termination of Employment . For purposes of clarity, in the event that (i) Executive voluntarily resigns or otherwise voluntarily terminates employment, except due to death, Disability or for Good Reason, or (ii) Executive’s employment is terminated due to a No Severance Benefits Event then, in any such event under clause (i) or (ii), the Company shall have no obligation to provide the severance benefits described in paragraphs (1), (2) and (3) (above) of this Section 6(b) , except to offer COBRA coverage (as required by COBRA law) but not at the rate described in paragraph (2). However, Executive shall still be entitled to the minimum benefits provided under Section 6(a) .
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(5) No Duplication of Severance Benefits . The severance payments provided under Section 6(b) shall supersede and replace any severance payments under any severance pay plan or similar agreement that the Company or any Affiliate maintains for key management employees or employees generally.
(c) Release Agreement . Notwithstanding any provision of the Agreement to the contrary, in order to receive the vesting acceleration provided under Section 6(a)(4)(A) or the severance benefits provided under Section 6(b)(1) , (2) , or (3) , the Executive must first execute an appropriate release agreement (on a form provided by the Company) whereby the Executive agrees to release and waive, in return for such vesting acceleration or severance benefits, any claims that Executive may have against the Company or any of its Affiliates including, without limitation, for unlawful discrimination ( e.g. , Title VII of the Civil Rights Act); provided, however, such release agreement shall not release any claim or cause of action by or on behalf of the Executive for (a) any payment or benefit that may be due or payable under this Agreement or any vested benefits under any employee benefit plan or program or (b) non-payment of salary or benefits to which Executive is entitled from the Company as of the Termination Date. The release agreement must be provided to Executive within five (5) days following the Termination Date, and signed by Executive and returned to the Company, and any applicable revocation period must have expired, no later than sixty (60) days following the Termination Date; provided, however, the second release agreement required for an Anticipatory Termination Payment under Section 6(b)(1)(B) must be provided to Executive within five (5) days following the Change in Control Date, and signed by Executive and returned to the Company, and any applicable revocation period must have expired, no later than sixty (60) days following the Change in Control Date. Any payments to which Executive becomes entitled pursuant to Section 6(b)(1) , shall be paid within ten (10) days after the executed release agreement (or executed second release agreement with respect to an Anticipatory Termination Payment) has been timely returned to the Company for counter-signature and become effective and non-revocable by Executive under the terms of the release agreement. Notwithstanding anything in this Agreement to the contrary, to the extent that any severance payments or benefits provided under Section 6(a )( 4)(A) or Section 6(b) are deferred compensation under Code Section 409A, and are not otherwise exempt from the application of Section 409A, then, if the period during which Executive may consider and sign the release agreement spans two calendar years, the severance payments or benefits will not be made or begin until the later calendar year.
(d) Definitions .
(1) “ Accounting Firm ” means any nationally recognized, certified public accounting firm selected by the Company and reasonably acceptable to the Executive; provided, however, the firm selected must be within the top 20 in the United States at such time based on annual revenues for certified public accounting firms in the immediately preceding year.
(2) “ Affiliate ” means any parent or subsidiary entity of the Company, or any other entity in whatever form, of which the Company has any direct or indirect controlling ownership interest or management control, or vice-versa, as determined by the Company. For purposes of clarity and not limitation, (i) Riverstone Investment Group LLC, Bayou City Energy Management, LLC, HPS Investment Partners, LLC, or High Mesa Inc., and their affiliates (other than Silver Run or any of its subsidiaries, to the extent considered an affiliate of any such entity) are not Affiliates for purposes of this Agreement, and (ii) Silver Run is an Affiliate of the Company.
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(3) “ Anticipatory Termination ” means a termination of the Executive’s employment within the three (3) month period ending immediately prior to the Change in Control Date (in which the Change in Control is a “change in control event” within the meaning of Code Section 409A), but only if (a) the Executive’s employment with the Company was (i) terminated by the Company without Cause or (ii) terminated by the Executive for Good Reason, and (b) it is reasonably demonstrated by the Executive that such termination of employment (1) was at the request of a third party who has taken steps reasonably calculated to effect such Change in Control or (2) otherwise arose in connection with or anticipation of such Change in Control.
(4) “ Board ” means the then-current Board of Directors of the Company or, following the closing of the Transaction, the then-current Board of Directors of Silver Run, in each case, including the Compensation Committee (the “ Compensation Committee ”) or another authorized committee thereof.
(5) “ Cause ” means any of the following: (A) the Executive’s final conviction by a court of competent jurisdiction of a felony involving moral turpitude, or entering the plea of nolo contendere to such felony by the Executive; (B) the commission by the Executive of a demonstrable act of material fraud, or a proven and material misappropriation of funds or other property, of or upon the Company or any Affiliate; (C) the engagement by the Executive, without the written approval of the Company, in any material activity which directly competes with the business of the Company or any Affiliate, or which would directly result in a material injury to the business or reputation of the Company or any Affiliate; or (D) the breach by Executive of any material provision of this Agreement. With respect to items (C) and (D) above, in order to constitute “Cause” hereunder, Executive must also fail to cure such breach within a reasonable time period set by the Company but in no event less than twenty (20) calendar days after Executive’s receipt of such notice.
(6) “ Change in Control ” means and includes each of the following:
(A) A transaction or series of transactions (other than an offering of Common Stock to the general public through a registration statement filed with the Securities and Exchange Commission or a transaction or series of transactions that meets the requirements of clauses (1) and (2) of subsection (C) below) whereby any “person” or related “group” of “persons” (as such terms are used in Sections 13(d) and 14(d)(2) of the Exchange Act) (other than Silver Run, any of its subsidiaries, an employee benefit plan maintained by Silver Run or any of its subsidiaries or a “person” that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common control with, Silver Run) directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of securities of Silver Run possessing more than 50% of the total combined voting power of Silver Run’s securities outstanding immediately after such acquisition; or
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(B) During any period of two consecutive years, individuals who, at the beginning of such period, constitute the Board together with any new Director(s) (other than a Director designated by a person who shall have entered into an agreement with Silver Run to effect a transaction described in subsections (A) or (C)) whose election by the Board or nomination for election by Silver Run’s stockholders was approved by a vote of at least two-thirds of the Directors then still in office who either were Directors at the beginning of such two-year period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or
(C) The consummation by Silver Run (whether directly involving Silver Run or indirectly involving Silver Run through one or more intermediaries) of (x) a merger, consolidation, reorganization, or business combination or (y) a sale or other disposition of all or substantially all of Silver Run’s assets in any single transaction or series of related transactions, or (z) the acquisition of assets or stock of another entity, in each case other than a transaction:
(1) which results in Silver Run’s voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of Silver Run or the person that, as a result of the transaction, controls, directly or indirectly, Silver Run or owns, directly or indirectly, all or substantially all of Silver Run’s assets or otherwise succeeds to the business of Silver Run (Silver Run or such person, the “ Successor Entity ”)) directly or indirectly, at least a majority of the combined voting power of the Successor Entity’s outstanding voting securities immediately after the transaction; and
(2) after which no person or group beneficially owns voting securities representing 50% or more of the combined voting power of the Successor Entity; provided, however, that no person or group shall be treated for purposes of this clause (2) as beneficially owning 50% or more of the combined voting power of the Successor Entity solely as a result of the voting power held in Silver Run prior to the consummation of the transaction.
Notwithstanding the foregoing, in no event shall the following constitute a Change in Control: (i) the Transaction or any transactions occurring in connection therewith or (ii) any initial public offering of any subsidiary of Silver Run that owns all or part of Silver Run’s Midstream Assets (as defined in Section 10(d)(1) ) or any other sale or disposition of such Midstream Assets directly or indirectly by Silver Run in connection with such initial public offering.
If a Change in Control constitutes a payment event with respect to any amount, benefit or award (or portion of any amount, benefit or award) that provides for the deferral of compensation that is subject to Section 409A, to the extent required to avoid the imposition of additional taxes under Section 409A, the transaction or event described
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in subsection (A), (B) or (C) above with respect to such amount, benefit or award (or portion thereof) shall only constitute a Change in Control for purposes of the payment timing of such amount, benefit or award if such transaction also constitutes a “change in control event,” as defined in Treasury Regulation Section 1.409A- 3(i)(5).
The Board as in effect immediately prior to the occurrence of a Change in Control shall have full and final authority, which shall be exercised in its discretion, to determine conclusively whether a Change in Control has occurred pursuant to the above definition, the date of the occurrence of such Change in Control and any incidental matters relating thereto; provided that any exercise of such authority in conjunction with a determination regarding whether a Change in Control is a “change in control event” (as defined in Treasury Regulation Section 1.409A-3(i)(5)) shall be determined on a basis consistent with such regulation.
(7) “ Change in Control Date ” means the effective date of the occurrence of a Change in Control.
(8) “ Code ” means the Internal Revenue Code of 1986, as amended or its successor. References herein to any Section of the Code shall include any successor provisions of the Code.
(9) “ Common Stock ” means the Class A common stock of Silver Run, $0.0001 par value per share, and any class of common stock into which such common shares may hereafter be converted, reclassified or recapitalized.
(10) “ Designated Beneficiary ” means the Executive’s surviving spouse, if any. If there is no such surviving spouse at the time of Executive’s death, then the Designated Beneficiary hereunder shall be Executive’s estate after the legal representative of such estate provides satisfactory evidence thereof to the Company (or its delegate).
(11) “ Director ” means a Board member.
(12) “ Disability ” shall mean that (a) Executive is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or last for a continuous period of not less than 12 months, or (b) by reason of any medically determinable physical or mental impairment which can be expected to result in death or to last for a continuous period of not less than 12 months, Executive is receiving income replacement for a period of not less than three months under an accident and health plan covering employees of the Company. Evidence of such Disability shall be certified by a physician acceptable to both the Company and Executive. In the event that the Parties are not able to agree on the choice of a physician, each shall select one physician who, in turn, shall select a third physician to render such certification. All reasonable costs directly relating to the determination of whether Executive has incurred a Disability for purposes of this Agreement shall be paid by the Company. Executive agrees to submit to any examinations that are reasonably required by the attending physician or other healthcare service providers to determine whether Executive has a Disability.
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(13) “ Dispute ” means any dispute, disagreement, claim, or controversy arising from, in connection with, or relating to (a) the employment, or termination of employment, of Executive, or (b) the Agreement, or the validity, interpretation, performance, breach or termination of the Agreement.
(14) “ Exchange Act ” means the Securities Exchange Act of 1934, as amended.
(15) “ Good Reason ” means the occurrence of any of the following without the Executive’s prior written consent, if not cured and corrected by the Company or Silver Run, or either of their successor(s), within 60 days after written notice thereof is provided by Executive to the Company or its successor, provided such notice is delivered within 90 days after the occurrence of the applicable condition or event and that Executive resigns from employment with the Company within 90 days following expiration of such 60-day cure period: (a) the demotion or reduction in title or rank of Executive with the Company or Silver Run, or the assignment to Executive of duties that are materially inconsistent with Executive’s positions, duties and responsibilities with the Company or Silver Run, or any removal of the Executive from, or any failure to nominate for re-election the Executive to, any of such positions (other than a change due to the Executive’s Disability or as an accommodation under the American with Disabilities Act), except for any such demotion, reduction, assignment, removal or failure that occurs in connection with Executive’s termination of employment for Cause, Disability or death; (b) the reduction of the Executive’s annual base salary and/or target bonus opportunity, as compared to his aggregate base salary and target bonus opportunity as effective immediately prior to such reduction, if such reduction of base salary and/or target bonus opportunity, on an aggregated basis, is five percent (5%) or greater of the aggregate base salary and target bonus opportunity as effective immediately prior to such reduction; (c) a relocation of Executive’s principal work location to a location in excess of 50 miles from its then current location; or (d) failure to nominate the Executive to be re-elected to the Board. For the avoidance of doubt, the closing of the Transaction will not by itself be deemed to provide a basis for the Executive to resign for Good Reason.
(16) “ No Severance Benefits Event ” means termination of Executive’s employment by the Company for Cause.
(17) “ Silver Run ” means Silver Run Acquisition Corporation II, a Delaware corporation (whose name will change to Alta Mesa Resources, Inc. at the closing of the Transaction), or its successor in interest.
7. Notice of Termination . Any termination of Executive’s employment by the Company or the Executive other than for death shall be communicated by Notice of Termination to the other Party hereto. For purposes of this Agreement, the term “ Notice of Termination ” means a written notice which indicates the specific termination provision of this Agreement relied upon, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated and specifies a Termination
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Date which, if submitted by Executive, shall be at least thirty (30) days following the date of such Notice of Termination unless such termination is for Good Reason (in which case the requirements for a termination due to Good Reason shall apply); provided, however, that in the event that Executive delivers a Notice of Termination to the Company, the Company may, in its sole discretion, change the Date of Termination to any date that occurs following the date of receipt of such Notice of Termination and is prior to the date specified in such Notice of Termination. A Notice of Termination submitted by the Company may provide for a Termination Date on the date Executive receives the Notice of Termination, or any date thereafter elected by the Company in its sole discretion. The failure by the Company or Executive to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Cause or Good Reason shall not waive any right of such Party hereunder or preclude such Party from asserting such fact or circumstance in enforcing such Party’s rights hereunder.
8. No Mitigation . Except as provided in Section 6(b)(2) for continued Health Plan coverage or Section 6(b)(3) regarding excess parachute payments, Executive shall not be required to mitigate the amount of any payment or other benefits provided under this Agreement by seeking other employment or in any other manner.
9. Restrictive Covenants . As an inducement to the Company to enter into this Agreement, Executive represents to, and covenants with or in favor of, the Company that Executive will comply with all of the restrictive covenants in Sections 9 through 17 , as a condition to the Company’s obligation to provide any benefits to Executive under this Agreement.
10. Trade Secrets .
(a) Access to Trade Secrets . As of the Effective Date and on an ongoing basis, the Company agrees to give Executive access to Trade Secrets which the Executive did not have access to, or knowledge of, before Executive’s commencement of employment with the Company.
(b) Agreement Not to Use or Disclose Trade Secrets . In exchange for the Company’s promises to provide Executive with access to Trade Secrets, and the other consideration and benefits provided to Executive under this Agreement, Executive agrees, during the Employment Period, and any time thereafter, not to disclose to anyone, including, without limitation, any person, firm, corporation or other entity, or publish or use for any purpose, any Trade Secrets, except (1) as required in the ordinary course of the business of the Company or an Affiliate or (2) as authorized by the Company or Affiliate, as applicable. Executive acknowledges that Trade Secrets (A) have been and will be developed or acquired by the Company (or an Affiliate) through the expenditure of substantial time, effort and money and (B) provide the Company (or an Affiliate) with an advantage over competitors who do not know or use Trade Secrets.
Executive shall hold in a fiduciary capacity for the benefit of the Company (or its Affiliate, as applicable) any Trade Secret relating to the Company or any of its Affiliates, and their respective businesses, which (a) has been obtained by Executive during his employment by the Company (or any Affiliate) and (b) is not public knowledge other than via an unauthorized disclosure made by Executive in violation of this Agreement. Executive acknowledges and agrees that all Trade Secrets are, and will continue to be, the exclusive property of the Company or Affiliate, as applicable.
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Executive shall not at any time disclose to any person or entity, or publish, or use for any unauthorized purpose, any Trade Secret, except as the Company directs or under compulsion of law. Executive agrees to give notice to the Company of any attempt to compel disclosure of any Trade Secret within five (5) business days after Executive is informed that such disclosure is being, or will be, compelled. Any such notice shall contain a copy of the subpoena, order or other process used to compel disclosure.
The agreements and covenants in this Section 10(b) apply to all Trade Secrets, whether now known or later to become known to Executive. In addition, these provisions shall be in addition to, and not limit or restrict in any way, any other confidentiality agreement or covenant between the Executive and the Company or any of its Affiliates.
(c) Agreement to Refrain from Defamatory Statements . Executive shall refrain, both during the Employment Period and thereafter, from publishing any oral or written statements about any directors, partners, officers, employees, agents, investors or representatives of the Company or any Affiliate that are (1) slanderous, libelous, or defamatory; (2) disclose private or confidential information about the business affairs, directors, partners, officers, employees, agents, investors or representatives of the Company or any Affiliate; (3) constitute an intrusion into the seclusion or private lives of any such person; (4) give rise to unreasonable publicity about the private life of any such person; (5) place any such person in a false light before the public; or (6) constitute a misappropriation of the name or likeness of any such person. A violation or threatened violation of these restrictive covenants may be enjoined by a court of law notwithstanding the arbitration provisions of Section 31 .
(d) Definitions . The following terms, when used in this Agreement, are defined below:
(1) “ Restricted Territory ” means any county, or equivalent political or governmental subdivision, of any state, district, or territory of North America in which the Company or any of its Affiliates conducts its business; and any area adjacent to such counties, or equivalent political or governmental subdivision, to the extent such adjacent areas are within a 50-mile radius of any (x) producing property or leasehold of the Company or any of its Affiliates or (y) assets relating to the gathering, processing, storage, treating or transmission of oil or natural gas or otherwise generally considered “midstream” in nature in accordance with generally accepted U.S. oil and gas industry practices and customs (“ Midstream Assets ”) of the Company or any of its Affiliates.
(2) “ Trade Secrets ” means any and all information and materials (in any form or medium) that are proprietary to the Company or an Affiliate, or are treated as confidential by the Company or an Affiliate as part of, or relating to, any portion of its or their businesses (whether or not owned or developed by the Company or an Affiliate) and that are not generally known by other persons or entities in the same type of business.
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For purposes of the Agreement, Trade Secrets include, without limitation, the following: all of the Company’s or Affiliate’s research, technical and business information, whether patentable or not, which is of a confidential, trade secret or proprietary character, and which is either developed by the Executive alone, or with others or by others; all non-public information that the Company or an Affiliate has marked as confidential or has otherwise described to Executive (either in writing or orally) as confidential; all non-public information concerning the Company’s or Affiliate’s products, services, prospective products or services, research, prospects, leases, surveys, seismic data, drilling data, designs, prices, costs, marketing plans, marketing techniques, studies, test data, leasehold and royalty owners, investors, suppliers and contracts; all business records and plans; all personnel files; all financial information of or concerning the Company or an Affiliate; all information relating to the Company’s operating system software, application software, software and system methodology, hardware platforms, technical information, inventions, computer programs and listings, source codes, object codes, copyrights and other intellectual property; all technical specifications; any proprietary information belonging to the Company or an Affiliate; all computer hardware or software manuals of the Company or an Affiliate; all Company or Affiliate training or instruction manuals; all Company or Affiliate electronic data; and all computer system passwords and user codes.
11. Duty to Return Company Documents and Property . Upon the Termination Date, Executive shall immediately return and deliver to the Company any and all papers, books, records, documents, memoranda and manuals, e-mail, electronic or magnetic recordings or data, including all copies thereof, belonging to the Company or relating to its business, in Executive ’ s possession, whether prepared by Executive or others. If at any time after the Termination Date, Executive determines that Executive has any Trade Secrets in Executive ’ s possession or control, Executive shall immediately return them to the Company, including all copies thereof.
12. Best Efforts and Disclosure . Executive agrees that, while employed with the Company under this Agreement, Executive’s services shall be devoted on a full time basis to the Company’s business, and Executive shall use best efforts to promote its success. Further, Executive shall promptly disclose to the Company all ideas, inventions, computer programs, and discoveries, whether or not patentable or copyrightable, which Executive may conceive or make, alone or with others, during Executive’s period of employment with the Company or its Affiliates, whether or not during working hours, and which directly or indirectly:
| (a) | relate to a matter within the scope, field, duties or responsibility of Executive’s employment with the Company or within the scope or field of the Company’s or an Affiliate’s business; or |
| (b) | are based on any knowledge of the actual or anticipated business or interests of the Company; or |
| (c) | are aided by the use of time, materials, facilities or information of the Company or an Affiliate. |
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Executive assigns to the Company, without further compensation, any and all rights, titles and interest in all such ideas, inventions, computer programs and discoveries in all countries of the world. Executive recognizes that all ideas inventions, computer programs and discoveries of the type described above, conceived or made by Executive alone or with others within 12 months after the Termination Date (voluntary or otherwise), are likely to have been conceived in significant part either while employed by the Company or as a direct result of knowledge Executive had of proprietary information or Trade Secrets. Accordingly, Executive agrees that such ideas, inventions or discoveries shall be presumed to have been conceived during Executive’s period of employment with the Company or its Affiliates, unless and until the contrary is clearly established by the Executive.
13. Inventions and Other Works . Any and all writings, computer software, inventions, improvements, processes, procedures and/or techniques which Executive may make, conceive, discover, or develop, either solely or jointly with any other person or persons, at any time during Executive’s period of employment with the Company or its Affiliates, whether at the request or upon the suggestion of the Company or otherwise, which relate to or are useful in connection with any business now or hereafter carried on or contemplated by the Company, including developments or expansions of its present fields of operations, shall be the sole and exclusive property of the Company. Executive agrees to take any and all actions necessary or appropriate so that the Company can prepare and present applications for copyright or letters patent therefor, and secure such copyright or letters patent wherever possible, as well as reissue renewals, and extensions thereof, and obtain the record title to such copyright or patents. Executive shall not be entitled to any additional or special compensation or reimbursement regarding any such writings, computer software, inventions, improvements, processes, procedures and techniques. Executive acknowledges that the Company from time to time may have agreements with other persons or entities which impose obligations or restrictions on the Company regarding inventions made during the course of work thereunder or regarding the confidential nature of such work. Executive agrees to be bound by all such obligations and restrictions, and to take all action necessary to discharge the obligations of the Company.
14. Non-Solicitation Restriction . Executive hereby agrees that in order to protect Trade Secrets, it is necessary to enter into the following restrictive covenant, which is ancillary to the enforceable promises between the Company and Executive in Sections 9 through 13 and other provisions of this Agreement. During the Executive ’ s employment and for a period of one (1) year following the Termination Date (regardless of the reason for termination), Executive hereby covenants and agrees that he will not, directly or indirectly, without obtaining the express written consent of the Board, either individually or as a principal, partner, agent, consultant, contractor, employee, or as a director or officer of any entity, or in any other manner or capacity whatsoever, except on behalf of the Company, solicit business, attempt to solicit business, or conduct business, in products or services competitive with any products or services offered or performed by the Company or its Affiliates in any business which the Company or any of its Affiliates does business, prepared to conduct business as of the Termination Date (or if the applicable activity occurs before the Termination, Date, then as of the date on which such activity occurs), or has any business interest within the Restricted Territory as of the Termination Date (or if the applicable activity occurs before the Termination, Date, then as of the date on which such activity occurs), (a) from those individuals or entities with whom the Company or Affiliate conducted or prepared to conduct business in the Restricted Territory during the Executive ’ s employment with the Company or (b) with respect to any assets or holdings in which the Company or Affiliate had any interest in the Restricted Territory at any time during the two-year period ending on the earlier of the Termination Date or the date on which such activity occurs.
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15. Non-Competition Restriction . Executive hereby agrees that in order to protect Trade Secrets, it is necessary to enter into the following restrictive covenant, which is ancillary to the enforceable promises between the Company and Executive in Sections 9 through 14 and other provisions of this Agreement. Executive hereby covenants and agrees that during Executive’s period of employment with the Company or its Affiliates, and for a period of one (1) year following the Termination Date (regardless of the reason for termination), Executive will not, without obtaining the express written consent of the Company, engage in any capacity, directly or indirectly (whether as proprietor, stockholder, director, partner, employee, agent, independent contractor, consultant, trustee, or in any other capacity), with respect to any entity engaged or preparing to engage in the business of oil and gas exploration and production, the acquisition, development or operation of Midstream Assets or any other aspect of the Company’s or an Affiliate’s business, in each case, within the Restricted Territory (a “ Competing Enterprise ”); provided, however, Executive shall not be deemed to be participating or engaging in a Competing Enterprise solely by virtue of the ownership of not more than one percent (1%) of any class of stock or other securities which are publicly traded on a national securities exchange or in a recognized over-the-counter market.
16. No Recruitment Restriction . Executive agrees that during Executive’s period of employment with the Company or its Affiliates, and for a period of one (1) year following the Termination Date (regardless of the reason for termination), without obtaining the express written consent of the Company, Executive shall not, either directly or indirectly, or by acting in concert with another person or entity, (a) hire any employee or independent contractor performing services for the Company or any Affiliate, or any such individual who performed services for the Company or any Affiliate at any time during the one-year period ending on the earlier of the Termination Date or the date on which such hiring occurs, or (b) solicit or influence or seek to solicit or influence, any employee or independent contractor performing services for the Company or any Affiliate, or any such individual who performed services for the Company or any Affiliate at any time during the one-year period ending on the earlier of the Termination Date or the date on which such activity occurs, to terminate, reduce or otherwise adversely affect such individual’s employment or other relationship with the Company or any Affiliate.
17. Business Opportunities . During Executive’s period of employment with the Company or its Affiliates and for a period of one (1) year following the Termination Date (regardless of the reason for termination), the Executive assigns and agrees to assign without further compensation to the Company, its Affiliates and its successors, assigns or designees, all of the Executive’s right, title and interest in and to all Business Opportunities (defined below), and further acknowledges and agrees that all Business Opportunities constitute the exclusive property of the Company. The Executive shall present all Business Opportunities to the Company, and shall not exploit a Business Opportunity. For purposes of this Agreement, “ Business Opportunities ” means all business ideas, prospects, or proposals pertaining to oil and gas exploration and production, the acquisition, development or operation of Midstream Assets or any other aspect of the Company’s or an Affiliate’s business, and any business the Company or any Affiliate
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prepared to conduct, or contemplated conducting during Executive’s employment with the Company, which are developed by the Executive or originated by any third party and brought to the attention of the Executive, together with information relating thereto; provided however, that for the one (1) year period following the Termination Date, “Business Opportunities” shall be limited to those Business Opportunities in the Restricted Territory. For the avoidance of doubt, this Section 17 is not intended to limit or narrow the Executive’s duties or obligations under federal or state law with respect to corporate opportunities.
18 . Tolling . If Executive violates any of the restrictions contained in Sections 9 through 17 , then notwithstanding any provision hereof to the contrary, the restrictive period will be suspended and will not run in favor of Executive from the time of the commencement of any such violation, unless and until such time when the Executive cures the violation to the reasonable satisfaction of the Company.
19. Reformation . If a court or arbitrator rules that any time period or the geographic area specified in any restrictive covenant in Sections 9 through 17 is unenforceable, then the time period will be reduced by the number of months, or the geographic area will be reduced by the elimination of such unenforceable portion, or both, so that the restrictions may be enforced in the geographic area and for the time to the full extent permitted by law.
20. No Previous Restrictive Agreements . Executive represents that, except as disclosed in writing to the Company as of the Effective Date, Executive is not bound by the terms of any agreement with any previous employer or other third party to (a) refrain from using or disclosing any confidential or proprietary information in the course of Executive ’ s employment by the Company or (b) refrain from competing, directly or indirectly, with the business of such previous employer or any other person or entity. Executive further represents that Executive ’ s performance under this Agreement and work duties for the Company do not, and will not, breach any agreement to keep in confidence any proprietary information, knowledge or data acquired by Executive in confidence or in trust prior to Executive ’ s employment with the Company, and Executive will not disclose to the Company or induce the Company to use any confidential or proprietary information or material belonging to any previous employer or others.
21. Conflicts of Interest . In keeping with Executive’s fiduciary duties to the Company, Executive hereby agrees that Executive shall not become involved in a conflict of interest, or upon discovery thereof, allow such a conflict to continue at any time during Executive’s period of employment with the Company or its Affiliates. In this respect, Executive agrees to fully comply with the conflict of interest agreement entered into by Executive as an employee, officer or director of the Company or an Affiliate. In the instance of a violation of the conflict of interest agreement to which Executive is a party, it may be necessary for the Company to terminate Executive’s employment for Cause.
22. Remedies . Executive acknowledges that the restrictions contained in Sections 9 through 21 of this Agreement, in view of the nature of the Company’s business, are reasonable and necessary to protect the Company’s legitimate business interests, and that any violation of this Agreement would result in irreparable injury to the Company. Notwithstanding the arbitration provisions in Section 31 , in the event of a breach or a threatened breach by Executive of any provision of Sections 9 through 21 of this Agreement, the Company shall be entitled to a
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temporary restraining order and injunctive relief restraining Executive from the commission of any breach, and to recover the Company’s attorneys’ fees, costs and expenses related to the breach or threatened breach. Nothing contained in this Agreement shall be construed as prohibiting the Company from pursuing any other remedies available to it for any such breach or threatened breach, including, without limitation, the recovery of money damages, attorneys’ fees, and costs. These covenants and agreements shall each be construed as independent of any other provisions in this Agreement, and the existence of any claim or cause of action by Executive against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of such covenants and agreements.
23. No Interference . Notwithstanding any other provision of this Agreement, (a) Executive may disclose confidential information when required to do so by a court of competent jurisdiction, by any governmental agency having authority over Executive or the business of the Company or by any administrative body or legislative body (including a committee thereof) with jurisdiction to order Executive to divulge, disclose or make accessible such information, in each case, subject to Executive’s obligations to notify the Company under Section 10(b) ; and (b) nothing in this Agreement is intended to interfere with Executive’s right to (1) report possible violations of state or federal law or regulation to any governmental or law enforcement agency or entity; (2) make other disclosures that are protected under the whistleblower provisions of state or federal law or regulation (including the right to receive an award for information provided to any such government agencies); (3) file a claim or charge any governmental agency or entity; or (4) testify, assist, or participate in an investigation, hearing, or proceeding conducted by any governmental or law enforcement agency or entity, or any court. For purposes of clarity, in making or initiating any such reports or disclosures or engaging in any of the conduct outlined in subsection (b) above, Executive may disclose confidential information to the extent necessary to such governmental or law enforcement agency or entity or such court, need not seek prior authorization from the Company, and is not required to notify the Company of any such reports, disclosures or conduct.
24. Defend Trade Secrets Act . Executive is hereby notified in accordance with the Defend Trade Secrets Act of 2016 that Executive will not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that (a) is made (1) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (2) solely for the purpose of reporting or investigating a suspected violation of law; or (b) is made in a complaint or other document that is filed under seal in a lawsuit or other proceeding. If Executive files a lawsuit for retaliation against the Company for reporting a suspected violation of law, Executive may disclose the Company’s trade secrets to Executive’s attorney and use the trade secret information in the court proceeding if Executive files any document containing the trade secret under seal, and does not disclose the trade secret, except pursuant to court order.
25. Withholdings; Right of Offset . The Company may withhold and deduct from any benefits and payments made or to be made pursuant to this Agreement (a) all federal, state, local and other taxes as may be required pursuant to any law or governmental regulation or ruling, (b) all other normal employee deductions made with respect to Company’s employees generally, and (c) any advances made to Executive and owed to Company.
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26. Nonalienation . The right to receive payments under this Agreement shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge or encumbrance by Executive, dependents or beneficiaries of Executive, or to any other person who is or may become entitled to receive such payments hereunder. The right to receive payments hereunder shall not be subject to or liable for the debts, contracts, liabilities, engagements or torts of any person who is or may become entitled to receive such payments, nor may the same be subject to attachment or seizure by any creditor of such person under any circumstances, and any such attempted attachment or seizure shall be void and of no force and effect.
27. Incompetent or Minor Payees . Should the Company determine, in its discretion, that any person to whom any payment is payable under this Agreement has been determined to be legally incompetent or is a minor, any payment due hereunder, notwithstanding any other provision of this Agreement to the contrary, may be made in any one or more of the following ways: (a) directly to such minor or person; (b) to the legal guardian or other duly appointed personal representative of the person or estate of such minor or person; or (c) to such adult or adults as have, in the good faith knowledge of the Company, assumed custody and support of such minor or person; and any payment so made shall constitute full and complete discharge of any liability under this Agreement in respect to the amount paid.
28. Severability . It is the desire of the Parties hereto that this Agreement be enforced to the maximum extent permitted by law, and should any provision contained herein be held unenforceable by a court of competent jurisdiction or arbitrator (pursuant to Section 31 ), the Parties hereby agree and consent that such provision shall be reformed to create a valid and enforceable provision to the maximum extent permitted by law; provided, however, if such provision cannot be reformed, it shall be deemed ineffective and deleted herefrom without affecting any other provision of this Agreement. This Agreement should be construed by limiting and reducing it only to the minimum extent necessary to be enforceable under then applicable law.
29. Title and Headings; Construction . In the interpretation of the Agreement, except where the context clearly otherwise requires:
(a) “including” or “include” does not denote or imply any limitation;
(b) “or” has the inclusive meaning “and/or”;
(c) the singular includes the plural, and vice versa, and each gender includes each of the others;
(d) captions or headings are only for reference and are not to be considered in interpreting the Agreement;
(e) “Section” refers to a Section of the Agreement, unless otherwise stated in the Agreement;
(f) the words “herein”, “hereof”, “hereunder” and other compounds of the word “here” shall refer to the entire Agreement and not to any particular provision; and
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(g) a reference to any statute, rule, or regulation includes any amendment thereto or any statute, rule, or regulation enacted or promulgated in replacement thereof or as the successor thereto.
30. Governing Law; Jurisdiction . All matters or issues relating to the interpretation, construction, validity, and enforcement of this Agreement shall be governed by the laws of the State of Texas, without giving effect to any choice-of-law principle that would cause the application of the laws of any jurisdiction other than Texas. Jurisdiction and venue of any action or proceeding relating to this Agreement or any Dispute (to the extent arbitration is not required under Section 31 ) shall be exclusively in Harris County, Texas.
31. Mandatory Arbitration . Except as provided in subsection (h) of this Section 31 , any Dispute must be resolved by binding arbitration in accordance with the following:
(a) Either Party may begin arbitration by filing a demand for arbitration in accordance with the Commercial Arbitration Rules of the AAA (the “ Arbitration Rules ”) and concurrently notifying the other Party of that demand. If the Parties are unable to agree upon a panel of three neutral arbitrators within twenty days after the demand for arbitration was filed (the Parties agree to a reasonable, one-time extension of that twenty-day period), either Party may request the Houston, Texas office of the American Arbitration Association (“ AAA ”) to appoint the arbitrator or arbitrators necessary to complete the panel in accordance with the Arbitration Rules. Each arbitrator so appointed shall be deemed accepted by the Parties as part of the panel. Notwithstanding the foregoing, the Parties, by mutual consent, may agree to a single arbitrator instead of a panel of three arbitrators and, in such event, references herein to “panel” shall refer to the single appointed arbitrator.
(b) The arbitration shall be conducted in the Houston, Texas metropolitan area at a place and time agreed upon by the Parties with the panel, or if the Parties cannot agree, as designated by the panel. The panel may, however, call and conduct hearings and meetings at such other places as the Parties may agree or as the panel may, on the motion of one Party, determine to be necessary to obtain significant testimony or evidence.
(c) The panel may authorize any and all forms of discovery upon a Party’s showing of need that the requested discovery is likely to lead to material evidence needed to resolve the Dispute and is not excessive in scope, timing, or cost.
(d) The arbitration shall be subject to the Federal Arbitration Act and conducted in accordance with the Arbitration Rules to the extent that they do not conflict with this Section 31 . The Parties and the panel may, however, agree to vary to provisions of this Section 31 or the matters otherwise governed by the Arbitration Rules as permitted by law.
(e) The arbitration hearing shall be held within 60 days after the appointment of the panel. The panel’s final decision or award shall be made within 30 days after the hearing. That final decision or award shall be made by unanimous or majority vote or consent of the arbitrators constituting the panel, and shall be deemed issued at the place of arbitration. The panel’s final decision or award shall be based on the terms and conditions of this Agreement and applicable law.
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(f) The panel’s final decision or award may include injunctive relief in response to any actual or impending breach of this Agreement or any other actual or impending action or omission of a Party under or in connection with this Agreement.
(g) The panel’s final decision or award shall be final and binding upon the Parties, and judgment upon that decision or award may be entered in any court having jurisdiction. The Parties waive any right to apply or appeal to any court for relief from the preceding sentence or from any decision of the panel that is made before the final decision or award.
(h) Nothing in this Section 31 limits the right of either Party to apply to a court having jurisdiction to (i) enforce the agreement to arbitrate in accordance with this Section 31 , (ii) seek provisional or temporary injunctive relief, in response to an actual or impending breach of the Agreement or otherwise so as to avoid an irreparable damage or maintain the status quo, until a final arbitration decision or award is rendered or the Dispute is otherwise resolved, or challenge or vacate any final arbitration decision or award that does not comply with this Section 31 . In addition, nothing in this Section 31 prohibits the Parties from resolving any Dispute (in whole or in part) at any time by mutual agreement or compromise. This Section 31 shall also not preclude the Parties at any time from mutually agreeing to pursue non-binding mediation of the Dispute.
(i) The panel may proceed to an award notwithstanding the failure of any Party to participate in such proceedings. The prevailing Party in the arbitration proceeding may be entitled to an award of reasonable attorneys’ fees incurred in connection with the arbitration in such amount, if any, as determined by the panel in its discretion. The costs of the arbitration shall be borne equally by the Parties unless otherwise determined by the panel in its award.
(j) The panel shall be empowered to impose sanctions and to take such other actions as it deems necessary to the same extent a judge could impose sanctions or take such other actions pursuant to the Federal Rules of Civil Procedure and applicable law. Each Party agrees to keep all Disputes and arbitration proceedings strictly confidential except for disclosure of information required by applicable law which cannot be waived.
32. Binding Effect; Third Party Beneficiaries . Subject to Section 37 , this Agreement shall be binding upon and inure to the benefit of the Parties hereto, and to their respective heirs, executors, beneficiaries, personal representatives, successors and permitted assigns hereunder; otherwise this Agreement shall not be for the benefit of any third parties.
33. Entire Agreement; Amendment and Termination . This Agreement contains the entire agreement of the Parties hereto with respect to the matters covered herein; moreover, this Agreement supersedes all prior and contemporaneous agreements and understandings, oral or written, between the Parties concerning the subject matter hereof, including any employment agreement between the Company and Executive as in effect immediately before the Effective Date. This Agreement may be amended, waived or terminated only by a written instrument that is identified as an amendment, waiver or termination hereto, and is executed on behalf of both Parties. Executive hereby acknowledges and represents that in executing this Agreement, he did not rely on, has not relied on, and specifically disavows any reliance on any communications, promises, statements, inducements, or representation(s), oral or written, by the Company, except as expressly contained in this Agreement. The Parties represent that they relied on their own judgment in entering into this Agreement.
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34. Section 409A .
(a) General . Any provisions of the Agreement that are subject to Section 409A of the Code and the regulations and other authoritative guidance issued thereunder (“ Section 409A ”), are intended to comply with all applicable requirements of Section 409A, or an exemption from the application of Section 409A, and shall be interpreted and administered accordingly. Notwithstanding any provision of this Agreement to the contrary, a termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amount or benefit that constitutes “non-qualified deferred compensation” (within the meaning of Section 409A) upon or following a termination of the Executive’s employment unless such termination is also a “separation from service” (as defined under Section 409A) (a “ Separation from Service ”) and, for purposes of any such provision, references herein to a “termination,” “termination of employment” or like terms shall mean a Separation from Service, if applicable. Each payment under this Agreement shall be treated as a separate payment for purposes of Section 409A. In no event may the Executive, directly or indirectly, designate the calendar year of any payment to be made under this Agreement.
(b) Specified Employee . Notwithstanding any provision of this Agreement to the contrary, if any payment or other benefit provided hereunder would be subject to additional taxes and interest under Section 409A because the timing of such payment is not delayed as required by Section 409A for a “specified employee” (as defined under Section 409A), then if the Executive is on the date of Executive ’ s Separation from Service a specified employee, any such payment or benefit that Executive would otherwise be entitled to receive during the first six months following the Separation from Service shall be accumulated and paid in a lump sum within ten (10) days after the date that is six months following the date of the Separation from Service, or such earlier date upon which such amount can be paid under Section 409A without being subject to such additional taxes and interest such as, for example, upon the Executive’s death. Any remaining payments due to Executive under this Agreement shall be paid as otherwise provided in this Agreement.
(c) Reimbursements and In-Kind Benefits . Notwithstanding any provision of this Agreement to the contrary, any reimbursements or in-kind benefits provided under this Agreement that constitute “nonqualified deferred compensation” within the meaning of Section 409A shall be paid to Executive no later than December 31 of the year following the year in which the expense was incurred, the amount of expenses reimbursed in one year shall not affect the amount eligible for reimbursement in any subsequent year, other than medical expenses referred to in Section 105(b) of the Code, and Executive ’ s right to reimbursement under this Agreement will not be subject to liquidation or exchange for other benefits.
(d) No Section 409A Representations . Notwithstanding the foregoing, the Company makes no representations, warranties, or guarantees regarding the tax consequences of this Agreement, or any payments made hereunder, under Section 409A or otherwise, and has advised the Executive to consult with Executive ’ s own tax advisor.
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35. Survival of Certain Provisions . Provisions of this Agreement which by their terms must survive the termination of this Agreement shall survive any such termination or expiration of this Agreement or termination of Executive’s employment, as applicable, including, without limitation, Executive’s obligations under Sections 9 through 18 and the Company’s obligations under Section 6 .
36. Waiver of Breach . No waiver by any party hereto of a breach of any provision of this Agreement by any other party, or of compliance with any condition or provision of this Agreement to be performed by such other party, will operate or be construed as a waiver of any subsequent breach by such other party or any similar or dissimilar provision or condition at the same or any subsequent time. The failure of any party hereto to take any action by reason of any breach will not deprive such party of the right to take action at any time while such breach continues.
37. Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of the Company and its Affiliates (and its and their successors), as well as upon any person or entity acquiring, whether by merger, consolidation, purchase of assets, dissolution or otherwise, all or substantially all of the capital stock, business and/or assets of the Company (or its successor) regardless of whether the Company is the surviving or resulting entity. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation, dissolution or otherwise) to all or substantially all of the capital stock, business or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had occurred; provided, however, no such assumption shall relieve the Company or any of its Affiliates (or any successor thereof) of any of its duties or obligations hereunder unless otherwise agreed, in writing, by Executive.
This Agreement shall inure to the benefit of and be enforceable by Executive’s personal or legal representative, executors, administrators, successors, and heirs. In the event of the death of Executive while any amount is payable hereunder, all such amounts shall be paid to the Designated Beneficiary.
38. Notice . Each notice or other communication required or permitted under this Agreement shall be in writing and transmitted, delivered, or sent by personal delivery, prepaid courier or messenger service (whether overnight or same-day), or prepaid certified United States mail (with return receipt requested), addressed (in any case) to the other party at the address for that party set forth below that party’s signature on this Agreement, or at such other address as the recipient has designated by Notice to the other party, by electronic mail, delivery and read receipt required, or by facsimile, confirmation of delivery required.
Each notice or communication so transmitted, delivered, or sent (a) in person, by courier or messenger service, or by certified United States mail shall be deemed given, received, and effective on the date delivered to or refused by the intended recipient (with the return receipt, or the equivalent record of the courier or messenger, being deemed conclusive evidence of delivery or refusal), or (b) by telecopy or facsimile shall be deemed given received) and effective on the date of actual receipt (with the confirmation of transmission being deemed conclusive evidence of receipt, except where the intended recipient has promptly notified the other party that the transmission is illegible). Nevertheless, if the date of delivery or transmission is not a business day, or if the delivery or transmission is after 5:00 p.m. (local time) on a business day, the notice or other communication shall be deemed given, received, and effective on the next business day.
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39. Executive Acknowledgment . Executive acknowledges (a) being knowledgeable and sophisticated as to business matters, including the subject matter of this Agreement, (b) having read this Agreement and understanding its terms and conditions, (c) having been given an ample opportunity to discuss this Agreement with his personal legal counsel prior to execution, and (d) that no strict rules of construction shall apply for or against the drafter or any other party. Executive hereby represents that he is free to enter into this Agreement including, without limitation, that he is not subject to any covenant not to compete or confidentiality agreement that conflicts with this Agreement.
40. Counterparts . This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute one and the same instrument. Each counterpart may consist of a copy hereof containing multiple signature pages, each signed by one party hereto, but together signed by both Parties.
41. Parent Acknowledgment and Guarantee . Alta Mesa is the direct or indirect parent of the Company. Alta Mesa hereby unconditionally guarantees full and timely performance of the obligations of the Company and its Affiliates under this Agreement. The foregoing guarantee shall include the guarantee of the payment of all benefits and payments due Executive hereunder as a result of the nonperformance of any of such obligations or agreements so guaranteed or as a result of the nonperformance of this guarantee. Executive may, at his option, proceed against Alta Mesa for damages for default in the performance thereof, without first proceeding against the Company or against any of its properties or Affiliates. Alta Mesa further agrees that its guarantee shall be an irrevocable guarantee and shall continue in effect notwithstanding any extension or modification of any guaranteed obligation, any assumption of any such guaranteed obligation by any other party, or any other act or thing which might otherwise operate as a legal or equitable discharge of a guarantor, and Alta Mesa hereby waives all special suretyship defenses and notice requirements. This guarantee shall also be binding upon all successors and assigns of all of substantially all of the business or assets of Alta Mesa. Section 31 shall apply to Disputes between Alta Mesa and Executive mutatis mutandis .
[ Signature pages follow .]
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IN WITNESS WHEREOF , Executive has executed this Agreement, the Company has caused this Agreement to be executed in its name and on its behalf by its duly authorized officer, and Alta Mesa has caused this Agreement to be executed in its name and on its behalf by its duly authorized officer solely for purposes of Section 41 of the Agreement, to be effective as of the Effective Date.
| EXECUTIVE: |
|
/s/ Michael E. Ellis |
| Michael E. Ellis |
| Address for Notices: |
| Most recent mailing address for Executive in the Company’s personnel files |
[ Signature pages continue .]
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[ Signature pages continue .]
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[End of Signatures.]
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Exhibit 10.15
Execution Copy
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the “ Agreement ”), is made and entered into as of February 9, 2018 (the “ Effective Date ”), by and between Alta Mesa Services, LP, a Texas limited partnership (the “ Company ”), Michael A. McCabe (hereafter “ Executive ”)and, solely with respect to Section 41 , Alta Mesa Holdings, LP, a Texas limited partnership (“ Alta Mesa ”). The Company and Executive may sometimes hereafter be referred to singularly as a “ Party ” or collectively as the “ Parties .”
WITNESSETH:
WHEREAS , Alta Mesa Holdings, L.P. (the “ Parent ”), has entered into a Contribution Agreement by and among High Mesa Holdings, LP, High Mesa Holdings GP, LLC, Alta Mesa Holdings GP, LLC, Silver Run and certain other parties thereto, dated as of August 16, 2017, as the same may be amended from time to time, pursuant to which Silver Run will acquire certain of the outstanding equity interests in Parent (the “ Transaction ”); and
WHEREAS , the Company desires to continue to secure the employment services of Executive subject to the terms and conditions hereafter set forth;
NOW, THEREFORE, in consideration of Executive’s continued employment with the Company, and the premises and mutual covenants contained herein, the Parties hereto agree as follows:
1. Employment Position and Defined Terms . During the Employment Period (as defined in Section 4 ), the Company shall employ Executive, and Executive shall serve, as Vice President and Chief Financial Officer of the Company. During the Employment Period, Executive shall also serve in the same positions of employment with Silver Run as he does with the Company for no additional compensation. Executive’s principal place of employment shall be at the main business offices of the Company in Houston, Texas. Defined terms used in the Agreement that are not otherwise defined herein when first used are defined in Sections 6(d) and 10(d) .
2. Compensation .
(a) Base Salary . The Company shall pay to Executive during the Employment Period a base salary of Four Hundred Fifty Thousand dollars ($450,000) per year, as adjusted pursuant to the subsequent provisions of this paragraph (the “ Base Salary ”). The Base Salary shall be payable in accordance with the Company’s normal payroll schedule and procedures for its executives. Nothing contained herein shall preclude the payment of any other compensation to Executive at any time as determined by the Board.
| M. McCabe Agreement |
(b) Annual Bonus .
(1) In addition to the Base Salary in Section 2(a) , for each annual fiscal year of the Company during the Employment Period (each such annual period being referred to as a “ Bonus Period ”), Executive will be eligible to participate in an annual bonus program established by the Board, under which Executive shall receive a bonus equal to a percentage of Executive’s Base Salary paid during each such one-year period (referred to herein as the “ Annual Bonus ”), such percentage to be established by the Board in its sole discretion; provided, however, that the payment of any Annual Bonus will be subject to the Board’s discretion and made only if Executive has met the pre-established performance criteria set by the Board for the Bonus Period.
(2) In the event that the Employment Period ends before the end of the Bonus Period, Executive shall be entitled to a pro rata portion of the Annual Bonus for that year (based on the number of days in which Executive was employed during the year divided by 365), as determined based on satisfaction of the performance criteria for that Bonus Period on a pro rata basis (calculated as if the final day of the Employment Period were the final day of the applicable Bonus Period), unless Executive was terminated for Cause or terminated voluntarily without Good Reason, in any of which events Executive shall not be entitled to any Annual Bonus for that year.
(3) If Executive successfully meets the performance criteria for a Bonus Period, the Company shall pay Executive the Annual Bonus amount determined by the Board within the earlier of: (A) sixty days (60) days after the end of the Bonus Period or (B) sixty days (60) after the end of the Employment Period.
(c) Compensation in Event of Injury or Sickness . In the event that Executive becomes injured or suffers a medically determinable physical or mental illness, as determined by a physician acceptable to both the Company and Executive in the same manner as provided in the definition of Disability in Section 6(d) , during the Employment Period, Executive shall be entitled to receive continued Base Salary (as set forth in Section 2(a) ) for a period of six (6) months following the occurrence of such injury or sickness; provided, however, such Base Salary shall be reduced by any short-term and/or long-term disability income benefits that are received by Executive under such programs sponsored by the Company (or an Affiliate) during such 6-month period.
3. Duties and Responsibilities of Executive . During the Employment Period, Executive shall devote his full working time to (a) the business of the Company and its Affiliates and (b) performance of the duties and responsibilities assigned to Executive to the best of Executive’s ability and with reasonable diligence. In determining Executive’s duties and responsibilities, Executive shall not be assigned duties and responsibilities that are materially inconsistent with Executive’s position. This Section 3 shall not be construed as preventing Executive from (a) engaging in reasonable volunteer services for charitable, educational or civic organizations, or (b) investing personal assets in such a manner that will not require a material amount of the Executive’s time or services in the operation of the businesses in which such investments are made; provided, however, no such other activity shall conflict or materially interfere with Executive’s loyalties, duties or responsibilities to the Company and its Affiliates. Executive shall at all times use his best efforts to comply in good faith with United States laws applicable to Executive’s actions on behalf of the Company and its Affiliates. Executive understands and agrees that Executive may be required to travel from time to time for purposes of the Company’s business. The Parties agree that Executive’s principal work location cannot be relocated further than 50 miles from Executive’s principal work location on the Effective Date, except as mutually agreed by the Parties.
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4. Term of Employment . Executive’s term of employment with the Company under this Agreement shall be for the period from the Effective Date through the date that is three (3) years from the Effective Date, unless earlier terminated in accordance with this Agreement, and if not earlier terminated, this Agreement will expire upon the date that is three (3) years from the Effective Date.
The period from the Effective Date through the earlier of the third (3 rd ) anniversary of the Effective Date and the date of Executive’s termination of employment with the Company and its Affiliates for whatever reason (the “ Termination Date ”) shall be referred to herein as the “ Employment Period .” Notwithstanding the above, Executive agrees to remain available beyond the Employment Period to provide assistance to the Company or its Affiliate in the event that the Company or an Affiliate become involved in litigation (or another type of dispute or controversy) regarding matters of which Executive has relevant knowledge resulting from Executive’s employment with the Company or an Affiliate. Such post-termination assistance shall be provided by Executive in the capacity of an independent contractor at an agreed-upon, reasonable consulting fee, and shall not be deemed to create or continue an employee-employer or fiduciary relationship, or to represent a continuation of this Agreement.
5. Benefits . Subject to the terms and conditions of this Agreement, during the Employment Period, Executive shall be entitled to all of the following:
(a) Reimbursement of Business Expenses . The Company shall pay or reimburse Executive for all reasonable travel, entertainment and other business expenses paid or incurred by Executive in the performance of duties hereunder. The Company shall also provide Executive with suitable office space, including staff support, paid parking, and necessary equipment, including but not limited to, cellular telephone and laptop computer.
(b) Other Employee Benefits . Executive shall be entitled to participate in any pension, retirement, 401(k), profit-sharing, and other employee benefits plans or programs of the Company to the same extent as available to other senior management employees of the Company under the terms of such plans or programs. Executive shall also be entitled to participate in any group insurance, hospitalization, medical, dental, health, life, accident, disability and other employee benefits plans or programs of the Company to the extent available to other senior management employees of the Company, and their spouses and eligible dependents, under the terms of such plans or programs including any medical expense reimbursement account and post-retirement medical program as made available to other senior management employees of the Company.
(c) Vacation and Holidays . Executive shall be entitled to five (5) weeks of paid vacation per calendar year (prorated in any calendar year during which Executive is employed for less than the entire year based on the number of days in such calendar year in which Executive was employed). Executive shall also be entitled to all paid holidays and personal days provided by the Company for its key management employees under the Company’s personnel policy as then effective. Unused vacation shall not carry over to the following year unless specifically approved by the Company.
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(d) Equity Incentive Awards . Executive shall be eligible to participate in the Alta Mesa Resources, Inc. 2018 Long Term Incentive Plan (the “ LTIP ”) or any other incentive plan sponsored by the Company which provides for equity grants of incentive awards. The terms and conditions of any equity incentive award granted to Executive shall be set forth in the incentive plan document and award agreement governing such award.
(e) Annual Physical . Executive shall be entitled to be reimbursed by the Company for the full cost of an annual physical examination by a physician (1) selected by the Company or (2) selected by Executive and approved by the Company.
(f) Key Man or Company-Owned Life Insurance . The Company may, at any time during the term of this Agreement, apply for and procure as owner, and for its sole benefit, life insurance on the Executive’s life in such amounts and in such forms as the Company may select. Executive hereby acknowledges that he will have no interest whatsoever in any such insurance policy. Executive shall submit to such medical examinations, supply such information, and execute such documents as may be reasonably requested by the insurer to obtain any such key man policy.
(g) Tax Planning, Preparation and Advice . Executive shall be entitled to be reimbursed by the Company for the cost of tax preparation and planning by a certified financial planner or certified public accountant (1) selected by the Company or (2) selected by Executive and approved by the Company, provided that such annual reimbursement shall not exceed $5,000.00.
6. Rights and Payments upon Termination . The Executive’s right to compensation and benefits for periods after the Termination Date shall be determined in accordance with this Section 6 . Except as otherwise expressly required by law or as specifically provided in an employee benefit plan or this Agreement, all of Executive’s rights to salary, severance, benefits, bonuses and other compensatory amounts under this Agreement shall cease upon the Termination Date.
(a) Minimum Payments and Vesting . Executive shall be entitled to the following minimum payments under this Section 6(a) , in addition to any other payments or benefits which Executive is entitled to receive under the terms of any employee benefit plan or program or Section 6(b) :
(1) unpaid salary for the full calendar month in which the Termination Date occurs; provided, however, if Executive is terminated for Cause or terminates his employment voluntarily without Good Reason, Executive shall only be entitled to receive accrued but unpaid salary through the Termination Date;
(2) unpaid vacation days for that year which have accrued through the Termination Date;
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(3) reimbursement of reasonable business expenses that were incurred but unpaid as of the Termination Date; and
(4) to the extent Executive participated in any nonqualified deferred compensation plan or program with vesting criteria, or received any equity incentive grant that is not fully vested, as of the Termination Date, Executive will automatically vest as of the Termination Date as follows:
(A) subject to Section 6(c) , if Executive is involuntarily terminated by the Company other than for Cause (and not including death or termination due to Disability), or if the Executive terminates his employment for Good Reason, Executive shall become immediately 100% vested in (i) any outstanding awards of restricted stock, stock options and any other equity incentive awards granted under the LTIP (or any other equity incentive plan of the Company or Silver Run) that vest solely based on the passage of time (with any such awards that vest based on the attainment of performance-based vesting conditions vesting at the target level); and (ii) any nonqualified deferred compensation account balance or benefit; and
(B) if Executive is terminated by the Company for Cause, or voluntarily terminates his employment without Good Reason, all unvested equity incentive awards shall be treated in accordance with the terms of the outstanding award agreement or plan document, as applicable.
Salary and accrued vacation days under this Section 6(a) shall be paid to Executive within five (5) business days following the Termination Date in a cash lump sum payment, less applicable withholdings. Business expenses shall be reimbursed in accordance with the Company’s normal procedures.
(b) Other Severance Payments . In the event that during the Employment Period (i) Executive’s employment is involuntarily terminated by the Company (except due to a No Severance Benefits Event), (ii) Executive’s employment is terminated due to death or Disability, or (iii) Executive terminates his employment for Good Reason; then in any such event under clause (i), (ii), or (iii), subject to Section 6(c) , the following severance benefits shall be provided to Executive or, in the event of his death before receiving all such benefits, to Executive’s Designated Beneficiary following his death:
(1) Additional Payment . The Company shall pay additional compensation as described in this Section 6(b )( 1) (the “ Additional Payment ”). Subject to Section 6(c) , the Company shall make the Additional Payment to Executive in a cash lump sum, net of applicable withholdings.
(A) Termination Not Following Change in Control . If the Termination Date does not occur within the 15-month period immediately following a Change in Control, the Additional Payment shall be (i) an amount equal to one hundred fifty percent (150%) of Executive’s Base Salary in effect as of the Termination Date, (ii) an amount equal to one hundred fifty percent (150%) of the greater of
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(x) 100% of the “target” bonus for Executive for the year containing the Termination Date or (y) the amount of the Annual Bonus paid to the Executive for the year immediately preceding the year containing the Termination Date, and (iii) an additional $24,000.00 lump sum cash payment for outplacement services. In such event, the Additional Payments described in Section 6(b)(1)(C) following a Change in Control shall be inapplicable for Executive.
(B) Anticipatory Termination . If the Executive incurs an Anticipatory Termination, he shall be entitled to receive, in addition to the payment described in Section 6(b)(1)(A) above, an additional amount equal to the sum of (i) fifty percent (50%) of Executive’s Base Salary as in effect as of the Termination Date, plus (ii) fifty percent (50%) times the greater of (x) 100% of the “target” bonus for Executive for the year containing the Termination Date or (y) the amount of the Annual Bonus paid to the Executive for the year immediately preceding the year containing the Termination Date (the “ Anticipatory Termination Payment ”). In such event, the Additional Payments described in Section 6(b)(1)(C) following a Change in Control shall be inapplicable for Executive. The Anticipatory Termination Payment shall be subject to the Executive executing a second release agreement, as described in Section 6(c) , but covering only the period from the Termination Date until the date immediately following the Change in Control.
(C) Termination Following Change in Control . If the Termination Date occurs within the fifteen (15) month period immediately following a Change in Control, the Additional Payment shall be (i) an amount equal to two hundred percent (200%) of Executive’s Base Salary in effect as of the Termination Date, (ii) an amount equal to two hundred percent (200%) times the greater of (x) 100% of the “target” bonus for Executive for the year containing the Termination Date or (y) the amount of the Annual Bonus paid to the Executive for the year immediately preceding the year containing the Termination Date, and (iii) an additional $24,000.00 lump sum cash payment for outplacement services. In such event, the Additional Payments described in Sections 6(b )( 1)(A) and 6(b)(1)(B) above shall be inapplicable for Executive.
(2) COBRA Coverage .
(A) In the event that Executive timely elects continuation coverage under any of the Company’s “group health plans” within the meaning of Treasury Regulations Section 54.4980B-2 Q/A-1 (collectively, the “ Health Plan ”) on behalf of himself and any of his eligible covered dependents (including his spouse) pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“ COBRA ”), following the Termination Date, the Company shall pay directly or reimburse Executive for an amount equal to the monthly premium for such COBRA coverage for each month during which such COBRA coverage is in effect during the period commencing on the Termination Date and ending upon the earliest of (x) the date that is eighteen (18) months following the Termination Date, (y) the date that Executive and Executive’s covered dependents
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become no longer eligible for COBRA coverage or (z) the date Executive becomes eligible to receive group healthcare coverage from a subsequent employer (and Executive agrees to promptly notify the Company of such eligibility). In all other respects, Executive and his dependents shall be treated the same as any other qualified beneficiaries under the Health Plan and COBRA.
(B) If Executive’s eligibility for continued COBRA coverage under the Health Plan ends due to expiration of the “maximum coverage period” under and within the meaning of 26 C.F.R. 54.4980B-7 Q/A-4(b), Executive shall be entitled to continue coverage for himself and his eligible covered dependents (including his spouse), if any, under the Health Plan (Executive and each such covered dependent being referred to herein as a “ Qualified Beneficiary ”) for the period beginning on the first day following such expiration of eligibility for COBRA coverage and ending on the second anniversary of the Termination Date or the earlier date that Executive becomes eligible to receive group healthcare coverage from a subsequent employer (and Executive agrees to promptly notify the Company of such eligibility) (the “ Extended Coverage ”), subject to the Company or an Affiliate continuing to sponsor a Health Plan for the benefit of the Company’s employees generally. In order for Executive to be eligible to receive the Extended Coverage on behalf of himself and any other Qualified Beneficiaries, Executive and any other Qualified Beneficiary must first exhaust such individual’s rights to any COBRA coverage available under the Health Plan. The Parties acknowledge that following expiration of the Extended Coverage, neither Executive nor any other Qualified Beneficiary will have any right to elect coverage under the Health Plan. Executive shall, on a monthly after-tax basis, pay to the Company (or its delegate) the COBRA rate, as then effective, for each month during the period of Extended Coverage. For purposes of Code Section 409A, the benefits provided under this Section 6(b )( 2)(B) shall be provided as separate monthly in-kind payments of those benefits, and to the extent those benefits are subject to and not otherwise excepted from Section 409A, the provision of in-kind benefits during one calendar year shall not affect in-kind benefits to be provided in any other calendar year.
(C) Executive and Executive’s spouse, if applicable, consent and agree to acquire and maintain any and all coverage that either or both of them are entitled to at any time during their lives under the Medicare program or any similar program of the United States or any agency thereof. Executive and Executive’s spouse further agree to pay any required premiums for Medicare coverage from their personal funds.
(D) Notwithstanding Section 6(b)(2)(A) or (B) to the contrary, the Company may alter the manner in which health benefits are provided to Executive under such sections following termination of Executive’s employment to the extent the Company reasonably determines is necessary for purposes of satisfying Code Section 105(h)(2) or avoiding the imposition of an excise tax on the Company or any of its Affiliates, provided that such alterations do not materially decrease coverage or increase the after-tax cost to Executive of such benefits.
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(3) Code Section 280G Tax Gross-up . If the Termination Date occurs within three (3) years after the Effective Date, the Accounting Firm shall determine if any of the payments or benefits received or to be received by Executive (including, without limitation, any payment or benefits received in connection with a Change in Control or Executive’s termination of employment, whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement), constitute “parachute payments” within the meaning of Code Section 280G as a result of a “change in ownership or control,” under and within the meaning of Treasury Regulation Section 1.280G-1, of Silver Run or any of its subsidiaries, including the Company, but excluding as a result of the closing of the Transaction (all such payments and benefits collectively referred to herein as the “ 280G Payments ”) that are subject to the excise tax imposed under Code Section 4999 (the “ Excise Tax ”). If the Accounting Firm determines any of the 280G Payments are subject to the Excise Tax, the Company shall pay to Executive, as soon as reasonably practicable following such determination but in any event no later than the end of the year following the year in which the Executive pays the relevant taxes, an additional amount equal to the sum of the Excise Tax payable by Executive plus the amount that the Accounting Firm determines is necessary to put Executive in the same after-tax position (taking into account all applicable federal, state and local excise, income and other taxes) as if no Excise Tax had been imposed.
All determinations required to be made under this Section 6(b)(3) , including whether a payment would result in an “excess parachute payment” within the meaning of Code Section 280G and the assumptions utilized in arriving at such determination, shall be made by the Accounting Firm. All fees and expenses of the Accounting Firm shall be paid solely by the Company. The final determination by the Accounting Firm shall be binding on the Parties absent manifest error.
Executive agrees to reasonably cooperate with the Company to minimize the amount of any excess parachute payments, including, without limitation, assisting the Company in establishing that some or all of the payments received by Executive which are “contingent on a change”, as described in Code Section 280G(b)(2)(A), are reasonable compensation for personal services actually rendered by Executive before the date of such change or to be rendered by Executive on or after the date of such change. Notwithstanding the foregoing, Executive shall not be required to take any action which his attorney or tax advisor advises him in writing exposes the Executive to material personal liability.
(4) Other Termination of Employment . For purposes of clarity, in the event that (i) Executive voluntarily resigns or otherwise voluntarily terminates employment, except due to death, Disability or for Good Reason, or (ii) Executive’s employment is terminated due to a No Severance Benefits Event then, in any such event under clause (i) or (ii), the Company shall have no obligation to provide the severance benefits described in paragraphs (1), (2) and (3) (above) of this Section 6(b) , except to offer COBRA coverage (as required by COBRA law) but not at the rate described in paragraph (2). However, Executive shall still be entitled to the minimum benefits provided under Section 6(a) .
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(5) No Duplication of Severance Benefits . The severance payments provided under Section 6(b) shall supersede and replace any severance payments under any severance pay plan or similar agreement that the Company or any Affiliate maintains for key management employees or employees generally.
(c) Release Agreement . Notwithstanding any provision of the Agreement to the contrary, in order to receive the vesting acceleration provided under Section 6(a)(4)(A) or the severance benefits provided under Section 6(b)(1) , (2) , or (3) , the Executive must first execute an appropriate release agreement (on a form provided by the Company) whereby the Executive agrees to release and waive, in return for such vesting acceleration or severance benefits, any claims that Executive may have against the Company or any of its Affiliates including, without limitation, for unlawful discrimination ( e.g. , Title VII of the Civil Rights Act); provided, however, such release agreement shall not release any claim or cause of action by or on behalf of the Executive for (a) any payment or benefit that may be due or payable under this Agreement or any vested benefits under any employee benefit plan or program or (b) non-payment of salary or benefits to which Executive is entitled from the Company as of the Termination Date. The release agreement must be provided to Executive within five (5) days following the Termination Date, and signed by Executive and returned to the Company, and any applicable revocation period must have expired, no later than sixty (60) days following the Termination Date; provided, however, the second release agreement required for an Anticipatory Termination Payment under Section 6(b)(1)(B) must be provided to Executive within five (5) days following the Change in Control Date, and signed by Executive and returned to the Company, and any applicable revocation period must have expired, no later than sixty (60) days following the Change in Control Date. Any payments to which Executive becomes entitled pursuant to Section 6(b)(1) , shall be paid within ten (10) days after the executed release agreement (or executed second release agreement with respect to an Anticipatory Termination Payment) has been timely returned to the Company for counter-signature and become effective and non-revocable by Executive under the terms of the release agreement. Notwithstanding anything in this Agreement to the contrary, to the extent that any severance payments or benefits provided under Section 6(a )( 4)(A) or Section 6(b) are deferred compensation under Code Section 409A, and are not otherwise exempt from the application of Section 409A, then, if the period during which Executive may consider and sign the release agreement spans two calendar years, the severance payments or benefits will not be made or begin until the later calendar year.
(d) Definitions .
(1) “ Accounting Firm ” means any nationally recognized, certified public accounting firm selected by the Company and reasonably acceptable to the Executive; provided, however, the firm selected must be within the top 20 in the United States at such time based on annual revenues for certified public accounting firms in the immediately preceding year.
(2) “ Affiliate ” means any parent or subsidiary entity of the Company, or any other entity in whatever form, of which the Company has any direct or indirect controlling ownership interest or management control, or vice-versa, as determined by the Company. For purposes of clarity and not limitation, (i) Riverstone Investment Group LLC, Bayou City Energy Management, LLC, HPS Investment Partners, LLC, or High Mesa Inc., and their affiliates (other than Silver Run or any of its subsidiaries, to the extent considered an affiliate of any such entity) are not Affiliates for purposes of this Agreement, and (ii) Silver Run is an Affiliate of the Company.
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(3) “ Anticipatory Termination ” means a termination of the Executive’s employment within the three (3) month period ending immediately prior to the Change in Control Date (in which the Change in Control is a “change in control event” within the meaning of Code Section 409A), but only if (a) the Executive’s employment with the Company was (i) terminated by the Company without Cause or (ii) terminated by the Executive for Good Reason, and (b) it is reasonably demonstrated by the Executive that such termination of employment (1) was at the request of a third party who has taken steps reasonably calculated to effect such Change in Control or (2) otherwise arose in connection with or anticipation of such Change in Control.
(4) “ Board ” means the then-current Board of Directors of the Company or, following the closing of the Transaction, the then-current Board of Directors of Silver Run, in each case, including the Compensation Committee (the “ Compensation Committee ”) or another authorized committee thereof.
(5) “ Cause ” means any of the following: (A) the Executive’s final conviction by a court of competent jurisdiction of a felony involving moral turpitude, or entering the plea of nolo contendere to such felony by the Executive; (B) the commission by the Executive of a demonstrable act of material fraud, or a proven and material misappropriation of funds or other property, of or upon the Company or any Affiliate; (C) the engagement by the Executive, without the written approval of the Company, in any material activity which directly competes with the business of the Company or any Affiliate, or which would directly result in a material injury to the business or reputation of the Company or any Affiliate; or (D) the breach by Executive of any material provision of this Agreement. With respect to items (C) and (D) above, in order to constitute “Cause” hereunder, Executive must also fail to cure such breach within a reasonable time period set by the Company but in no event less than twenty (20) calendar days after Executive’s receipt of such notice.
(6) “ Change in Control ” means and includes each of the following:
(A) A transaction or series of transactions (other than an offering of Common Stock to the general public through a registration statement filed with the Securities and Exchange Commission or a transaction or series of transactions that meets the requirements of clauses (1) and (2) of subsection (C) below) whereby any “person” or related “group” of “persons” (as such terms are used in Sections 13(d) and 14(d)(2) of the Exchange Act) (other than Silver Run, any of its subsidiaries, an employee benefit plan maintained by Silver Run or any of its subsidiaries or a “person” that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common control with, Silver Run) directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of securities of Silver Run possessing more than 50% of the total combined voting power of Silver Run’s securities outstanding immediately after such acquisition; or
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(B) During any period of two consecutive years, individuals who, at the beginning of such period, constitute the Board together with any new Director(s) (other than a Director designated by a person who shall have entered into an agreement with Silver Run to effect a transaction described in subsections (A) or (C)) whose election by the Board or nomination for election by Silver Run’s stockholders was approved by a vote of at least two-thirds of the Directors then still in office who either were Directors at the beginning of such two-year period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or
(C) The consummation by Silver Run (whether directly involving Silver Run or indirectly involving Silver Run through one or more intermediaries) of (x) a merger, consolidation, reorganization, or business combination or (y) a sale or other disposition of all or substantially all of Silver Run’s assets in any single transaction or series of related transactions, or (z) the acquisition of assets or stock of another entity, in each case other than a transaction:
(1) which results in Silver Run’s voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of Silver Run or the person that, as a result of the transaction, controls, directly or indirectly, Silver Run or owns, directly or indirectly, all or substantially all of Silver Run’s assets or otherwise succeeds to the business of Silver Run (Silver Run or such person, the “ Successor Entity ”)) directly or indirectly, at least a majority of the combined voting power of the Successor Entity’s outstanding voting securities immediately after the transaction; and
(2) after which no person or group beneficially owns voting securities representing 50% or more of the combined voting power of the Successor Entity; provided, however, that no person or group shall be treated for purposes of this clause (2) as beneficially owning 50% or more of the combined voting power of the Successor Entity solely as a result of the voting power held in Silver Run prior to the consummation of the transaction.
Notwithstanding the foregoing, in no event shall the following constitute a Change in Control: (i) the Transaction or any transactions occurring in connection therewith or (ii) any initial public offering of any subsidiary of Silver Run that owns all or part of Silver Run’s Midstream Assets (as defined in Section 10(d)(1) ) or any other sale or disposition of such Midstream Assets directly or indirectly by Silver Run in connection with such initial public offering.
If a Change in Control constitutes a payment event with respect to any amount, benefit or award (or portion of any amount, benefit or award) that provides for the deferral of compensation that is subject to Section 409A, to the extent required to avoid the imposition of additional taxes under Section 409A, the transaction or event described
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in subsection (A), (B) or (C) above with respect to such amount, benefit or award (or portion thereof) shall only constitute a Change in Control for purposes of the payment timing of such amount, benefit or award if such transaction also constitutes a “change in control event,” as defined in Treasury Regulation Section 1.409A- 3(i)(5).
The Board as in effect immediately prior to the occurrence of a Change in Control shall have full and final authority, which shall be exercised in its discretion, to determine conclusively whether a Change in Control has occurred pursuant to the above definition, the date of the occurrence of such Change in Control and any incidental matters relating thereto; provided that any exercise of such authority in conjunction with a determination regarding whether a Change in Control is a “change in control event” (as defined in Treasury Regulation Section 1.409A-3(i)(5)) shall be determined on a basis consistent with such regulation.
(7) “ Change in Control Date ” means the effective date of the occurrence of a Change in Control.
(8) “ Code ” means the Internal Revenue Code of 1986, as amended or its successor. References herein to any Section of the Code shall include any successor provisions of the Code.
(9) “ Common Stock ” means the Class A common stock of Silver Run, $0.0001 par value per share, and any class of common stock into which such common shares may hereafter be converted, reclassified or recapitalized.
(10) “ Designated Beneficiary ” means the Executive’s surviving spouse, if any. If there is no such surviving spouse at the time of Executive’s death, then the Designated Beneficiary hereunder shall be Executive’s estate after the legal representative of such estate provides satisfactory evidence thereof to the Company (or its delegate).
(11) “ Director ” means a Board member.
(12) “ Disability ” shall mean that (a) Executive is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or last for a continuous period of not less than 12 months, or (b) by reason of any medically determinable physical or mental impairment which can be expected to result in death or to last for a continuous period of not less than 12 months, Executive is receiving income replacement for a period of not less than three months under an accident and health plan covering employees of the Company. Evidence of such Disability shall be certified by a physician acceptable to both the Company and Executive. In the event that the Parties are not able to agree on the choice of a physician, each shall select one physician who, in turn, shall select a third physician to render such certification. All reasonable costs directly relating to the determination of whether Executive has incurred a Disability for purposes of this Agreement shall be paid by the Company. Executive agrees to submit to any examinations that are reasonably required by the attending physician or other healthcare service providers to determine whether Executive has a Disability.
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(13) “ Dispute ” means any dispute, disagreement, claim, or controversy arising from, in connection with, or relating to (a) the employment, or termination of employment, of Executive, or (b) the Agreement, or the validity, interpretation, performance, breach or termination of the Agreement.
(14) “ Exchange Act ” means the Securities Exchange Act of 1934, as amended.
(15) “ Good Reason ” means the occurrence of any of the following without the Executive’s prior written consent, if not cured and corrected by the Company or Silver Run, or either of their successor(s), within 60 days after written notice thereof is provided by Executive to the Company or its successor, provided such notice is delivered within 90 days after the occurrence of the applicable condition or event and that Executive resigns from employment with the Company within 90 days following expiration of such 60-day cure period: (a) the demotion or reduction in title or rank of Executive with the Company or Silver Run, or the assignment to Executive of duties that are materially inconsistent with Executive’s positions, duties and responsibilities with the Company or Silver Run, or any removal of the Executive from, or any failure to nominate for re-election the Executive to, any of such positions (other than a change due to the Executive’s Disability or as an accommodation under the American with Disabilities Act), except for any such demotion, reduction, assignment, removal or failure that occurs in connection with Executive’s termination of employment for Cause, Disability or death; (b) the reduction of the Executive’s annual base salary and/or target bonus opportunity, as compared to his aggregate base salary and target bonus opportunity as effective immediately prior to such reduction, if such reduction of base salary and/or target bonus opportunity, on an aggregated basis, is five percent (5%) or greater of the aggregate base salary and target bonus opportunity as effective immediately prior to such reduction; or (c) a relocation of Executive’s principal work location to a location in excess of 50 miles from its then current location. For the avoidance of doubt, the closing of the Transaction will not by itself be deemed to provide a basis for the Executive to resign for Good Reason.
(16) “ No Severance Benefits Event ” means termination of Executive’s employment by the Company for Cause.
(17) “ Silver Run ” means Silver Run Acquisition Corporation II, a Delaware corporation (whose name will change to Alta Mesa Resources, Inc. at the closing of the Transaction), or its successor in interest.
7. Notice of Termination . Any termination of Executive’s employment by the Company or the Executive other than for death shall be communicated by Notice of Termination to the other Party hereto. For purposes of this Agreement, the term “ Notice of Termination ” means a written notice which indicates the specific termination provision of this Agreement relied upon, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated and specifies a Termination
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Date which, if submitted by Executive, shall be at least thirty (30) days following the date of such Notice of Termination unless such termination is for Good Reason (in which case the requirements for a termination due to Good Reason shall apply); provided, however, that in the event that Executive delivers a Notice of Termination to the Company, the Company may, in its sole discretion, change the Date of Termination to any date that occurs following the date of receipt of such Notice of Termination and is prior to the date specified in such Notice of Termination. A Notice of Termination submitted by the Company may provide for a Termination Date on the date Executive receives the Notice of Termination, or any date thereafter elected by the Company in its sole discretion. The failure by the Company or Executive to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Cause or Good Reason shall not waive any right of such Party hereunder or preclude such Party from asserting such fact or circumstance in enforcing such Party’s rights hereunder.
8. No Mitigation . Except as provided in Section 6(b)(2) for continued Health Plan coverage or Section 6(b)(3) regarding excess parachute payments, Executive shall not be required to mitigate the amount of any payment or other benefits provided under this Agreement by seeking other employment or in any other manner.
9. Restrictive Covenants . As an inducement to the Company to enter into this Agreement, Executive represents to, and covenants with or in favor of, the Company that Executive will comply with all of the restrictive covenants in Sections 9 through 17 , as a condition to the Company’s obligation to provide any benefits to Executive under this Agreement.
10. Trade Secrets .
(a) Access to Trade Secrets . As of the Effective Date and on an ongoing basis, the Company agrees to give Executive access to Trade Secrets which the Executive did not have access to, or knowledge of, before Executive’s commencement of employment with the Company.
(b) Agreement Not to Use or Disclose Trade Secrets . In exchange for the Company’s promises to provide Executive with access to Trade Secrets, and the other consideration and benefits provided to Executive under this Agreement, Executive agrees, during the Employment Period, and any time thereafter, not to disclose to anyone, including, without limitation, any person, firm, corporation or other entity, or publish or use for any purpose, any Trade Secrets, except (1) as required in the ordinary course of the business of the Company or an Affiliate or (2) as authorized by the Company or Affiliate, as applicable. Executive acknowledges that Trade Secrets (A) have been and will be developed or acquired by the Company (or an Affiliate) through the expenditure of substantial time, effort and money and (B) provide the Company (or an Affiliate) with an advantage over competitors who do not know or use Trade Secrets.
Executive shall hold in a fiduciary capacity for the benefit of the Company (or its Affiliate, as applicable) any Trade Secret relating to the Company or any of its Affiliates, and their respective businesses, which (a) has been obtained by Executive during his employment by the Company (or any Affiliate) and (b) is not public knowledge other than via an unauthorized disclosure made by Executive in violation of this Agreement. Executive acknowledges and agrees that all Trade Secrets are, and will continue to be, the exclusive property of the Company or Affiliate, as applicable.
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Executive shall not at any time disclose to any person or entity, or publish, or use for any unauthorized purpose, any Trade Secret, except as the Company directs or under compulsion of law. Executive agrees to give notice to the Company of any attempt to compel disclosure of any Trade Secret within five (5) business days after Executive is informed that such disclosure is being, or will be, compelled. Any such notice shall contain a copy of the subpoena, order or other process used to compel disclosure.
The agreements and covenants in this Section 10(b) apply to all Trade Secrets, whether now known or later to become known to Executive. In addition, these provisions shall be in addition to, and not limit or restrict in any way, any other confidentiality agreement or covenant between the Executive and the Company or any of its Affiliates.
(c) Agreement to Refrain from Defamatory Statements . Executive shall refrain, both during the Employment Period and thereafter, from publishing any oral or written statements about any directors, partners, officers, employees, agents, investors or representatives of the Company or any Affiliate that are (1) slanderous, libelous, or defamatory; (2) disclose private or confidential information about the business affairs, directors, partners, officers, employees, agents, investors or representatives of the Company or any Affiliate; (3) constitute an intrusion into the seclusion or private lives of any such person; (4) give rise to unreasonable publicity about the private life of any such person; (5) place any such person in a false light before the public; or (6) constitute a misappropriation of the name or likeness of any such person. A violation or threatened violation of these restrictive covenants may be enjoined by a court of law notwithstanding the arbitration provisions of Section 31 .
(d) Definitions . The following terms, when used in this Agreement, are defined below:
(1) “ Restricted Territory ” means any county, or equivalent political or governmental subdivision, of any state, district, or territory of North America in which the Company or any of its Affiliates conducts its business; and any area adjacent to such counties, or equivalent political or governmental subdivision, to the extent such adjacent areas are within a 50-mile radius of any (x) producing property or leasehold of the Company or any of its Affiliates or (y) assets relating to the gathering, processing, storage, treating or transmission of oil or natural gas or otherwise generally considered “midstream” in nature in accordance with generally accepted U.S. oil and gas industry practices and customs (“ Midstream Assets ”) of the Company or any of its Affiliates.
(2) “ Trade Secrets ” means any and all information and materials (in any form or medium) that are proprietary to the Company or an Affiliate, or are treated as confidential by the Company or an Affiliate as part of, or relating to, any portion of its or their businesses (whether or not owned or developed by the Company or an Affiliate) and that are not generally known by other persons or entities in the same type of business.
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For purposes of the Agreement, Trade Secrets include, without limitation, the following: all of the Company’s or Affiliate’s research, technical and business information, whether patentable or not, which is of a confidential, trade secret or proprietary character, and which is either developed by the Executive alone, or with others or by others; all non-public information that the Company or an Affiliate has marked as confidential or has otherwise described to Executive (either in writing or orally) as confidential; all non-public information concerning the Company’s or Affiliate’s products, services, prospective products or services, research, prospects, leases, surveys, seismic data, drilling data, designs, prices, costs, marketing plans, marketing techniques, studies, test data, leasehold and royalty owners, investors, suppliers and contracts; all business records and plans; all personnel files; all financial information of or concerning the Company or an Affiliate; all information relating to the Company’s operating system software, application software, software and system methodology, hardware platforms, technical information, inventions, computer programs and listings, source codes, object codes, copyrights and other intellectual property; all technical specifications; any proprietary information belonging to the Company or an Affiliate; all computer hardware or software manuals of the Company or an Affiliate; all Company or Affiliate training or instruction manuals; all Company or Affiliate electronic data; and all computer system passwords and user codes.
11. Duty to Return Company Documents and Property . Upon the Termination Date, Executive shall immediately return and deliver to the Company any and all papers, books, records, documents, memoranda and manuals, e-mail, electronic or magnetic recordings or data, including all copies thereof, belonging to the Company or relating to its business, in Executive ’ s possession, whether prepared by Executive or others. If at any time after the Termination Date, Executive determines that Executive has any Trade Secrets in Executive ’ s possession or control, Executive shall immediately return them to the Company, including all copies thereof.
12. Best Efforts and Disclosure . Executive agrees that, while employed with the Company under this Agreement, Executive’s services shall be devoted on a full time basis to the Company’s business, and Executive shall use best efforts to promote its success. Further, Executive shall promptly disclose to the Company all ideas, inventions, computer programs, and discoveries, whether or not patentable or copyrightable, which Executive may conceive or make, alone or with others, during Executive’s period of employment with the Company or its Affiliates, whether or not during working hours, and which directly or indirectly:
| (a) | relate to a matter within the scope, field, duties or responsibility of Executive’s employment with the Company or within the scope or field of the Company’s or an Affiliate’s business; or |
| (b) | are based on any knowledge of the actual or anticipated business or interests of the Company; or |
| (c) | are aided by the use of time, materials, facilities or information of the Company or an Affiliate. |
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Executive assigns to the Company, without further compensation, any and all rights, titles and interest in all such ideas, inventions, computer programs and discoveries in all countries of the world. Executive recognizes that all ideas inventions, computer programs and discoveries of the type described above, conceived or made by Executive alone or with others within 12 months after the Termination Date (voluntary or otherwise), are likely to have been conceived in significant part either while employed by the Company or as a direct result of knowledge Executive had of proprietary information or Trade Secrets. Accordingly, Executive agrees that such ideas, inventions or discoveries shall be presumed to have been conceived during Executive’s period of employment with the Company or its Affiliates, unless and until the contrary is clearly established by the Executive.
13. Inventions and Other Works . Any and all writings, computer software, inventions, improvements, processes, procedures and/or techniques which Executive may make, conceive, discover, or develop, either solely or jointly with any other person or persons, at any time during Executive’s period of employment with the Company or its Affiliates, whether at the request or upon the suggestion of the Company or otherwise, which relate to or are useful in connection with any business now or hereafter carried on or contemplated by the Company, including developments or expansions of its present fields of operations, shall be the sole and exclusive property of the Company. Executive agrees to take any and all actions necessary or appropriate so that the Company can prepare and present applications for copyright or letters patent therefor, and secure such copyright or letters patent wherever possible, as well as reissue renewals, and extensions thereof, and obtain the record title to such copyright or patents. Executive shall not be entitled to any additional or special compensation or reimbursement regarding any such writings, computer software, inventions, improvements, processes, procedures and techniques. Executive acknowledges that the Company from time to time may have agreements with other persons or entities which impose obligations or restrictions on the Company regarding inventions made during the course of work thereunder or regarding the confidential nature of such work. Executive agrees to be bound by all such obligations and restrictions, and to take all action necessary to discharge the obligations of the Company.
14. Non-Solicitation Restriction . Executive hereby agrees that in order to protect Trade Secrets, it is necessary to enter into the following restrictive covenant, which is ancillary to the enforceable promises between the Company and Executive in Sections 9 through 13 and other provisions of this Agreement. During the Executive ’ s employment and for a period of one (1) year following the Termination Date (regardless of the reason for termination), Executive hereby covenants and agrees that he will not, directly or indirectly, without obtaining the express written consent of the Board, either individually or as a principal, partner, agent, consultant, contractor, employee, or as a director or officer of any entity, or in any other manner or capacity whatsoever, except on behalf of the Company, solicit business, attempt to solicit business, or conduct business, in products or services competitive with any products or services offered or performed by the Company or its Affiliates in any business which the Company or any of its Affiliates does business, prepared to conduct business as of the Termination Date (or if the applicable activity occurs before the Termination, Date, then as of the date on which such activity occurs), or has any business interest within the Restricted Territory as of the Termination Date (or if the applicable activity occurs before the Termination, Date, then as of the date on which such activity occurs), (a) from those individuals or entities with whom the Company or Affiliate conducted or prepared to conduct business in the Restricted Territory during the Executive ’ s employment with the Company or (b) with respect to any assets or holdings in which the Company or Affiliate had any interest in the Restricted Territory at any time during the two-year period ending on the earlier of the Termination Date or the date on which such activity occurs.
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15. Non-Competition Restriction . Executive hereby agrees that in order to protect Trade Secrets, it is necessary to enter into the following restrictive covenant, which is ancillary to the enforceable promises between the Company and Executive in Sections 9 through 14 and other provisions of this Agreement. Executive hereby covenants and agrees that during Executive’s period of employment with the Company or its Affiliates, and for a period of one (1) year following the Termination Date (regardless of the reason for termination), Executive will not, without obtaining the express written consent of the Company, engage in any capacity, directly or indirectly (whether as proprietor, stockholder, director, partner, employee, agent, independent contractor, consultant, trustee, or in any other capacity), with respect to any entity engaged or preparing to engage in the business of oil and gas exploration and production, the acquisition, development or operation of Midstream Assets or any other aspect of the Company’s or an Affiliate’s business, in each case, within the Restricted Territory (a “ Competing Enterprise ”); provided, however, Executive shall not be deemed to be participating or engaging in a Competing Enterprise solely by virtue of the ownership of not more than one percent (1%) of any class of stock or other securities which are publicly traded on a national securities exchange or in a recognized over-the-counter market.
16. No Recruitment Restriction . Executive agrees that during Executive’s period of employment with the Company or its Affiliates, and for a period of one (1) year following the Termination Date (regardless of the reason for termination), without obtaining the express written consent of the Company, Executive shall not, either directly or indirectly, or by acting in concert with another person or entity, (a) hire any employee or independent contractor performing services for the Company or any Affiliate, or any such individual who performed services for the Company or any Affiliate at any time during the one-year period ending on the earlier of the Termination Date or the date on which such hiring occurs, or (b) solicit or influence or seek to solicit or influence, any employee or independent contractor performing services for the Company or any Affiliate, or any such individual who performed services for the Company or any Affiliate at any time during the one-year period ending on the earlier of the Termination Date or the date on which such activity occurs, to terminate, reduce or otherwise adversely affect such individual’s employment or other relationship with the Company or any Affiliate.
17. Business Opportunities . During Executive’s period of employment with the Company or its Affiliates and for a period of one (1) year following the Termination Date (regardless of the reason for termination), the Executive assigns and agrees to assign without further compensation to the Company, its Affiliates and its successors, assigns or designees, all of the Executive’s right, title and interest in and to all Business Opportunities (defined below), and further acknowledges and agrees that all Business Opportunities constitute the exclusive property of the Company. The Executive shall present all Business Opportunities to the Company, and shall not exploit a Business Opportunity. For purposes of this Agreement, “ Business Opportunities ” means all business ideas, prospects, or proposals pertaining to oil and gas exploration and production, the acquisition, development or operation of Midstream Assets or any other aspect of the Company’s or an Affiliate’s business, and any business the Company or any Affiliate
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prepared to conduct, or contemplated conducting during Executive’s employment with the Company, which are developed by the Executive or originated by any third party and brought to the attention of the Executive, together with information relating thereto; provided however, that for the one (1) year period following the Termination Date, “Business Opportunities” shall be limited to those Business Opportunities in the Restricted Territory. For the avoidance of doubt, this Section 17 is not intended to limit or narrow the Executive’s duties or obligations under federal or state law with respect to corporate opportunities.
18. Tolling . If Executive violates any of the restrictions contained in Sections 9 through 17 , then notwithstanding any provision hereof to the contrary, the restrictive period will be suspended and will not run in favor of Executive from the time of the commencement of any such violation, unless and until such time when the Executive cures the violation to the reasonable satisfaction of the Company.
19. Reformation . If a court or arbitrator rules that any time period or the geographic area specified in any restrictive covenant in Sections 9 through 17 is unenforceable, then the time period will be reduced by the number of months, or the geographic area will be reduced by the elimination of such unenforceable portion, or both, so that the restrictions may be enforced in the geographic area and for the time to the full extent permitted by law.
20. No Previous Restrictive Agreements . Executive represents that, except as disclosed in writing to the Company as of the Effective Date, Executive is not bound by the terms of any agreement with any previous employer or other third party to (a) refrain from using or disclosing any confidential or proprietary information in the course of Executive ’ s employment by the Company or (b) refrain from competing, directly or indirectly, with the business of such previous employer or any other person or entity. Executive further represents that Executive ’ s performance under this Agreement and work duties for the Company do not, and will not, breach any agreement to keep in confidence any proprietary information, knowledge or data acquired by Executive in confidence or in trust prior to Executive ’ s employment with the Company, and Executive will not disclose to the Company or induce the Company to use any confidential or proprietary information or material belonging to any previous employer or others.
21. Conflicts of Interest . In keeping with Executive’s fiduciary duties to the Company, Executive hereby agrees that Executive shall not become involved in a conflict of interest, or upon discovery thereof, allow such a conflict to continue at any time during Executive’s period of employment with the Company or its Affiliates. In this respect, Executive agrees to fully comply with the conflict of interest agreement entered into by Executive as an employee, officer or director of the Company or an Affiliate. In the instance of a violation of the conflict of interest agreement to which Executive is a party, it may be necessary for the Company to terminate Executive’s employment for Cause.
22. Remedies . Executive acknowledges that the restrictions contained in Sections 9 through 21 of this Agreement, in view of the nature of the Company’s business, are reasonable and necessary to protect the Company’s legitimate business interests, and that any violation of this Agreement would result in irreparable injury to the Company. Notwithstanding the arbitration provisions in Section 31 , in the event of a breach or a threatened breach by Executive of any provision of Sections 9 through 21 of this Agreement, the Company shall be entitled to a
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temporary restraining order and injunctive relief restraining Executive from the commission of any breach, and to recover the Company’s attorneys’ fees, costs and expenses related to the breach or threatened breach. Nothing contained in this Agreement shall be construed as prohibiting the Company from pursuing any other remedies available to it for any such breach or threatened breach, including, without limitation, the recovery of money damages, attorneys’ fees, and costs. These covenants and agreements shall each be construed as independent of any other provisions in this Agreement, and the existence of any claim or cause of action by Executive against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of such covenants and agreements.
23. No Interference . Notwithstanding any other provision of this Agreement, (a) Executive may disclose confidential information when required to do so by a court of competent jurisdiction, by any governmental agency having authority over Executive or the business of the Company or by any administrative body or legislative body (including a committee thereof) with jurisdiction to order Executive to divulge, disclose or make accessible such information, in each case, subject to Executive’s obligations to notify the Company under Section 10(b) ; and (b) nothing in this Agreement is intended to interfere with Executive’s right to (1) report possible violations of state or federal law or regulation to any governmental or law enforcement agency or entity; (2) make other disclosures that are protected under the whistleblower provisions of state or federal law or regulation (including the right to receive an award for information provided to any such government agencies); (3) file a claim or charge any governmental agency or entity; or (4) testify, assist, or participate in an investigation, hearing, or proceeding conducted by any governmental or law enforcement agency or entity, or any court. For purposes of clarity, in making or initiating any such reports or disclosures or engaging in any of the conduct outlined in subsection (b) above, Executive may disclose confidential information to the extent necessary to such governmental or law enforcement agency or entity or such court, need not seek prior authorization from the Company, and is not required to notify the Company of any such reports, disclosures or conduct.
24. Defend Trade Secrets Act . Executive is hereby notified in accordance with the Defend Trade Secrets Act of 2016 that Executive will not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that (a) is made (1) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (2) solely for the purpose of reporting or investigating a suspected violation of law; or (b) is made in a complaint or other document that is filed under seal in a lawsuit or other proceeding. If Executive files a lawsuit for retaliation against the Company for reporting a suspected violation of law, Executive may disclose the Company’s trade secrets to Executive’s attorney and use the trade secret information in the court proceeding if Executive files any document containing the trade secret under seal, and does not disclose the trade secret, except pursuant to court order.
25. Withholdings; Right of Offset . The Company may withhold and deduct from any benefits and payments made or to be made pursuant to this Agreement (a) all federal, state, local and other taxes as may be required pursuant to any law or governmental regulation or ruling, (b) all other normal employee deductions made with respect to Company’s employees generally, and (c) any advances made to Executive and owed to Company.
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26. Nonalienation . The right to receive payments under this Agreement shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge or encumbrance by Executive, dependents or beneficiaries of Executive, or to any other person who is or may become entitled to receive such payments hereunder. The right to receive payments hereunder shall not be subject to or liable for the debts, contracts, liabilities, engagements or torts of any person who is or may become entitled to receive such payments, nor may the same be subject to attachment or seizure by any creditor of such person under any circumstances, and any such attempted attachment or seizure shall be void and of no force and effect.
27. Incompetent or Minor Payees . Should the Company determine, in its discretion, that any person to whom any payment is payable under this Agreement has been determined to be legally incompetent or is a minor, any payment due hereunder, notwithstanding any other provision of this Agreement to the contrary, may be made in any one or more of the following ways: (a) directly to such minor or person; (b) to the legal guardian or other duly appointed personal representative of the person or estate of such minor or person; or (c) to such adult or adults as have, in the good faith knowledge of the Company, assumed custody and support of such minor or person; and any payment so made shall constitute full and complete discharge of any liability under this Agreement in respect to the amount paid.
28. Severability . It is the desire of the Parties hereto that this Agreement be enforced to the maximum extent permitted by law, and should any provision contained herein be held unenforceable by a court of competent jurisdiction or arbitrator (pursuant to Section 31 ), the Parties hereby agree and consent that such provision shall be reformed to create a valid and enforceable provision to the maximum extent permitted by law; provided, however, if such provision cannot be reformed, it shall be deemed ineffective and deleted herefrom without affecting any other provision of this Agreement. This Agreement should be construed by limiting and reducing it only to the minimum extent necessary to be enforceable under then applicable law.
29. Title and Headings; Construction . In the interpretation of the Agreement, except where the context clearly otherwise requires:
(a) “including” or “include” does not denote or imply any limitation;
(b) “or” has the inclusive meaning “and/or”;
(c) the singular includes the plural, and vice versa, and each gender includes each of the others;
(d) captions or headings are only for reference and are not to be considered in interpreting the Agreement;
(e) “Section” refers to a Section of the Agreement, unless otherwise stated in the Agreement;
(f) the words “herein”, “hereof”, “hereunder” and other compounds of the word “here” shall refer to the entire Agreement and not to any particular provision; and
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(g) a reference to any statute, rule, or regulation includes any amendment thereto or any statute, rule, or regulation enacted or promulgated in replacement thereof or as the successor thereto.
30. Governing Law; Jurisdiction . All matters or issues relating to the interpretation, construction, validity, and enforcement of this Agreement shall be governed by the laws of the State of Texas, without giving effect to any choice-of-law principle that would cause the application of the laws of any jurisdiction other than Texas. Jurisdiction and venue of any action or proceeding relating to this Agreement or any Dispute (to the extent arbitration is not required under Section 31 ) shall be exclusively in Harris County, Texas.
31. Mandatory Arbitration . Except as provided in subsection (h) of this Section 31 , any Dispute must be resolved by binding arbitration in accordance with the following:
(a) Either Party may begin arbitration by filing a demand for arbitration in accordance with the Commercial Arbitration Rules of the AAA (the “ Arbitration Rules ”) and concurrently notifying the other Party of that demand. If the Parties are unable to agree upon a panel of three neutral arbitrators within twenty days after the demand for arbitration was filed (the Parties agree to a reasonable, one-time extension of that twenty-day period), either Party may request the Houston, Texas office of the American Arbitration Association (“ AAA ”) to appoint the arbitrator or arbitrators necessary to complete the panel in accordance with the Arbitration Rules. Each arbitrator so appointed shall be deemed accepted by the Parties as part of the panel. Notwithstanding the foregoing, the Parties, by mutual consent, may agree to a single arbitrator instead of a panel of three arbitrators and, in such event, references herein to “panel” shall refer to the single appointed arbitrator.
(b) The arbitration shall be conducted in the Houston, Texas metropolitan area at a place and time agreed upon by the Parties with the panel, or if the Parties cannot agree, as designated by the panel. The panel may, however, call and conduct hearings and meetings at such other places as the Parties may agree or as the panel may, on the motion of one Party, determine to be necessary to obtain significant testimony or evidence.
(c) The panel may authorize any and all forms of discovery upon a Party’s showing of need that the requested discovery is likely to lead to material evidence needed to resolve the Dispute and is not excessive in scope, timing, or cost.
(d) The arbitration shall be subject to the Federal Arbitration Act and conducted in accordance with the Arbitration Rules to the extent that they do not conflict with this Section 31 . The Parties and the panel may, however, agree to vary to provisions of this Section 31 or the matters otherwise governed by the Arbitration Rules as permitted by law.
(e) The arbitration hearing shall be held within 60 days after the appointment of the panel. The panel’s final decision or award shall be made within 30 days after the hearing. That final decision or award shall be made by unanimous or majority vote or consent of the arbitrators constituting the panel, and shall be deemed issued at the place of arbitration. The panel’s final decision or award shall be based on the terms and conditions of this Agreement and applicable law.
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(f) The panel’s final decision or award may include injunctive relief in response to any actual or impending breach of this Agreement or any other actual or impending action or omission of a Party under or in connection with this Agreement.
(g) The panel’s final decision or award shall be final and binding upon the Parties, and judgment upon that decision or award may be entered in any court having jurisdiction. The Parties waive any right to apply or appeal to any court for relief from the preceding sentence or from any decision of the panel that is made before the final decision or award.
(h) Nothing in this Section 31 limits the right of either Party to apply to a court having jurisdiction to (i) enforce the agreement to arbitrate in accordance with this Section 31 , (ii) seek provisional or temporary injunctive relief, in response to an actual or impending breach of the Agreement or otherwise so as to avoid an irreparable damage or maintain the status quo, until a final arbitration decision or award is rendered or the Dispute is otherwise resolved, or challenge or vacate any final arbitration decision or award that does not comply with this Section 31 . In addition, nothing in this Section 31 prohibits the Parties from resolving any Dispute (in whole or in part) at any time by mutual agreement or compromise. This Section 31 shall also not preclude the Parties at any time from mutually agreeing to pursue non-binding mediation of the Dispute.
(i) The panel may proceed to an award notwithstanding the failure of any Party to participate in such proceedings. The prevailing Party in the arbitration proceeding may be entitled to an award of reasonable attorneys’ fees incurred in connection with the arbitration in such amount, if any, as determined by the panel in its discretion. The costs of the arbitration shall be borne equally by the Parties unless otherwise determined by the panel in its award.
(j) The panel shall be empowered to impose sanctions and to take such other actions as it deems necessary to the same extent a judge could impose sanctions or take such other actions pursuant to the Federal Rules of Civil Procedure and applicable law. Each Party agrees to keep all Disputes and arbitration proceedings strictly confidential except for disclosure of information required by applicable law which cannot be waived.
32. Binding Effect; Third Party Beneficiaries . Subject to Section 37 , this Agreement shall be binding upon and inure to the benefit of the Parties hereto, and to their respective heirs, executors, beneficiaries, personal representatives, successors and permitted assigns hereunder; otherwise this Agreement shall not be for the benefit of any third parties.
33. Entire Agreement; Amendment and Termination . This Agreement contains the entire agreement of the Parties hereto with respect to the matters covered herein; moreover, this Agreement supersedes all prior and contemporaneous agreements and understandings, oral or written, between the Parties concerning the subject matter hereof, including any employment agreement between the Company and Executive as in effect immediately before the Effective Date. This Agreement may be amended, waived or terminated only by a written instrument that is identified as an amendment, waiver or termination hereto, and is executed on behalf of both Parties. Executive hereby acknowledges and represents that in executing this Agreement, he did not rely on, has not relied on, and specifically disavows any reliance on any communications, promises, statements, inducements, or representation(s), oral or written, by the Company, except as expressly contained in this Agreement. The Parties represent that they relied on their own judgment in entering into this Agreement.
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34. Section 409A .
(a) General. Any provisions of the Agreement that are subject to Section 409A of the Code and the regulations and other authoritative guidance issued thereunder (“ Section 409A ”), are intended to comply with all applicable requirements of Section 409A, or an exemption from the application of Section 409A, and shall be interpreted and administered accordingly. Notwithstanding any provision of this Agreement to the contrary, a termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amount or benefit that constitutes “non-qualified deferred compensation” (within the meaning of Section 409A) upon or following a termination of the Executive’s employment unless such termination is also a “separation from service” (as defined under Section 409A) (a “ Separation from Service ”) and, for purposes of any such provision, references herein to a “termination,” “termination of employment” or like terms shall mean a Separation from Service, if applicable. Each payment under this Agreement shall be treated as a separate payment for purposes of Section 409A. In no event may the Executive, directly or indirectly, designate the calendar year of any payment to be made under this Agreement.
(b) Specified Employee. Notwithstanding any provision of this Agreement to the contrary, if any payment or other benefit provided hereunder would be subject to additional taxes and interest under Section 409A because the timing of such payment is not delayed as required by Section 409A for a “specified employee” (as defined under Section 409A), then if the Executive is on the date of Executive ’ s Separation from Service a specified employee, any such payment or benefit that Executive would otherwise be entitled to receive during the first six months following the Separation from Service shall be accumulated and paid in a lump sum within ten (10) days after the date that is six months following the date of the Separation from Service, or such earlier date upon which such amount can be paid under Section 409A without being subject to such additional taxes and interest such as, for example, upon the Executive’s death. Any remaining payments due to Executive under this Agreement shall be paid as otherwise provided in this Agreement.
(c) Reimbursements and In-Kind Benefits. Notwithstanding any provision of this Agreement to the contrary, any reimbursements or in-kind benefits provided under this Agreement that constitute “nonqualified deferred compensation” within the meaning of Section 409A shall be paid to Executive no later than December 31 of the year following the year in which the expense was incurred, the amount of expenses reimbursed in one year shall not affect the amount eligible for reimbursement in any subsequent year, other than medical expenses referred to in Section 105(b) of the Code, and Executive ’ s right to reimbursement under this Agreement will not be subject to liquidation or exchange for other benefits.
(d) No Section 409A Representations. Notwithstanding the foregoing, the Company makes no representations, warranties, or guarantees regarding the tax consequences of this Agreement, or any payments made hereunder, under Section 409A or otherwise, and has advised the Executive to consult with Executive ’ s own tax advisor.
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35. Survival of Certain Provisions. Provisions of this Agreement which by their terms must survive the termination of this Agreement shall survive any such termination or expiration of this Agreement or termination of Executive’s employment, as applicable, including, without limitation, Executive’s obligations under Sections 9 through 18 and the Company’s obligations under Section 6 .
36. Waiver of Breach . No waiver by any party hereto of a breach of any provision of this Agreement by any other party, or of compliance with any condition or provision of this Agreement to be performed by such other party, will operate or be construed as a waiver of any subsequent breach by such other party or any similar or dissimilar provision or condition at the same or any subsequent time. The failure of any party hereto to take any action by reason of any breach will not deprive such party of the right to take action at any time while such breach continues.
37. Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of the Company and its Affiliates (and its and their successors), as well as upon any person or entity acquiring, whether by merger, consolidation, purchase of assets, dissolution or otherwise, all or substantially all of the capital stock, business and/or assets of the Company (or its successor) regardless of whether the Company is the surviving or resulting entity. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation, dissolution or otherwise) to all or substantially all of the capital stock, business or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had occurred; provided, however, no such assumption shall relieve the Company or any of its Affiliates (or any successor thereof) of any of its duties or obligations hereunder unless otherwise agreed, in writing, by Executive.
This Agreement shall inure to the benefit of and be enforceable by Executive’s personal or legal representative, executors, administrators, successors, and heirs. In the event of the death of Executive while any amount is payable hereunder, all such amounts shall be paid to the Designated Beneficiary.
38. Notice . Each notice or other communication required or permitted under this Agreement shall be in writing and transmitted, delivered, or sent by personal delivery, prepaid courier or messenger service (whether overnight or same-day), or prepaid certified United States mail (with return receipt requested), addressed (in any case) to the other party at the address for that party set forth below that party’s signature on this Agreement, or at such other address as the recipient has designated by Notice to the other party, by electronic mail, delivery and read receipt required, or by facsimile, confirmation of delivery required.
Each notice or communication so transmitted, delivered, or sent (a) in person, by courier or messenger service, or by certified United States mail shall be deemed given, received, and effective on the date delivered to or refused by the intended recipient (with the return receipt, or the equivalent record of the courier or messenger, being deemed conclusive evidence of delivery or refusal), or (b) by telecopy or facsimile shall be deemed given received) and effective on the date of actual receipt (with the confirmation of transmission being deemed conclusive evidence of receipt, except where the intended recipient has promptly notified the other party that the transmission is illegible). Nevertheless, if the date of delivery or transmission is not a business day, or if the delivery or transmission is after 5:00 p.m. (local time) on a business day, the notice or other communication shall be deemed given, received, and effective on the next business day.
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39. Executive Acknowledgment . Executive acknowledges (a) being knowledgeable and sophisticated as to business matters, including the subject matter of this Agreement, (b) having read this Agreement and understanding its terms and conditions, (c) having been given an ample opportunity to discuss this Agreement with his personal legal counsel prior to execution, and (d) that no strict rules of construction shall apply for or against the drafter or any other party. Executive hereby represents that he is free to enter into this Agreement including, without limitation, that he is not subject to any covenant not to compete or confidentiality agreement that conflicts with this Agreement.
40. Counterparts . This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute one and the same instrument. Each counterpart may consist of a copy hereof containing multiple signature pages, each signed by one party hereto, but together signed by both Parties.
41. Parent Acknowledgment and Guarantee . Alta Mesa is the direct or indirect parent of the Company. Alta Mesa hereby unconditionally guarantees full and timely performance of the obligations of the Company and its Affiliates under this Agreement. The foregoing guarantee shall include the guarantee of the payment of all benefits and payments due Executive hereunder as a result of the nonperformance of any of such obligations or agreements so guaranteed or as a result of the nonperformance of this guarantee. Executive may, at his option, proceed against Alta Mesa for damages for default in the performance thereof, without first proceeding against the Company or against any of its properties or Affiliates. Alta Mesa further agrees that its guarantee shall be an irrevocable guarantee and shall continue in effect notwithstanding any extension or modification of any guaranteed obligation, any assumption of any such guaranteed obligation by any other party, or any other act or thing which might otherwise operate as a legal or equitable discharge of a guarantor, and Alta Mesa hereby waives all special suretyship defenses and notice requirements. This guarantee shall also be binding upon all successors and assigns of all of substantially all of the business or assets of Alta Mesa. Section 31 shall apply to Disputes between Alta Mesa and Executive mutatis mutandis .
[ Signature pages follow .]
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IN WITNESS WHEREOF , Executive has executed this Agreement, the Company has caused this Agreement to be executed in its name and on its behalf by its duly authorized officer, and Alta Mesa has caused this Agreement to be executed in its name and on its behalf by its duly authorized officer solely for purposes of Section 41 of the Agreement, to be effective as of the Effective Date.
| EXECUTIVE: |
|
/s/ Michael A. McCabe |
| Michael A. McCabe |
| Address for Notices: |
| Most recent mailing address for Executive in the Company’s personnel files |
[ Signature pages continue .]
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[ Signature pages continue .]
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[End of Signatures.]
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Exhibit 10.16
Execution Copy
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the “ Agreement ”), is made and entered into as of February 9, 2018 (the “ Effective Date ”), by and between Alta Mesa Services, LP, a Texas limited partnership (the “ Company ”), Homer E. Cole (hereafter “ Executive ”)and, solely with respect to Section 41 , Alta Mesa Holdings, LP, a Texas limited partnership (“ Alta Mesa ”). The Company and Executive may sometimes hereafter be referred to singularly as a “ Party ” or collectively as the “ Parties .”
WITNESSETH:
WHEREAS , Alta Mesa Holdings, L.P. (the “ Parent ”), has entered into a Contribution Agreement by and among High Mesa Holdings, LP, High Mesa Holdings GP, LLC, Alta Mesa Holdings GP, LLC, Silver Run and certain other parties thereto, dated as of August 16, 2017, as the same may be amended from time to time, pursuant to which Silver Run will acquire certain of the outstanding equity interests in Parent (the “ Transaction ”); and
WHEREAS , the Company desires to continue to secure the employment services of Executive subject to the terms and conditions hereafter set forth;
NOW, THEREFORE, in consideration of Executive’s continued employment with the Company, and the premises and mutual covenants contained herein, the Parties hereto agree as follows:
1. Employment Position and Defined Terms . During the Employment Period (as defined in Section 4 ), the Company shall employ Executive, and Executive shall serve, as a Vice President of the Company. During the Employment Period, Executive shall also serve in the same positions of employment with Silver Run as he does with the Company for no additional compensation. Executive’s principal place of employment shall be at the main business offices of the Company in Houston, Texas. Defined terms used in the Agreement that are not otherwise defined herein when first used are defined in Sections 6(d) and 10(d) .
2. Compensation .
(a) Base Salary . The Company shall pay to Executive during the Employment Period a base salary of Four Hundred Fifty Thousand dollars ($450,000) per year, as adjusted pursuant to the subsequent provisions of this paragraph (the “ Base Salary ”). The Base Salary shall be payable in accordance with the Company’s normal payroll schedule and procedures for its executives. Nothing contained herein shall preclude the payment of any other compensation to Executive at any time as determined by the Board.
| H. Cole Agreement |
(b) Annual Bonus .
(1) In addition to the Base Salary in Section 2(a) , for each annual fiscal year of the Company during the Employment Period (each such annual period being referred to as a “ Bonus Period ”), Executive will be eligible to participate in an annual bonus program established by the Board, under which Executive shall receive a bonus equal to a percentage of Executive’s Base Salary paid during each such one-year period (referred to herein as the “ Annual Bonus ”), such percentage to be established by the Board in its sole discretion; provided, however, that the payment of any Annual Bonus will be subject to the Board’s discretion and made only if Executive has met the pre-established performance criteria set by the Board for the Bonus Period.
(2) In the event that the Employment Period ends before the end of the Bonus Period, Executive shall be entitled to a pro rata portion of the Annual Bonus for that year (based on the number of days in which Executive was employed during the year divided by 365), as determined based on satisfaction of the performance criteria for that Bonus Period on a pro rata basis (calculated as if the final day of the Employment Period were the final day of the applicable Bonus Period), unless Executive was terminated for Cause or terminated voluntarily without Good Reason, in any of which events Executive shall not be entitled to any Annual Bonus for that year.
(3) If Executive successfully meets the performance criteria for a Bonus Period, the Company shall pay Executive the Annual Bonus amount determined by the Board within the earlier of: (A) sixty days (60) days after the end of the Bonus Period or (B) sixty days (60) after the end of the Employment Period.
(c) Compensation in Event of Injury or Sickness . In the event that Executive becomes injured or suffers a medically determinable physical or mental illness, as determined by a physician acceptable to both the Company and Executive in the same manner as provided in the definition of Disability in Section 6(d) , during the Employment Period, Executive shall be entitled to receive continued Base Salary (as set forth in Section 2(a) ) for a period of six (6) months following the occurrence of such injury or sickness; provided, however, such Base Salary shall be reduced by any short-term and/or long-term disability income benefits that are received by Executive under such programs sponsored by the Company (or an Affiliate) during such 6-month period.
3. Duties and Responsibilities of Executive . During the Employment Period, Executive shall devote his full working time to (a) the business of the Company and its Affiliates and (b) performance of the duties and responsibilities assigned to Executive to the best of Executive’s ability and with reasonable diligence. In determining Executive’s duties and responsibilities, Executive shall not be assigned duties and responsibilities that are materially inconsistent with Executive’s position. This Section 3 shall not be construed as preventing Executive from (a) engaging in reasonable volunteer services for charitable, educational or civic organizations, or (b) investing personal assets in such a manner that will not require a material amount of the Executive’s time or services in the operation of the businesses in which such investments are made; provided, however, no such other activity shall conflict or materially interfere with Executive’s loyalties, duties or responsibilities to the Company and its Affiliates. Executive shall at all times use his best efforts to comply in good faith with United States laws applicable to Executive’s actions on behalf of the Company and its Affiliates. Executive understands and agrees that Executive may be required to travel from time to time for purposes of the Company’s business. The Parties agree that Executive’s principal work location cannot be relocated further than 50 miles from Executive’s principal work location on the Effective Date, except as mutually agreed by the Parties.
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4. Term of Employment . Executive’s term of employment with the Company under this Agreement shall be for the period from the Effective Date through the date that is three (3) years from the Effective Date, unless earlier terminated in accordance with this Agreement, and if not earlier terminated, this Agreement will expire upon the date that is three (3) years from the Effective Date.
The period from the Effective Date through the earlier of the third (3 rd ) anniversary of the Effective Date and the date of Executive’s termination of employment with the Company and its Affiliates for whatever reason (the “ Termination Date ”) shall be referred to herein as the “ Employment Period .” Notwithstanding the above, Executive agrees to remain available beyond the Employment Period to provide assistance to the Company or its Affiliate in the event that the Company or an Affiliate become involved in litigation (or another type of dispute or controversy) regarding matters of which Executive has relevant knowledge resulting from Executive’s employment with the Company or an Affiliate. Such post-termination assistance shall be provided by Executive in the capacity of an independent contractor at an agreed-upon, reasonable consulting fee, and shall not be deemed to create or continue an employee-employer or fiduciary relationship, or to represent a continuation of this Agreement.
5. Benefits . Subject to the terms and conditions of this Agreement, during the Employment Period, Executive shall be entitled to all of the following:
(a) Reimbursement of Business Expenses . The Company shall pay or reimburse Executive for all reasonable travel, entertainment and other business expenses paid or incurred by Executive in the performance of duties hereunder. The Company shall also provide Executive with suitable office space, including staff support, paid parking, and necessary equipment, including but not limited to, cellular telephone and laptop computer.
(b) Other Employee Benefits . Executive shall be entitled to participate in any pension, retirement, 401(k), profit-sharing, and other employee benefits plans or programs of the Company to the same extent as available to other senior management employees of the Company under the terms of such plans or programs. Executive shall also be entitled to participate in any group insurance, hospitalization, medical, dental, health, life, accident, disability and other employee benefits plans or programs of the Company to the extent available to other senior management employees of the Company, and their spouses and eligible dependents, under the terms of such plans or programs including any medical expense reimbursement account and post-retirement medical program as made available to other senior management employees of the Company.
(c) Vacation and Holidays . Executive shall be entitled to five (5) weeks of paid vacation per calendar year (prorated in any calendar year during which Executive is employed for less than the entire year based on the number of days in such calendar year in which Executive was employed). Executive shall also be entitled to all paid holidays and personal days provided by the Company for its key management employees under the Company’s personnel policy as then effective. Unused vacation shall not carry over to the following year unless specifically approved by the Company.
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(d) Equity Incentive Awards . Executive shall be eligible to participate in the Alta Mesa Resources, Inc. 2018 Long Term Incentive Plan (the “ LTIP ”) or any other incentive plan sponsored by the Company which provides for equity grants of incentive awards. The terms and conditions of any equity incentive award granted to Executive shall be set forth in the incentive plan document and award agreement governing such award.
(e) Annual Physical . Executive shall be entitled to be reimbursed by the Company for the full cost of an annual physical examination by a physician (1) selected by the Company or (2) selected by Executive and approved by the Company.
(f) Key Man or Company-Owned Life Insurance . The Company may, at any time during the term of this Agreement, apply for and procure as owner, and for its sole benefit, life insurance on the Executive’s life in such amounts and in such forms as the Company may select. Executive hereby acknowledges that he will have no interest whatsoever in any such insurance policy. Executive shall submit to such medical examinations, supply such information, and execute such documents as may be reasonably requested by the insurer to obtain any such key man policy.
(g) Tax Planning, Preparation and Advice . Executive shall be entitled to be reimbursed by the Company for the cost of tax preparation and planning by a certified financial planner or certified public accountant (1) selected by the Company or (2) selected by Executive and approved by the Company, provided that such annual reimbursement shall not exceed $5,000.00.
6. Rights and Payments upon Termination . The Executive’s right to compensation and benefits for periods after the Termination Date shall be determined in accordance with this Section 6 . Except as otherwise expressly required by law or as specifically provided in an employee benefit plan or this Agreement, all of Executive’s rights to salary, severance, benefits, bonuses and other compensatory amounts under this Agreement shall cease upon the Termination Date.
(a) Minimum Payments and Vesting . Executive shall be entitled to the following minimum payments under this Section 6(a) , in addition to any other payments or benefits which Executive is entitled to receive under the terms of any employee benefit plan or program or Section 6(b) :
(1) unpaid salary for the full calendar month in which the Termination Date occurs; provided, however, if Executive is terminated for Cause or terminates his employment voluntarily without Good Reason, Executive shall only be entitled to receive accrued but unpaid salary through the Termination Date;
(2) unpaid vacation days for that year which have accrued through the Termination Date;
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(3) reimbursement of reasonable business expenses that were incurred but unpaid as of the Termination Date; and
(4) to the extent Executive participated in any nonqualified deferred compensation plan or program with vesting criteria, or received any equity incentive grant that is not fully vested, as of the Termination Date, Executive will automatically vest as of the Termination Date as follows:
(A) subject to Section 6(c) , if Executive is involuntarily terminated by the Company other than for Cause (and not including death or termination due to Disability), or if the Executive terminates his employment for Good Reason, Executive shall become immediately 100% vested in (i) any outstanding awards of restricted stock, stock options and any other equity incentive awards granted under the LTIP (or any other equity incentive plan of the Company or Silver Run) that vest solely based on the passage of time (with any such awards that vest based on the attainment of performance-based vesting conditions vesting at the target level); and (ii) any nonqualified deferred compensation account balance or benefit; and
(B) if Executive is terminated by the Company for Cause, or voluntarily terminates his employment without Good Reason, all unvested equity incentive awards shall be treated in accordance with the terms of the outstanding award agreement or plan document, as applicable.
Salary and accrued vacation days under this Section 6(a) shall be paid to Executive within five (5) business days following the Termination Date in a cash lump sum payment, less applicable withholdings. Business expenses shall be reimbursed in accordance with the Company’s normal procedures.
(b) Other Severance Payments . In the event that during the Employment Period (i) Executive’s employment is involuntarily terminated by the Company (except due to a No Severance Benefits Event), (ii) Executive’s employment is terminated due to death or Disability, or (iii) Executive terminates his employment for Good Reason; then in any such event under clause (i), (ii), or (iii), subject to Section 6(c) , the following severance benefits shall be provided to Executive or, in the event of his death before receiving all such benefits, to Executive’s Designated Beneficiary following his death:
(1) Additional Payment . The Company shall pay additional compensation as described in this Section 6(b )( 1) (the “ Additional Payment ”). Subject to Section 6(c) , the Company shall make the Additional Payment to Executive in a cash lump sum, net of applicable withholdings.
(A) Termination Not Following Change in Control . If the Termination Date does not occur within the 15-month period immediately following a Change in Control, the Additional Payment shall be (i) an amount equal to one hundred fifty percent (150%) of Executive’s Base Salary in effect as of the Termination Date, (ii) an amount equal to one hundred fifty percent (150%) of the greater of
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(x) 100% of the “target” bonus for Executive for the year containing the Termination Date or (y) the amount of the Annual Bonus paid to the Executive for the year immediately preceding the year containing the Termination Date, and (iii) an additional $24,000.00 lump sum cash payment for outplacement services. In such event, the Additional Payments described in Section 6(b)(1)(C) following a Change in Control shall be inapplicable for Executive.
(B) Anticipatory Termination . If the Executive incurs an Anticipatory Termination, he shall be entitled to receive, in addition to the payment described in Section 6(b)(1)(A) above, an additional amount equal to the sum of (i) fifty percent (50%) of Executive’s Base Salary as in effect as of the Termination Date, plus (ii) fifty percent (50%) times the greater of (x) 100% of the “target” bonus for Executive for the year containing the Termination Date or (y) the amount of the Annual Bonus paid to the Executive for the year immediately preceding the year containing the Termination Date (the “ Anticipatory Termination Payment ”). In such event, the Additional Payments described in Section 6(b)(1)(C) following a Change in Control shall be inapplicable for Executive. The Anticipatory Termination Payment shall be subject to the Executive executing a second release agreement, as described in Section 6(c) , but covering only the period from the Termination Date until the date immediately following the Change in Control.
(C) Termination Following Change in Control . If the Termination Date occurs within the fifteen (15) month period immediately following a Change in Control, the Additional Payment shall be (i) an amount equal to two hundred percent (200%) of Executive’s Base Salary in effect as of the Termination Date, (ii) an amount equal to two hundred percent (200%) times the greater of (x) 100% of the “target” bonus for Executive for the year containing the Termination Date or (y) the amount of the Annual Bonus paid to the Executive for the year immediately preceding the year containing the Termination Date, and (iii) an additional $24,000.00 lump sum cash payment for outplacement services. In such event, the Additional Payments described in Sections 6(b )( 1)(A) and 6(b)(1)(B) above shall be inapplicable for Executive.
(2) COBRA Coverage .
(A) In the event that Executive timely elects continuation coverage under any of the Company’s “group health plans” within the meaning of Treasury Regulations Section 54.4980B-2 Q/A-1 (collectively, the “ Health Plan ”) on behalf of himself and any of his eligible covered dependents (including his spouse) pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“ COBRA ”), following the Termination Date, the Company shall pay directly or reimburse Executive for an amount equal to the monthly premium for such COBRA coverage for each month during which such COBRA coverage is in effect during the period commencing on the Termination Date and ending upon the earliest of (x) the date that is eighteen (18) months following the Termination Date, (y) the date that Executive and Executive’s covered dependents
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become no longer eligible for COBRA coverage or (z) the date Executive becomes eligible to receive group healthcare coverage from a subsequent employer (and Executive agrees to promptly notify the Company of such eligibility). In all other respects, Executive and his dependents shall be treated the same as any other qualified beneficiaries under the Health Plan and COBRA.
(B) If Executive’s eligibility for continued COBRA coverage under the Health Plan ends due to expiration of the “maximum coverage period” under and within the meaning of 26 C.F.R. 54.4980B-7 Q/A-4(b), Executive shall be entitled to continue coverage for himself and his eligible covered dependents (including his spouse), if any, under the Health Plan (Executive and each such covered dependent being referred to herein as a “ Qualified Beneficiary ”) for the period beginning on the first day following such expiration of eligibility for COBRA coverage and ending on the second anniversary of the Termination Date or the earlier date that Executive becomes eligible to receive group healthcare coverage from a subsequent employer (and Executive agrees to promptly notify the Company of such eligibility) (the “ Extended Coverage ”), subject to the Company or an Affiliate continuing to sponsor a Health Plan for the benefit of the Company’s employees generally. In order for Executive to be eligible to receive the Extended Coverage on behalf of himself and any other Qualified Beneficiaries, Executive and any other Qualified Beneficiary must first exhaust such individual’s rights to any COBRA coverage available under the Health Plan. The Parties acknowledge that following expiration of the Extended Coverage, neither Executive nor any other Qualified Beneficiary will have any right to elect coverage under the Health Plan. Executive shall, on a monthly after-tax basis, pay to the Company (or its delegate) the COBRA rate, as then effective, for each month during the period of Extended Coverage. For purposes of Code Section 409A, the benefits provided under this Section 6(b )( 2)(B) shall be provided as separate monthly in-kind payments of those benefits, and to the extent those benefits are subject to and not otherwise excepted from Section 409A, the provision of in-kind benefits during one calendar year shall not affect in-kind benefits to be provided in any other calendar year.
(C) Executive and Executive’s spouse, if applicable, consent and agree to acquire and maintain any and all coverage that either or both of them are entitled to at any time during their lives under the Medicare program or any similar program of the United States or any agency thereof. Executive and Executive’s spouse further agree to pay any required premiums for Medicare coverage from their personal funds.
(D) Notwithstanding Section 6(b)(2)(A) or (B) to the contrary, the Company may alter the manner in which health benefits are provided to Executive under such sections following termination of Executive’s employment to the extent the Company reasonably determines is necessary for purposes of satisfying Code Section 105(h)(2) or avoiding the imposition of an excise tax on the Company or any of its Affiliates, provided that such alterations do not materially decrease coverage or increase the after-tax cost to Executive of such benefits.
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(3) Code Section 280G Tax Gross-up . If the Termination Date occurs within three (3) years after the Effective Date, the Accounting Firm shall determine if any of the payments or benefits received or to be received by Executive (including, without limitation, any payment or benefits received in connection with a Change in Control or Executive’s termination of employment, whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement), constitute “parachute payments” within the meaning of Code Section 280G as a result of a “change in ownership or control,” under and within the meaning of Treasury Regulation Section 1.280G-1, of Silver Run or any of its subsidiaries, including the Company, but excluding as a result of the closing of the Transaction (all such payments and benefits collectively referred to herein as the “ 280G Payments ”) that are subject to the excise tax imposed under Code Section 4999 (the “ Excise Tax ”). If the Accounting Firm determines any of the 280G Payments are subject to the Excise Tax, the Company shall pay to Executive, as soon as reasonably practicable following such determination but in any event no later than the end of the year following the year in which the Executive pays the relevant taxes, an additional amount equal to the sum of the Excise Tax payable by Executive plus the amount that the Accounting Firm determines is necessary to put Executive in the same after-tax position (taking into account all applicable federal, state and local excise, income and other taxes) as if no Excise Tax had been imposed.
All determinations required to be made under this Section 6(b)(3) , including whether a payment would result in an “excess parachute payment” within the meaning of Code Section 280G and the assumptions utilized in arriving at such determination, shall be made by the Accounting Firm. All fees and expenses of the Accounting Firm shall be paid solely by the Company. The final determination by the Accounting Firm shall be binding on the Parties absent manifest error.
Executive agrees to reasonably cooperate with the Company to minimize the amount of any excess parachute payments, including, without limitation, assisting the Company in establishing that some or all of the payments received by Executive which are “contingent on a change”, as described in Code Section 280G(b)(2)(A), are reasonable compensation for personal services actually rendered by Executive before the date of such change or to be rendered by Executive on or after the date of such change. Notwithstanding the foregoing, Executive shall not be required to take any action which his attorney or tax advisor advises him in writing exposes the Executive to material personal liability.
(4) Other Termination of Employment . For purposes of clarity, in the event that (i) Executive voluntarily resigns or otherwise voluntarily terminates employment, except due to death, Disability or for Good Reason, or (ii) Executive’s employment is terminated due to a No Severance Benefits Event then, in any such event under clause (i) or (ii), the Company shall have no obligation to provide the severance benefits described in paragraphs (1), (2) and (3) (above) of this Section 6(b) , except to offer COBRA coverage (as required by COBRA law) but not at the rate described in paragraph (2). However, Executive shall still be entitled to the minimum benefits provided under Section 6(a) .
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(5) No Duplication of Severance Benefits . The severance payments provided under Section 6(b) shall supersede and replace any severance payments under any severance pay plan or similar agreement that the Company or any Affiliate maintains for key management employees or employees generally.
(c) Release Agreement . Notwithstanding any provision of the Agreement to the contrary, in order to receive the vesting acceleration provided under Section 6(a)(4)(A) or the severance benefits provided under Section 6(b)(1) , (2) , or (3) , the Executive must first execute an appropriate release agreement (on a form provided by the Company) whereby the Executive agrees to release and waive, in return for such vesting acceleration or severance benefits, any claims that Executive may have against the Company or any of its Affiliates including, without limitation, for unlawful discrimination ( e.g. , Title VII of the Civil Rights Act); provided, however, such release agreement shall not release any claim or cause of action by or on behalf of the Executive for (a) any payment or benefit that may be due or payable under this Agreement or any vested benefits under any employee benefit plan or program or (b) non-payment of salary or benefits to which Executive is entitled from the Company as of the Termination Date. The release agreement must be provided to Executive within five (5) days following the Termination Date, and signed by Executive and returned to the Company, and any applicable revocation period must have expired, no later than sixty (60) days following the Termination Date; provided, however, the second release agreement required for an Anticipatory Termination Payment under Section 6(b)(1)(B) must be provided to Executive within five (5) days following the Change in Control Date, and signed by Executive and returned to the Company, and any applicable revocation period must have expired, no later than sixty (60) days following the Change in Control Date. Any payments to which Executive becomes entitled pursuant to Section 6(b)(1) , shall be paid within ten (10) days after the executed release agreement (or executed second release agreement with respect to an Anticipatory Termination Payment) has been timely returned to the Company for counter-signature and become effective and non-revocable by Executive under the terms of the release agreement. Notwithstanding anything in this Agreement to the contrary, to the extent that any severance payments or benefits provided under Section 6(a )( 4)(A) or Section 6(b) are deferred compensation under Code Section 409A, and are not otherwise exempt from the application of Section 409A, then, if the period during which Executive may consider and sign the release agreement spans two calendar years, the severance payments or benefits will not be made or begin until the later calendar year.
(d) Definitions .
(1) “ Accounting Firm ” means any nationally recognized, certified public accounting firm selected by the Company and reasonably acceptable to the Executive; provided, however, the firm selected must be within the top 20 in the United States at such time based on annual revenues for certified public accounting firms in the immediately preceding year.
(2) “ Affiliate ” means any parent or subsidiary entity of the Company, or any other entity in whatever form, of which the Company has any direct or indirect controlling ownership interest or management control, or vice-versa, as determined by the Company. For purposes of clarity and not limitation, (i) Riverstone Investment Group LLC, Bayou City Energy Management, LLC, HPS Investment Partners, LLC, or High Mesa Inc., and their affiliates (other than Silver Run or any of its subsidiaries, to the extent considered an affiliate of any such entity) are not Affiliates for purposes of this Agreement, and (ii) Silver Run is an Affiliate of the Company.
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(3) “ Anticipatory Termination ” means a termination of the Executive’s employment within the three (3) month period ending immediately prior to the Change in Control Date (in which the Change in Control is a “change in control event” within the meaning of Code Section 409A), but only if (a) the Executive’s employment with the Company was (i) terminated by the Company without Cause or (ii) terminated by the Executive for Good Reason, and (b) it is reasonably demonstrated by the Executive that such termination of employment (1) was at the request of a third party who has taken steps reasonably calculated to effect such Change in Control or (2) otherwise arose in connection with or anticipation of such Change in Control.
(4) “ Board ” means the then-current Board of Directors of the Company or, following the closing of the Transaction, the then-current Board of Directors of Silver Run, in each case, including the Compensation Committee (the “ Compensation Committee ”) or another authorized committee thereof.
(5) “ Cause ” means any of the following: (A) the Executive’s final conviction by a court of competent jurisdiction of a felony involving moral turpitude, or entering the plea of nolo contendere to such felony by the Executive; (B) the commission by the Executive of a demonstrable act of material fraud, or a proven and material misappropriation of funds or other property, of or upon the Company or any Affiliate; (C) the engagement by the Executive, without the written approval of the Company, in any material activity which directly competes with the business of the Company or any Affiliate, or which would directly result in a material injury to the business or reputation of the Company or any Affiliate; or (D) the breach by Executive of any material provision of this Agreement. With respect to items (C) and (D) above, in order to constitute “Cause” hereunder, Executive must also fail to cure such breach within a reasonable time period set by the Company but in no event less than twenty (20) calendar days after Executive’s receipt of such notice.
(6) “ Change in Control ” means and includes each of the following:
(A) A transaction or series of transactions (other than an offering of Common Stock to the general public through a registration statement filed with the Securities and Exchange Commission or a transaction or series of transactions that meets the requirements of clauses (1) and (2) of subsection (C) below) whereby any “person” or related “group” of “persons” (as such terms are used in Sections 13(d) and 14(d)(2) of the Exchange Act) (other than Silver Run, any of its subsidiaries, an employee benefit plan maintained by Silver Run or any of its subsidiaries or a “person” that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common control with, Silver Run) directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of securities of Silver Run possessing more than 50% of the total combined voting power of Silver Run’s securities outstanding immediately after such acquisition; or
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(B) During any period of two consecutive years, individuals who, at the beginning of such period, constitute the Board together with any new Director(s) (other than a Director designated by a person who shall have entered into an agreement with Silver Run to effect a transaction described in subsections (A) or (C)) whose election by the Board or nomination for election by Silver Run’s stockholders was approved by a vote of at least two-thirds of the Directors then still in office who either were Directors at the beginning of such two-year period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or
(C) The consummation by Silver Run (whether directly involving Silver Run or indirectly involving Silver Run through one or more intermediaries) of (x) a merger, consolidation, reorganization, or business combination or (y) a sale or other disposition of all or substantially all of Silver Run’s assets in any single transaction or series of related transactions, or (z) the acquisition of assets or stock of another entity, in each case other than a transaction:
(1) which results in Silver Run’s voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of Silver Run or the person that, as a result of the transaction, controls, directly or indirectly, Silver Run or owns, directly or indirectly, all or substantially all of Silver Run’s assets or otherwise succeeds to the business of Silver Run (Silver Run or such person, the “ Successor Entity ”)) directly or indirectly, at least a majority of the combined voting power of the Successor Entity’s outstanding voting securities immediately after the transaction; and
(2) after which no person or group beneficially owns voting securities representing 50% or more of the combined voting power of the Successor Entity; provided, however, that no person or group shall be treated for purposes of this clause (2) as beneficially owning 50% or more of the combined voting power of the Successor Entity solely as a result of the voting power held in Silver Run prior to the consummation of the transaction.
Notwithstanding the foregoing, in no event shall the following constitute a Change in Control: (i) the Transaction or any transactions occurring in connection therewith or (ii) any initial public offering of any subsidiary of Silver Run that owns all or part of Silver Run’s Midstream Assets (as defined in Section 10(d)(1) ) or any other sale or disposition of such Midstream Assets directly or indirectly by Silver Run in connection with such initial public offering.
If a Change in Control constitutes a payment event with respect to any amount, benefit or award (or portion of any amount, benefit or award) that provides for the deferral of compensation that is subject to Section 409A, to the extent required to avoid the imposition of additional taxes under Section 409A, the transaction or event described
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in subsection (A), (B) or (C) above with respect to such amount, benefit or award (or portion thereof) shall only constitute a Change in Control for purposes of the payment timing of such amount, benefit or award if such transaction also constitutes a “change in control event,” as defined in Treasury Regulation Section 1.409A- 3(i)(5).
The Board as in effect immediately prior to the occurrence of a Change in Control shall have full and final authority, which shall be exercised in its discretion, to determine conclusively whether a Change in Control has occurred pursuant to the above definition, the date of the occurrence of such Change in Control and any incidental matters relating thereto; provided that any exercise of such authority in conjunction with a determination regarding whether a Change in Control is a “change in control event” (as defined in Treasury Regulation Section 1.409A-3(i)(5)) shall be determined on a basis consistent with such regulation.
(7) “ Change in Control Date ” means the effective date of the occurrence of a Change in Control.
(8) “ Code ” means the Internal Revenue Code of 1986, as amended or its successor. References herein to any Section of the Code shall include any successor provisions of the Code.
(9) “ Common Stock ” means the Class A common stock of Silver Run, $0.0001 par value per share, and any class of common stock into which such common shares may hereafter be converted, reclassified or recapitalized.
(10) “ Designated Beneficiary ” means the Executive’s surviving spouse, if any. If there is no such surviving spouse at the time of Executive’s death, then the Designated Beneficiary hereunder shall be Executive’s estate after the legal representative of such estate provides satisfactory evidence thereof to the Company (or its delegate).
(11) “ Director ” means a Board member.
(12) “ Disability ” shall mean that (a) Executive is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or last for a continuous period of not less than 12 months, or (b) by reason of any medically determinable physical or mental impairment which can be expected to result in death or to last for a continuous period of not less than 12 months, Executive is receiving income replacement for a period of not less than three months under an accident and health plan covering employees of the Company. Evidence of such Disability shall be certified by a physician acceptable to both the Company and Executive. In the event that the Parties are not able to agree on the choice of a physician, each shall select one physician who, in turn, shall select a third physician to render such certification. All reasonable costs directly relating to the determination of whether Executive has incurred a Disability for purposes of this Agreement shall be paid by the Company. Executive agrees to submit to any examinations that are reasonably required by the attending physician or other healthcare service providers to determine whether Executive has a Disability.
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(13) “ Dispute ” means any dispute, disagreement, claim, or controversy arising from, in connection with, or relating to (a) the employment, or termination of employment, of Executive, or (b) the Agreement, or the validity, interpretation, performance, breach or termination of the Agreement.
(14) “ Exchange Act ” means the Securities Exchange Act of 1934, as amended.
(15) “ Good Reason ” means, other than during the fifteen (15)-month period following a Change in Control, the occurrence of any of the following without the Executive’s prior written consent, if not cured and corrected by the Company or Silver Run, or either of their successor(s), within 60 days after written notice thereof is provided by Executive to the Company or its successor, provided such notice is delivered within 90 days after the occurrence of the applicable condition or event and that Executive resigns from employment with the Company within 90 days following expiration of such 60-day cure period:
(A) the demotion or reduction in title or rank of Executive with the Company or Silver Run, except for any such demotion or reduction that occurs in connection with Executive’s termination of employment for Cause, Disability or death;
(B) the reduction of the Executive’s annual base salary and/or target bonus opportunity, as compared to his aggregate base salary and target bonus opportunity as effective immediately prior to such reduction, if such reduction of base salary and/or target bonus opportunity, on an aggregated basis, is five percent (5%) or greater of the aggregate base salary and target bonus opportunity as effective immediately prior to such reduction; or
(C) a relocation of Executive’s principal work location to a location in excess of 50 miles from its then current location.
During the fifteen (15)-month period following a Change in Control, the definition of “Good Reason” shall have the same meaning as set out above except that clause (A) is replaced in its entirety with “the demotion or reduction in title or rank of Executive with the Company or Silver Run, or the assignment to Executive of duties that are materially inconsistent with Executive’s positions, duties and responsibilities with the Company or Silver Run, or any removal of the Executive from, or any failure to nominate for re-election the Executive to, any of such positions (other than a change due to the Executive’s Disability or as an accommodation under the American with Disabilities Act), except for any such demotion, reduction, assignment, removal or failure that occurs in connection with Executive’s termination of employment for Cause, Disability or death;”. In all other respects, the definition of Good Reason will be the same before and after a Change in Control.
For the avoidance of doubt, the closing of the Transaction will not by itself be deemed to provide a basis for the Executive to resign for Good Reason.
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(16) “ No Severance Benefits Event ” means termination of Executive’s employment by the Company for Cause.
(17) “ Silver Run ” means Silver Run Acquisition Corporation II, a Delaware corporation (whose name will change to Alta Mesa Resources, Inc. at the closing of the Transaction), or its successor in interest.
7. Notice of Termination . Any termination of Executive’s employment by the Company or the Executive other than for death shall be communicated by Notice of Termination to the other Party hereto. For purposes of this Agreement, the term “ Notice of Termination ” means a written notice which indicates the specific termination provision of this Agreement relied upon, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated and specifies a Termination Date which, if submitted by Executive, shall be at least thirty (30) days following the date of such Notice of Termination unless such termination is for Good Reason (in which case the requirements for a termination due to Good Reason shall apply); provided, however, that in the event that Executive delivers a Notice of Termination to the Company, the Company may, in its sole discretion, change the Date of Termination to any date that occurs following the date of receipt of such Notice of Termination and is prior to the date specified in such Notice of Termination. A Notice of Termination submitted by the Company may provide for a Termination Date on the date Executive receives the Notice of Termination, or any date thereafter elected by the Company in its sole discretion. The failure by the Company or Executive to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Cause or Good Reason shall not waive any right of such Party hereunder or preclude such Party from asserting such fact or circumstance in enforcing such Party’s rights hereunder.
8 . No Mitigation . Except as provided in Section 6(b)(2) for continued Health Plan coverage or Section 6(b)(3) regarding excess parachute payments, Executive shall not be required to mitigate the amount of any payment or other benefits provided under this Agreement by seeking other employment or in any other manner.
9. Restrictive Covenants . As an inducement to the Company to enter into this Agreement, Executive represents to, and covenants with or in favor of, the Company that Executive will comply with all of the restrictive covenants in Sections 9 through 17 , as a condition to the Company’s obligation to provide any benefits to Executive under this Agreement.
10. Trade Secrets .
(a) Access to Trade Secrets . As of the Effective Date and on an ongoing basis, the Company agrees to give Executive access to Trade Secrets which the Executive did not have access to, or knowledge of, before Executive’s commencement of employment with the Company.
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(b) Agreement Not to Use or Disclose Trade Secrets . In exchange for the Company’s promises to provide Executive with access to Trade Secrets, and the other consideration and benefits provided to Executive under this Agreement, Executive agrees, during the Employment Period, and any time thereafter, not to disclose to anyone, including, without limitation, any person, firm, corporation or other entity, or publish or use for any purpose, any Trade Secrets, except (1) as required in the ordinary course of the business of the Company or an Affiliate or (2) as authorized by the Company or Affiliate, as applicable. Executive acknowledges that Trade Secrets (A) have been and will be developed or acquired by the Company (or an Affiliate) through the expenditure of substantial time, effort and money and (B) provide the Company (or an Affiliate) with an advantage over competitors who do not know or use Trade Secrets.
Executive shall hold in a fiduciary capacity for the benefit of the Company (or its Affiliate, as applicable) any Trade Secret relating to the Company or any of its Affiliates, and their respective businesses, which (a) has been obtained by Executive during his employment by the Company (or any Affiliate) and (b) is not public knowledge other than via an unauthorized disclosure made by Executive in violation of this Agreement. Executive acknowledges and agrees that all Trade Secrets are, and will continue to be, the exclusive property of the Company or Affiliate, as applicable.
Executive shall not at any time disclose to any person or entity, or publish, or use for any unauthorized purpose, any Trade Secret, except as the Company directs or under compulsion of law. Executive agrees to give notice to the Company of any attempt to compel disclosure of any Trade Secret within five (5) business days after Executive is informed that such disclosure is being, or will be, compelled. Any such notice shall contain a copy of the subpoena, order or other process used to compel disclosure.
The agreements and covenants in this Section 10(b) apply to all Trade Secrets, whether now known or later to become known to Executive. In addition, these provisions shall be in addition to, and not limit or restrict in any way, any other confidentiality agreement or covenant between the Executive and the Company or any of its Affiliates.
(c) Agreement to Refrain from Defamatory Statements . Executive shall refrain, both during the Employment Period and thereafter, from publishing any oral or written statements about any directors, partners, officers, employees, agents, investors or representatives of the Company or any Affiliate that are (1) slanderous, libelous, or defamatory; (2) disclose private or confidential information about the business affairs, directors, partners, officers, employees, agents, investors or representatives of the Company or any Affiliate; (3) constitute an intrusion into the seclusion or private lives of any such person; (4) give rise to unreasonable publicity about the private life of any such person; (5) place any such person in a false light before the public; or (6) constitute a misappropriation of the name or likeness of any such person. A violation or threatened violation of these restrictive covenants may be enjoined by a court of law notwithstanding the arbitration provisions of Section 31 .
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(d) Definitions . The following terms, when used in this Agreement, are defined below:
(1) “ Restricted Territory ” means any county, or equivalent political or governmental subdivision, of any state, district, or territory of North America in which the Company or any of its Affiliates conducts its business; and any area adjacent to such counties, or equivalent political or governmental subdivision, to the extent such adjacent areas are within a 50-mile radius of any (x) producing property or leasehold of the Company or any of its Affiliates or (y) assets relating to the gathering, processing, storage, treating or transmission of oil or natural gas or otherwise generally considered “midstream” in nature in accordance with generally accepted U.S. oil and gas industry practices and customs (“ Midstream Assets ”) of the Company or any of its Affiliates.
(2) “ Trade Secrets ” means any and all information and materials (in any form or medium) that are proprietary to the Company or an Affiliate, or are treated as confidential by the Company or an Affiliate as part of, or relating to, any portion of its or their businesses (whether or not owned or developed by the Company or an Affiliate) and that are not generally known by other persons or entities in the same type of business.
For purposes of the Agreement, Trade Secrets include, without limitation, the following: all of the Company’s or Affiliate’s research, technical and business information, whether patentable or not, which is of a confidential, trade secret or proprietary character, and which is either developed by the Executive alone, or with others or by others; all non-public information that the Company or an Affiliate has marked as confidential or has otherwise described to Executive (either in writing or orally) as confidential; all non-public information concerning the Company’s or Affiliate’s products, services, prospective products or services, research, prospects, leases, surveys, seismic data, drilling data, designs, prices, costs, marketing plans, marketing techniques, studies, test data, leasehold and royalty owners, investors, suppliers and contracts; all business records and plans; all personnel files; all financial information of or concerning the Company or an Affiliate; all information relating to the Company’s operating system software, application software, software and system methodology, hardware platforms, technical information, inventions, computer programs and listings, source codes, object codes, copyrights and other intellectual property; all technical specifications; any proprietary information belonging to the Company or an Affiliate; all computer hardware or software manuals of the Company or an Affiliate; all Company or Affiliate training or instruction manuals; all Company or Affiliate electronic data; and all computer system passwords and user codes.
11. Duty to Return Company Documents and Property . Upon the Termination Date, Executive shall immediately return and deliver to the Company any and all papers, books, records, documents, memoranda and manuals, e-mail, electronic or magnetic recordings or data, including all copies thereof, belonging to the Company or relating to its business, in Executive ’ s possession, whether prepared by Executive or others. If at any time after the Termination Date, Executive determines that Executive has any Trade Secrets in Executive ’ s possession or control, Executive shall immediately return them to the Company, including all copies thereof.
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12. Best Efforts and Disclosure . Executive agrees that, while employed with the Company under this Agreement, Executive’s services shall be devoted on a full time basis to the Company’s business, and Executive shall use best efforts to promote its success. Further, Executive shall promptly disclose to the Company all ideas, inventions, computer programs, and discoveries, whether or not patentable or copyrightable, which Executive may conceive or make, alone or with others, during Executive’s period of employment with the Company or its Affiliates, whether or not during working hours, and which directly or indirectly:
| (a) | relate to a matter within the scope, field, duties or responsibility of Executive’s employment with the Company or within the scope or field of the Company’s or an Affiliate’s business; or |
| (b) | are based on any knowledge of the actual or anticipated business or interests of the Company; or |
| (c) | are aided by the use of time, materials, facilities or information of the Company or an Affiliate. |
Executive assigns to the Company, without further compensation, any and all rights, titles and interest in all such ideas, inventions, computer programs and discoveries in all countries of the world. Executive recognizes that all ideas inventions, computer programs and discoveries of the type described above, conceived or made by Executive alone or with others within 12 months after the Termination Date (voluntary or otherwise), are likely to have been conceived in significant part either while employed by the Company or as a direct result of knowledge Executive had of proprietary information or Trade Secrets. Accordingly, Executive agrees that such ideas, inventions or discoveries shall be presumed to have been conceived during Executive’s period of employment with the Company or its Affiliates, unless and until the contrary is clearly established by the Executive.
13. Inventions and Other Works . Any and all writings, computer software, inventions, improvements, processes, procedures and/or techniques which Executive may make, conceive, discover, or develop, either solely or jointly with any other person or persons, at any time during Executive’s period of employment with the Company or its Affiliates, whether at the request or upon the suggestion of the Company or otherwise, which relate to or are useful in connection with any business now or hereafter carried on or contemplated by the Company, including developments or expansions of its present fields of operations, shall be the sole and exclusive property of the Company. Executive agrees to take any and all actions necessary or appropriate so that the Company can prepare and present applications for copyright or letters patent therefor, and secure such copyright or letters patent wherever possible, as well as reissue renewals, and extensions thereof, and obtain the record title to such copyright or patents. Executive shall not be entitled to any additional or special compensation or reimbursement regarding any such writings, computer software, inventions, improvements, processes, procedures and techniques. Executive acknowledges that the Company from time to time may have agreements with other persons or entities which impose obligations or restrictions on the Company regarding inventions made during the course of work thereunder or regarding the confidential nature of such work. Executive agrees to be bound by all such obligations and restrictions, and to take all action necessary to discharge the obligations of the Company.
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14. Non-Solicitation Restriction . Executive hereby agrees that in order to protect Trade Secrets, it is necessary to enter into the following restrictive covenant, which is ancillary to the enforceable promises between the Company and Executive in Sections 9 through 13 and other provisions of this Agreement. During the Executive ’ s employment and for a period of one (1) year following the Termination Date (regardless of the reason for termination), Executive hereby covenants and agrees that he will not, directly or indirectly, without obtaining the express written consent of the Board, either individually or as a principal, partner, agent, consultant, contractor, employee, or as a director or officer of any entity, or in any other manner or capacity whatsoever, except on behalf of the Company, solicit business, attempt to solicit business, or conduct business, in products or services competitive with any products or services offered or performed by the Company or its Affiliates in any business which the Company or any of its Affiliates does business, prepared to conduct business as of the Termination Date (or if the applicable activity occurs before the Termination, Date, then as of the date on which such activity occurs), or has any business interest within the Restricted Territory as of the Termination Date (or if the applicable activity occurs before the Termination, Date, then as of the date on which such activity occurs), (a) from those individuals or entities with whom the Company or Affiliate conducted or prepared to conduct business in the Restricted Territory during the Executive ’ s employment with the Company or (b) with respect to any assets or holdings in which the Company or Affiliate had any interest in the Restricted Territory at any time during the two-year period ending on the earlier of the Termination Date or the date on which such activity occurs.
15. Non-Competition Restriction . Executive hereby agrees that in order to protect Trade Secrets, it is necessary to enter into the following restrictive covenant, which is ancillary to the enforceable promises between the Company and Executive in Sections 9 through 14 and other provisions of this Agreement. Executive hereby covenants and agrees that during Executive’s period of employment with the Company or its Affiliates, and for a period of one (1) year following the Termination Date (regardless of the reason for termination), Executive will not, without obtaining the express written consent of the Company, engage in any capacity, directly or indirectly (whether as proprietor, stockholder, director, partner, employee, agent, independent contractor, consultant, trustee, or in any other capacity), with respect to any entity engaged or preparing to engage in the business of oil and gas exploration and production, the acquisition, development or operation of Midstream Assets or any other aspect of the Company’s or an Affiliate’s business, in each case, within the Restricted Territory (a “ Competing Enterprise ”); provided, however, Executive shall not be deemed to be participating or engaging in a Competing Enterprise solely by virtue of the ownership of not more than one percent (1%) of any class of stock or other securities which are publicly traded on a national securities exchange or in a recognized over-the-counter market.
16. No Recruitment Restriction . Executive agrees that during Executive’s period of employment with the Company or its Affiliates, and for a period of one (1) year following the Termination Date (regardless of the reason for termination), without obtaining the express written consent of the Company, Executive shall not, either directly or indirectly, or by acting in concert with another person or entity, (a) hire any employee or independent contractor performing services for the Company or any Affiliate, or any such individual who performed services for the Company or any Affiliate at any time during the one-year period ending on the earlier of the Termination Date or the date on which such hiring occurs, or (b) solicit or influence or seek to solicit or influence, any employee or independent contractor performing services for the Company or any Affiliate, or any such individual who performed services for the Company or any Affiliate at any time during the one-year period ending on the earlier of the Termination Date or the date on which such activity occurs, to terminate, reduce or otherwise adversely affect such individual’s employment or other relationship with the Company or any Affiliate.
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17. Business Opportunities . During Executive’s period of employment with the Company or its Affiliates and for a period of one (1) year following the Termination Date (regardless of the reason for termination), the Executive assigns and agrees to assign without further compensation to the Company, its Affiliates and its successors, assigns or designees, all of the Executive’s right, title and interest in and to all Business Opportunities (defined below), and further acknowledges and agrees that all Business Opportunities constitute the exclusive property of the Company. The Executive shall present all Business Opportunities to the Company, and shall not exploit a Business Opportunity. For purposes of this Agreement, “ Business Opportunities ” means all business ideas, prospects, or proposals pertaining to oil and gas exploration and production, the acquisition, development or operation of Midstream Assets or any other aspect of the Company’s or an Affiliate’s business, and any business the Company or any Affiliate prepared to conduct, or contemplated conducting during Executive’s employment with the Company, which are developed by the Executive or originated by any third party and brought to the attention of the Executive, together with information relating thereto; provided however, that for the one (1) year period following the Termination Date, “Business Opportunities” shall be limited to those Business Opportunities in the Restricted Territory. For the avoidance of doubt, this Section 17 is not intended to limit or narrow the Executive’s duties or obligations under federal or state law with respect to corporate opportunities.
18. Tolling . If Executive violates any of the restrictions contained in Sections 9 through 17 , then notwithstanding any provision hereof to the contrary, the restrictive period will be suspended and will not run in favor of Executive from the time of the commencement of any such violation, unless and until such time when the Executive cures the violation to the reasonable satisfaction of the Company.
19. Reformation . If a court or arbitrator rules that any time period or the geographic area specified in any restrictive covenant in Sections 9 through 17 is unenforceable, then the time period will be reduced by the number of months, or the geographic area will be reduced by the elimination of such unenforceable portion, or both, so that the restrictions may be enforced in the geographic area and for the time to the full extent permitted by law.
20. No Previous Restrictive Agreements . Executive represents that, except as disclosed in writing to the Company as of the Effective Date, Executive is not bound by the terms of any agreement with any previous employer or other third party to (a) refrain from using or disclosing any confidential or proprietary information in the course of Executive ’ s employment by the Company or (b) refrain from competing, directly or indirectly, with the business of such previous employer or any other person or entity. Executive further represents that Executive ’ s performance under this Agreement and work duties for the Company do not, and will not, breach any agreement to keep in confidence any proprietary information, knowledge or data acquired by Executive in confidence or in trust prior to Executive ’ s employment with the Company, and Executive will not disclose to the Company or induce the Company to use any confidential or proprietary information or material belonging to any previous employer or others.
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21. Conflicts of Interest . In keeping with Executive’s fiduciary duties to the Company, Executive hereby agrees that Executive shall not become involved in a conflict of interest, or upon discovery thereof, allow such a conflict to continue at any time during Executive’s period of employment with the Company or its Affiliates. In this respect, Executive agrees to fully comply with the conflict of interest agreement entered into by Executive as an employee, officer or director of the Company or an Affiliate. In the instance of a violation of the conflict of interest agreement to which Executive is a party, it may be necessary for the Company to terminate Executive’s employment for Cause.
22. Remedies . Executive acknowledges that the restrictions contained in Sections 9 through 21 of this Agreement, in view of the nature of the Company’s business, are reasonable and necessary to protect the Company’s legitimate business interests, and that any violation of this Agreement would result in irreparable injury to the Company. Notwithstanding the arbitration provisions in Section 31 , in the event of a breach or a threatened breach by Executive of any provision of Sections 9 through 21 of this Agreement, the Company shall be entitled to a temporary restraining order and injunctive relief restraining Executive from the commission of any breach, and to recover the Company’s attorneys’ fees, costs and expenses related to the breach or threatened breach. Nothing contained in this Agreement shall be construed as prohibiting the Company from pursuing any other remedies available to it for any such breach or threatened breach, including, without limitation, the recovery of money damages, attorneys’ fees, and costs. These covenants and agreements shall each be construed as independent of any other provisions in this Agreement, and the existence of any claim or cause of action by Executive against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of such covenants and agreements.
23. No Interference . Notwithstanding any other provision of this Agreement, (a) Executive may disclose confidential information when required to do so by a court of competent jurisdiction, by any governmental agency having authority over Executive or the business of the Company or by any administrative body or legislative body (including a committee thereof) with jurisdiction to order Executive to divulge, disclose or make accessible such information, in each case, subject to Executive’s obligations to notify the Company under Section 10(b) ; and (b) nothing in this Agreement is intended to interfere with Executive’s right to (1) report possible violations of state or federal law or regulation to any governmental or law enforcement agency or entity; (2) make other disclosures that are protected under the whistleblower provisions of state or federal law or regulation (including the right to receive an award for information provided to any such government agencies); (3) file a claim or charge any governmental agency or entity; or (4) testify, assist, or participate in an investigation, hearing, or proceeding conducted by any governmental or law enforcement agency or entity, or any court. For purposes of clarity, in making or initiating any such reports or disclosures or engaging in any of the conduct outlined in subsection (b) above, Executive may disclose confidential information to the extent necessary to such governmental or law enforcement agency or entity or such court, need not seek prior authorization from the Company, and is not required to notify the Company of any such reports, disclosures or conduct.
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24. Defend Trade Secrets Act . Executive is hereby notified in accordance with the Defend Trade Secrets Act of 2016 that Executive will not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that (a) is made (1) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (2) solely for the purpose of reporting or investigating a suspected violation of law; or (b) is made in a complaint or other document that is filed under seal in a lawsuit or other proceeding. If Executive files a lawsuit for retaliation against the Company for reporting a suspected violation of law, Executive may disclose the Company’s trade secrets to Executive’s attorney and use the trade secret information in the court proceeding if Executive files any document containing the trade secret under seal, and does not disclose the trade secret, except pursuant to court order.
25. Withholdings; Right of Offset . The Company may withhold and deduct from any benefits and payments made or to be made pursuant to this Agreement (a) all federal, state, local and other taxes as may be required pursuant to any law or governmental regulation or ruling, (b) all other normal employee deductions made with respect to Company’s employees generally, and (c) any advances made to Executive and owed to Company.
26. Nonalienation . The right to receive payments under this Agreement shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge or encumbrance by Executive, dependents or beneficiaries of Executive, or to any other person who is or may become entitled to receive such payments hereunder. The right to receive payments hereunder shall not be subject to or liable for the debts, contracts, liabilities, engagements or torts of any person who is or may become entitled to receive such payments, nor may the same be subject to attachment or seizure by any creditor of such person under any circumstances, and any such attempted attachment or seizure shall be void and of no force and effect.
27. Incompetent or Minor Payees . Should the Company determine, in its discretion, that any person to whom any payment is payable under this Agreement has been determined to be legally incompetent or is a minor, any payment due hereunder, notwithstanding any other provision of this Agreement to the contrary, may be made in any one or more of the following ways: (a) directly to such minor or person; (b) to the legal guardian or other duly appointed personal representative of the person or estate of such minor or person; or (c) to such adult or adults as have, in the good faith knowledge of the Company, assumed custody and support of such minor or person; and any payment so made shall constitute full and complete discharge of any liability under this Agreement in respect to the amount paid.
28. Severability . It is the desire of the Parties hereto that this Agreement be enforced to the maximum extent permitted by law, and should any provision contained herein be held unenforceable by a court of competent jurisdiction or arbitrator (pursuant to Section 31 ), the Parties hereby agree and consent that such provision shall be reformed to create a valid and enforceable provision to the maximum extent permitted by law; provided, however, if such provision cannot be reformed, it shall be deemed ineffective and deleted herefrom without affecting any other provision of this Agreement. This Agreement should be construed by limiting and reducing it only to the minimum extent necessary to be enforceable under then applicable law.
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29. Title and Headings; Construction . In the interpretation of the Agreement, except where the context clearly otherwise requires:
(a) “including” or “include” does not denote or imply any limitation;
(b) “or” has the inclusive meaning “and/or”;
(c) the singular includes the plural, and vice versa, and each gender includes each of the others;
(d) captions or headings are only for reference and are not to be considered in interpreting the Agreement;
(e) “Section” refers to a Section of the Agreement, unless otherwise stated in the Agreement;
(f) the words “herein”, “hereof”, “hereunder” and other compounds of the word “here” shall refer to the entire Agreement and not to any particular provision; and
(g) a reference to any statute, rule, or regulation includes any amendment thereto or any statute, rule, or regulation enacted or promulgated in replacement thereof or as the successor thereto.
30. Governing Law; Jurisdiction . All matters or issues relating to the interpretation, construction, validity, and enforcement of this Agreement shall be governed by the laws of the State of Texas, without giving effect to any choice-of-law principle that would cause the application of the laws of any jurisdiction other than Texas. Jurisdiction and venue of any action or proceeding relating to this Agreement or any Dispute (to the extent arbitration is not required under Section 31 ) shall be exclusively in Harris County, Texas.
31. Mandatory Arbitration . Except as provided in subsection (h) of this Section 31 , any Dispute must be resolved by binding arbitration in accordance with the following:
(a) Either Party may begin arbitration by filing a demand for arbitration in accordance with the Commercial Arbitration Rules of the AAA (the “ Arbitration Rules ”) and concurrently notifying the other Party of that demand. If the Parties are unable to agree upon a panel of three neutral arbitrators within twenty days after the demand for arbitration was filed (the Parties agree to a reasonable, one-time extension of that twenty-day period), either Party may request the Houston, Texas office of the American Arbitration Association (“ AAA ”) to appoint the arbitrator or arbitrators necessary to complete the panel in accordance with the Arbitration Rules. Each arbitrator so appointed shall be deemed accepted by the Parties as part of the panel. Notwithstanding the foregoing, the Parties, by mutual consent, may agree to a single arbitrator instead of a panel of three arbitrators and, in such event, references herein to “panel” shall refer to the single appointed arbitrator.
(b) The arbitration shall be conducted in the Houston, Texas metropolitan area at a place and time agreed upon by the Parties with the panel, or if the Parties cannot agree, as designated by the panel. The panel may, however, call and conduct hearings and meetings at such other places as the Parties may agree or as the panel may, on the motion of one Party, determine to be necessary to obtain significant testimony or evidence.
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(c) The panel may authorize any and all forms of discovery upon a Party’s showing of need that the requested discovery is likely to lead to material evidence needed to resolve the Dispute and is not excessive in scope, timing, or cost.
(d) The arbitration shall be subject to the Federal Arbitration Act and conducted in accordance with the Arbitration Rules to the extent that they do not conflict with this Section 31 . The Parties and the panel may, however, agree to vary to provisions of this Section 31 or the matters otherwise governed by the Arbitration Rules as permitted by law.
(e) The arbitration hearing shall be held within 60 days after the appointment of the panel. The panel’s final decision or award shall be made within 30 days after the hearing. That final decision or award shall be made by unanimous or majority vote or consent of the arbitrators constituting the panel, and shall be deemed issued at the place of arbitration. The panel’s final decision or award shall be based on the terms and conditions of this Agreement and applicable law.
(f) The panel’s final decision or award may include injunctive relief in response to any actual or impending breach of this Agreement or any other actual or impending action or omission of a Party under or in connection with this Agreement.
(g) The panel’s final decision or award shall be final and binding upon the Parties, and judgment upon that decision or award may be entered in any court having jurisdiction. The Parties waive any right to apply or appeal to any court for relief from the preceding sentence or from any decision of the panel that is made before the final decision or award.
(h) Nothing in this Section 31 limits the right of either Party to apply to a court having jurisdiction to (i) enforce the agreement to arbitrate in accordance with this Section 31 , (ii) seek provisional or temporary injunctive relief, in response to an actual or impending breach of the Agreement or otherwise so as to avoid an irreparable damage or maintain the status quo, until a final arbitration decision or award is rendered or the Dispute is otherwise resolved, or challenge or vacate any final arbitration decision or award that does not comply with this Section 31 . In addition, nothing in this Section 31 prohibits the Parties from resolving any Dispute (in whole or in part) at any time by mutual agreement or compromise. This Section 31 shall also not preclude the Parties at any time from mutually agreeing to pursue non-binding mediation of the Dispute.
(i) The panel may proceed to an award notwithstanding the failure of any Party to participate in such proceedings. The prevailing Party in the arbitration proceeding may be entitled to an award of reasonable attorneys’ fees incurred in connection with the arbitration in such amount, if any, as determined by the panel in its discretion. The costs of the arbitration shall be borne equally by the Parties unless otherwise determined by the panel in its award.
(j) The panel shall be empowered to impose sanctions and to take such other actions as it deems necessary to the same extent a judge could impose sanctions or take such other actions pursuant to the Federal Rules of Civil Procedure and applicable law. Each Party agrees to keep all Disputes and arbitration proceedings strictly confidential except for disclosure of information required by applicable law which cannot be waived.
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32. Binding Effect; Third Party Beneficiaries . Subject to Section 37 , this Agreement shall be binding upon and inure to the benefit of the Parties hereto, and to their respective heirs, executors, beneficiaries, personal representatives, successors and permitted assigns hereunder; otherwise this Agreement shall not be for the benefit of any third parties.
33. Entire Agreement; Amendment and Termination . This Agreement contains the entire agreement of the Parties hereto with respect to the matters covered herein; moreover, this Agreement supersedes all prior and contemporaneous agreements and understandings, oral or written, between the Parties concerning the subject matter hereof, including any employment agreement between the Company and Executive as in effect immediately before the Effective Date. This Agreement may be amended, waived or terminated only by a written instrument that is identified as an amendment, waiver or termination hereto, and is executed on behalf of both Parties. Executive hereby acknowledges and represents that in executing this Agreement, he did not rely on, has not relied on, and specifically disavows any reliance on any communications, promises, statements, inducements, or representation(s), oral or written, by the Company, except as expressly contained in this Agreement. The Parties represent that they relied on their own judgment in entering into this Agreement.
34. Section 409A .
(a) General . Any provisions of the Agreement that are subject to Section 409A of the Code and the regulations and other authoritative guidance issued thereunder (“ Section 409A ”), are intended to comply with all applicable requirements of Section 409A, or an exemption from the application of Section 409A, and shall be interpreted and administered accordingly. Notwithstanding any provision of this Agreement to the contrary, a termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amount or benefit that constitutes “non-qualified deferred compensation” (within the meaning of Section 409A) upon or following a termination of the Executive’s employment unless such termination is also a “separation from service” (as defined under Section 409A) (a “ Separation from Service ”) and, for purposes of any such provision, references herein to a “termination,” “termination of employment” or like terms shall mean a Separation from Service, if applicable. Each payment under this Agreement shall be treated as a separate payment for purposes of Section 409A. In no event may the Executive, directly or indirectly, designate the calendar year of any payment to be made under this Agreement.
(b) Specified Employee . Notwithstanding any provision of this Agreement to the contrary, if any payment or other benefit provided hereunder would be subject to additional taxes and interest under Section 409A because the timing of such payment is not delayed as required by Section 409A for a “specified employee” (as defined under Section 409A), then if the Executive is on the date of Executive ’ s Separation from Service a specified employee, any such payment or benefit that Executive would otherwise be entitled to receive during the first six months following the Separation from Service shall be accumulated and paid in a lump sum within ten (10) days after the date that is six months following the date of the Separation from Service, or such earlier date upon which such amount can be paid under Section 409A without being subject to such additional taxes and interest such as, for example, upon the Executive’s death. Any remaining payments due to Executive under this Agreement shall be paid as otherwise provided in this Agreement.
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(c) Reimbursements and In-Kind Benefits . Notwithstanding any provision of this Agreement to the contrary, any reimbursements or in-kind benefits provided under this Agreement that constitute “nonqualified deferred compensation” within the meaning of Section 409A shall be paid to Executive no later than December 31 of the year following the year in which the expense was incurred, the amount of expenses reimbursed in one year shall not affect the amount eligible for reimbursement in any subsequent year, other than medical expenses referred to in Section 105(b) of the Code, and Executive ’ s right to reimbursement under this Agreement will not be subject to liquidation or exchange for other benefits.
(d) No Section 409A Representations . Notwithstanding the foregoing, the Company makes no representations, warranties, or guarantees regarding the tax consequences of this Agreement, or any payments made hereunder, under Section 409A or otherwise, and has advised the Executive to consult with Executive ’ s own tax advisor.
35. Survival of Certain Provisions . Provisions of this Agreement which by their terms must survive the termination of this Agreement shall survive any such termination or expiration of this Agreement or termination of Executive’s employment, as applicable, including, without limitation, Executive’s obligations under Sections 9 through 18 and the Company’s obligations under Section 6 .
36. Waiver of Breach . No waiver by any party hereto of a breach of any provision of this Agreement by any other party, or of compliance with any condition or provision of this Agreement to be performed by such other party, will operate or be construed as a waiver of any subsequent breach by such other party or any similar or dissimilar provision or condition at the same or any subsequent time. The failure of any party hereto to take any action by reason of any breach will not deprive such party of the right to take action at any time while such breach continues.
37. Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of the Company and its Affiliates (and its and their successors), as well as upon any person or entity acquiring, whether by merger, consolidation, purchase of assets, dissolution or otherwise, all or substantially all of the capital stock, business and/or assets of the Company (or its successor) regardless of whether the Company is the surviving or resulting entity. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation, dissolution or otherwise) to all or substantially all of the capital stock, business or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had occurred; provided, however, no such assumption shall relieve the Company or any of its Affiliates (or any successor thereof) of any of its duties or obligations hereunder unless otherwise agreed, in writing, by Executive.
This Agreement shall inure to the benefit of and be enforceable by Executive’s personal or legal representative, executors, administrators, successors, and heirs. In the event of the death of Executive while any amount is payable hereunder, all such amounts shall be paid to the Designated Beneficiary.
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38. Notice . Each notice or other communication required or permitted under this Agreement shall be in writing and transmitted, delivered, or sent by personal delivery, prepaid courier or messenger service (whether overnight or same-day), or prepaid certified United States mail (with return receipt requested), addressed (in any case) to the other party at the address for that party set forth below that party’s signature on this Agreement, or at such other address as the recipient has designated by Notice to the other party, by electronic mail, delivery and read receipt required, or by facsimile, confirmation of delivery required.
Each notice or communication so transmitted, delivered, or sent (a) in person, by courier or messenger service, or by certified United States mail shall be deemed given, received, and effective on the date delivered to or refused by the intended recipient (with the return receipt, or the equivalent record of the courier or messenger, being deemed conclusive evidence of delivery or refusal), or (b) by telecopy or facsimile shall be deemed given received) and effective on the date of actual receipt (with the confirmation of transmission being deemed conclusive evidence of receipt, except where the intended recipient has promptly notified the other party that the transmission is illegible). Nevertheless, if the date of delivery or transmission is not a business day, or if the delivery or transmission is after 5:00 p.m. (local time) on a business day, the notice or other communication shall be deemed given, received, and effective on the next business day.
39. Executive Acknowledgment . Executive acknowledges (a) being knowledgeable and sophisticated as to business matters, including the subject matter of this Agreement, (b) having read this Agreement and understanding its terms and conditions, (c) having been given an ample opportunity to discuss this Agreement with his personal legal counsel prior to execution, and (d) that no strict rules of construction shall apply for or against the drafter or any other party. Executive hereby represents that he is free to enter into this Agreement including, without limitation, that he is not subject to any covenant not to compete or confidentiality agreement that conflicts with this Agreement.
40. Counterparts . This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute one and the same instrument. Each counterpart may consist of a copy hereof containing multiple signature pages, each signed by one party hereto, but together signed by both Parties.
41. Parent Acknowledgment and Guarantee . Alta Mesa is the direct or indirect parent of the Company. Alta Mesa hereby unconditionally guarantees full and timely performance of the obligations of the Company and its Affiliates under this Agreement. The foregoing guarantee shall include the guarantee of the payment of all benefits and payments due Executive hereunder as a result of the nonperformance of any of such obligations or agreements so guaranteed or as a result of the nonperformance of this guarantee. Executive may, at his option, proceed against Alta Mesa for damages for default in the performance thereof, without first proceeding against the Company or against any of its properties or Affiliates. Alta Mesa further agrees that its guarantee shall be an irrevocable guarantee and shall continue in effect notwithstanding any extension or modification of any guaranteed obligation, any assumption of any such guaranteed obligation by any other party, or any other act or thing which might otherwise operate as a legal or equitable discharge of a guarantor, and Alta Mesa hereby waives all special suretyship defenses and notice requirements. This guarantee shall also be binding upon all successors and assigns of all of substantially all of the business or assets of Alta Mesa. Section 31 shall apply to Disputes between Alta Mesa and Executive mutatis mutandis .
[ Signature pages follow .]
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IN WITNESS WHEREOF , Executive has executed this Agreement, the Company has caused this Agreement to be executed in its name and on its behalf by its duly authorized officer, and Alta Mesa has caused this Agreement to be executed in its name and on its behalf by its duly authorized officer solely for purposes of Section 41 of the Agreement, to be effective as of the Effective Date.
| EXECUTIVE: | ||
| /s/ Homer E. Cole | ||
| Homer E. Cole | ||
| Address for Notices: | ||
| Most recent mailing address for Executive in the Company’s personnel files | ||
[ Signature pages continue .]
| 27 | H. Cole Agreement |
| COMPANY : | ||
| ALTA MESA SERVICES, LP, a Texas limited partnership | ||
| By: | OEM GP, LLC, | |
| a Texas limited liability company | ||
| its general partner | ||
| By: |
Alta Mesa Holdings, LP, |
|
|
a Texas limited partnership its sole member |
||
| By: |
Alta Mesa Holdings GP, LLC |
|
|
a Texas limited liability company its general partner |
||
| By: |
/s/ Harlan H. Chappelle |
|
| Name: Harlan H. Chappelle | ||
| Title: Chief Executive Officer | ||
| Address for Notices: | ||
|
OEM GP, LLC c/o Alta Mesa Resources, Inc. 15021 Katy Freeway, Suite 400 Houston, TX 77094 |
||
| Attn : Chief Executive Officer | ||
[ Signature pages continue .]
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[End of Signatures.]
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Exhibit 10.17
Execution Copy
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the “ Agreement ”), is made and entered into as of February 9, 2018 (the “ Effective Date ”), by and between Alta Mesa Services, LP, a Texas limited partnership (the “ Company ”), F. David Murrell (hereafter “ Executive ”)and, solely with respect to Section 41 , Alta Mesa Holdings, LP, a Texas limited partnership (“ Alta Mesa ”). The Company and Executive may sometimes hereafter be referred to singularly as a “ Party ” or collectively as the “ Parties .”
WITNESSETH:
WHEREAS , Alta Mesa Holdings, L.P. (the “ Parent ”), has entered into a Contribution Agreement by and among High Mesa Holdings, LP, High Mesa Holdings GP, LLC, Alta Mesa Holdings GP, LLC, Silver Run and certain other parties thereto, dated as of August 16, 2017, as the same may be amended from time to time, pursuant to which Silver Run will acquire certain of the outstanding equity interests in Parent (the “ Transaction ”); and
WHEREAS , the Company desires to continue to secure the employment services of Executive subject to the terms and conditions hereafter set forth;
NOW, THEREFORE, in consideration of Executive’s continued employment with the Company, and the premises and mutual covenants contained herein, the Parties hereto agree as follows:
1. Employment Position and Defined Terms . During the Employment Period (as defined in Section 4 ), the Company shall employ Executive, and Executive shall serve, as a Vice President of the Company. During the Employment Period, Executive shall also serve in the same positions of employment with Silver Run as he does with the Company for no additional compensation. Executive’s principal place of employment shall be at the main business offices of the Company in Houston, Texas. Defined terms used in the Agreement that are not otherwise defined herein when first used are defined in Sections 6(d) and 10(d) .
2. Compensation .
(a) Base Salary . The Company shall pay to Executive during the Employment Period a base salary of Three Hundred Sixty Thousand dollars ($360,000) per year, as adjusted pursuant to the subsequent provisions of this paragraph (the “ Base Salary ”). The Base Salary shall be payable in accordance with the Company’s normal payroll schedule and procedures for its executives. Nothing contained herein shall preclude the payment of any other compensation to Executive at any time as determined by the Board.
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(b) Annual Bonus.
(1) In addition to the Base Salary in Section 2(a) , for each annual fiscal year of the Company during the Employment Period (each such annual period being referred to as a “ Bonus Period ”), Executive will be eligible to participate in an annual bonus program established by the Board, under which Executive shall receive a bonus equal to a percentage of Executive’s Base Salary paid during each such one-year period (referred to herein as the “ Annual Bonus ”), such percentage to be established by the Board in its sole discretion; provided, however, that the payment of any Annual Bonus will be subject to the Board’s discretion and made only if Executive has met the pre-established performance criteria set by the Board for the Bonus Period.
(2) In the event that the Employment Period ends before the end of the Bonus Period, Executive shall be entitled to a pro rata portion of the Annual Bonus for that year (based on the number of days in which Executive was employed during the year divided by 365), as determined based on satisfaction of the performance criteria for that Bonus Period on a pro rata basis (calculated as if the final day of the Employment Period were the final day of the applicable Bonus Period), unless Executive was terminated for Cause or terminated voluntarily without Good Reason, in any of which events Executive shall not be entitled to any Annual Bonus for that year.
(3) If Executive successfully meets the performance criteria for a Bonus Period, the Company shall pay Executive the Annual Bonus amount determined by the Board within the earlier of: (A) sixty days (60) days after the end of the Bonus Period or (B) sixty days (60) after the end of the Employment Period.
(c) Compensation in Event of Injury or Sickness . In the event that Executive becomes injured or suffers a medically determinable physical or mental illness, as determined by a physician acceptable to both the Company and Executive in the same manner as provided in the definition of Disability in Section 6(d) , during the Employment Period, Executive shall be entitled to receive continued Base Salary (as set forth in Section 2(a) ) for a period of six (6) months following the occurrence of such injury or sickness; provided, however, such Base Salary shall be reduced by any short-term and/or long-term disability income benefits that are received by Executive under such programs sponsored by the Company (or an Affiliate) during such 6-month period.
3. Duties and Responsibilities of Executive . During the Employment Period, Executive shall devote his full working time to (a) the business of the Company and its Affiliates and (b) performance of the duties and responsibilities assigned to Executive to the best of Executive’s ability and with reasonable diligence. In determining Executive’s duties and responsibilities, Executive shall not be assigned duties and responsibilities that are materially inconsistent with Executive’s position. This Section 3 shall not be construed as preventing Executive from (a) engaging in reasonable volunteer services for charitable, educational or civic organizations, or (b) investing personal assets in such a manner that will not require a material amount of the Executive’s time or services in the operation of the businesses in which such investments are made; provided, however, no such other activity shall conflict or materially interfere with Executive’s loyalties, duties or responsibilities to the Company and its Affiliates. Executive shall at all times use his best efforts to comply in good faith with United States laws applicable to Executive’s actions on behalf of the Company and its Affiliates. Executive understands and agrees that Executive may be required to travel from time to time for purposes of the Company’s business. The Parties agree that Executive’s principal work location cannot be relocated further than 50 miles from Executive’s principal work location on the Effective Date, except as mutually agreed by the Parties.
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4. Term of Employment . Executive’s term of employment with the Company under this Agreement shall be for the period from the Effective Date through the date that is three (3) years from the Effective Date, unless earlier terminated in accordance with this Agreement, and if not earlier terminated, this Agreement will expire upon the date that is three (3) years from the Effective Date.
The period from the Effective Date through the earlier of the third (3 rd ) anniversary of the Effective Date and the date of Executive’s termination of employment with the Company and its Affiliates for whatever reason (the “ Termination Date ”) shall be referred to herein as the “ Employment Period .” Notwithstanding the above, Executive agrees to remain available beyond the Employment Period to provide assistance to the Company or its Affiliate in the event that the Company or an Affiliate become involved in litigation (or another type of dispute or controversy) regarding matters of which Executive has relevant knowledge resulting from Executive’s employment with the Company or an Affiliate. Such post-termination assistance shall be provided by Executive in the capacity of an independent contractor at an agreed-upon, reasonable consulting fee, and shall not be deemed to create or continue an employee-employer or fiduciary relationship, or to represent a continuation of this Agreement.
5. Benefits . Subject to the terms and conditions of this Agreement, during the Employment Period, Executive shall be entitled to all of the following:
(a) Reimbursement of Business Expenses . The Company shall pay or reimburse Executive for all reasonable travel, entertainment and other business expenses paid or incurred by Executive in the performance of duties hereunder. The Company shall also provide Executive with suitable office space, including staff support, paid parking, and necessary equipment, including but not limited to, cellular telephone and laptop computer.
(b) Other Employee Benefits . Executive shall be entitled to participate in any pension, retirement, 401(k), profit-sharing, and other employee benefits plans or programs of the Company to the same extent as available to other senior management employees of the Company under the terms of such plans or programs. Executive shall also be entitled to participate in any group insurance, hospitalization, medical, dental, health, life, accident, disability and other employee benefits plans or programs of the Company to the extent available to other senior management employees of the Company, and their spouses and eligible dependents, under the terms of such plans or programs including any medical expense reimbursement account and post-retirement medical program as made available to other senior management employees of the Company.
(c) Vacation and Holidays . Executive shall be entitled to five (5) weeks of paid vacation per calendar year (prorated in any calendar year during which Executive is employed for less than the entire year based on the number of days in such calendar year in which Executive was employed). Executive shall also be entitled to all paid holidays and personal days provided by the Company for its key management employees under the Company’s personnel policy as then effective. Unused vacation shall not carry over to the following year unless specifically approved by the Company.
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(d) Equity Incentive Awards . Executive shall be eligible to participate in the Alta Mesa Resources, Inc. 2018 Long Term Incentive Plan (the “ LTIP ”) or any other incentive plan sponsored by the Company which provides for equity grants of incentive awards. The terms and conditions of any equity incentive award granted to Executive shall be set forth in the incentive plan document and award agreement governing such award.
(e) Annual Physical . Executive shall be entitled to be reimbursed by the Company for the full cost of an annual physical examination by a physician (1) selected by the Company or (2) selected by Executive and approved by the Company.
(f) Key Man or Company-Owned Life Insurance . The Company may, at any time during the term of this Agreement, apply for and procure as owner, and for its sole benefit, life insurance on the Executive’s life in such amounts and in such forms as the Company may select. Executive hereby acknowledges that he will have no interest whatsoever in any such insurance policy. Executive shall submit to such medical examinations, supply such information, and execute such documents as may be reasonably requested by the insurer to obtain any such key man policy.
(g) Tax Planning, Preparation and Advice . Executive shall be entitled to be reimbursed by the Company for the cost of tax preparation and planning by a certified financial planner or certified public accountant (1) selected by the Company or (2) selected by Executive and approved by the Company, provided that such annual reimbursement shall not exceed $5,000.00.
6. Rights and Payments upon Termination . The Executive’s right to compensation and benefits for periods after the Termination Date shall be determined in accordance with this Section 6 . Except as otherwise expressly required by law or as specifically provided in an employee benefit plan or this Agreement, all of Executive’s rights to salary, severance, benefits, bonuses and other compensatory amounts under this Agreement shall cease upon the Termination Date.
(a) Minimum Payments and Vesting . Executive shall be entitled to the following minimum payments under this Section 6(a) , in addition to any other payments or benefits which Executive is entitled to receive under the terms of any employee benefit plan or program or Section 6(b) :
(1) unpaid salary for the full calendar month in which the Termination Date occurs; provided, however, if Executive is terminated for Cause or terminates his employment voluntarily without Good Reason, Executive shall only be entitled to receive accrued but unpaid salary through the Termination Date;
(2) unpaid vacation days for that year which have accrued through the Termination Date;
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(3) reimbursement of reasonable business expenses that were incurred but unpaid as of the Termination Date; and
(4) to the extent Executive participated in any nonqualified deferred compensation plan or program with vesting criteria, or received any equity incentive grant that is not fully vested, as of the Termination Date, Executive will automatically vest as of the Termination Date as follows:
(A) subject to Section 6(c) , if Executive is involuntarily terminated by the Company other than for Cause (and not including death or termination due to Disability), or if the Executive terminates his employment for Good Reason, Executive shall become immediately 100% vested in (i) any outstanding awards of restricted stock, stock options and any other equity incentive awards granted under the LTIP (or any other equity incentive plan of the Company or Silver Run) that vest solely based on the passage of time (with any such awards that vest based on the attainment of performance-based vesting conditions vesting at the target level); and (ii) any nonqualified deferred compensation account balance or benefit; and
(B) if Executive is terminated by the Company for Cause, or voluntarily terminates his employment without Good Reason, all unvested equity incentive awards shall be treated in accordance with the terms of the outstanding award agreement or plan document, as applicable.
Salary and accrued vacation days under this Section 6(a) shall be paid to Executive within five (5) business days following the Termination Date in a cash lump sum payment, less applicable withholdings. Business expenses shall be reimbursed in accordance with the Company’s normal procedures.
(b) Other Severance Payments . In the event that during the Employment Period (i) Executive’s employment is involuntarily terminated by the Company (except due to a No Severance Benefits Event), (ii) Executive’s employment is terminated due to death or Disability, or (iii) Executive terminates his employment for Good Reason; then in any such event under clause (i), (ii), or (iii), subject to Section 6(c) , the following severance benefits shall be provided to Executive or, in the event of his death before receiving all such benefits, to Executive’s Designated Beneficiary following his death:
(1) Additional Payment . The Company shall pay additional compensation as described in this Section 6(b)(1) (the “ Additional Payment ”). Subject to Section 6(c) , the Company shall make the Additional Payment to Executive in a cash lump sum, net of applicable withholdings.
(A) Termination Not Following Change in Control . If the Termination Date does not occur within the 15-month period immediately following a Change in Control, the Additional Payment shall be (i) an amount equal to one hundred fifty percent (150%) of Executive’s Base Salary in effect as of the Termination Date, (ii) an amount equal to one hundred fifty percent (150%) of the greater of
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(x) 100% of the “target” bonus for Executive for the year containing the Termination Date or (y) the amount of the Annual Bonus paid to the Executive for the year immediately preceding the year containing the Termination Date, and (iii) an additional $24,000.00 lump sum cash payment for outplacement services. In such event, the Additional Payments described in Section 6(b)(1)(C) following a Change in Control shall be inapplicable for Executive.
(B) Anticipatory Termination . If the Executive incurs an Anticipatory Termination, he shall be entitled to receive, in addition to the payment described in Section 6(b)(1)(A) above, an additional amount equal to the sum of (i) fifty percent (50%) of Executive’s Base Salary as in effect as of the Termination Date, plus (ii) fifty percent (50%) times the greater of (x) 100% of the “target” bonus for Executive for the year containing the Termination Date or (y) the amount of the Annual Bonus paid to the Executive for the year immediately preceding the year containing the Termination Date (the “ Anticipatory Termination Payment ”). In such event, the Additional Payments described in Section 6(b)(1)(C) following a Change in Control shall be inapplicable for Executive. The Anticipatory Termination Payment shall be subject to the Executive executing a second release agreement, as described in Section 6(c) , but covering only the period from the Termination Date until the date immediately following the Change in Control.
(C) Termination Following Change in Control . If the Termination Date occurs within the fifteen (15) month period immediately following a Change in Control, the Additional Payment shall be (i) an amount equal to two hundred percent (200%) of Executive’s Base Salary in effect as of the Termination Date, (ii) an amount equal to two hundred percent (200%) times the greater of (x) 100% of the “target” bonus for Executive for the year containing the Termination Date or (y) the amount of the Annual Bonus paid to the Executive for the year immediately preceding the year containing the Termination Date, and (iii) an additional $24,000.00 lump sum cash payment for outplacement services. In such event, the Additional Payments described in Sections 6(b)(1)(A) and 6(b)(1)(B) above shall be inapplicable for Executive.
(2) COBRA Coverage .
(A) In the event that Executive timely elects continuation coverage under any of the Company’s “group health plans” within the meaning of Treasury Regulations Section 54.4980B-2 Q/A-1 (collectively, the “ Health Plan ”) on behalf of himself and any of his eligible covered dependents (including his spouse) pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“ COBRA ”), following the Termination Date, the Company shall pay directly or reimburse Executive for an amount equal to the monthly premium for such COBRA coverage for each month during which such COBRA coverage is in effect during the period commencing on the Termination Date and ending upon the earliest of (x) the date that is eighteen (18) months following the Termination Date, (y) the date that Executive and Executive’s covered dependents
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become no longer eligible for COBRA coverage or (z) the date Executive becomes eligible to receive group healthcare coverage from a subsequent employer (and Executive agrees to promptly notify the Company of such eligibility). In all other respects, Executive and his dependents shall be treated the same as any other qualified beneficiaries under the Health Plan and COBRA.
(B) If Executive’s eligibility for continued COBRA coverage under the Health Plan ends due to expiration of the “maximum coverage period” under and within the meaning of 26 C.F.R. 54.4980B-7 Q/A-4(b), Executive shall be entitled to continue coverage for himself and his eligible covered dependents (including his spouse), if any, under the Health Plan (Executive and each such covered dependent being referred to herein as a “ Qualified Beneficiary ”) for the period beginning on the first day following such expiration of eligibility for COBRA coverage and ending on the second anniversary of the Termination Date or the earlier date that Executive becomes eligible to receive group healthcare coverage from a subsequent employer (and Executive agrees to promptly notify the Company of such eligibility) (the “ Extended Coverage ”), subject to the Company or an Affiliate continuing to sponsor a Health Plan for the benefit of the Company’s employees generally. In order for Executive to be eligible to receive the Extended Coverage on behalf of himself and any other Qualified Beneficiaries, Executive and any other Qualified Beneficiary must first exhaust such individual’s rights to any COBRA coverage available under the Health Plan. The Parties acknowledge that following expiration of the Extended Coverage, neither Executive nor any other Qualified Beneficiary will have any right to elect coverage under the Health Plan. Executive shall, on a monthly after-tax basis, pay to the Company (or its delegate) the COBRA rate, as then effective, for each month during the period of Extended Coverage. For purposes of Code Section 409A, the benefits provided under this Section 6(b)(2)(B) shall be provided as separate monthly in-kind payments of those benefits, and to the extent those benefits are subject to and not otherwise excepted from Section 409A, the provision of in-kind benefits during one calendar year shall not affect in-kind benefits to be provided in any other calendar year.
(C) Executive and Executive’s spouse, if applicable, consent and agree to acquire and maintain any and all coverage that either or both of them are entitled to at any time during their lives under the Medicare program or any similar program of the United States or any agency thereof. Executive and Executive’s spouse further agree to pay any required premiums for Medicare coverage from their personal funds.
(D) Notwithstanding Section 6(b)(2)(A) or (B) to the contrary, the Company may alter the manner in which health benefits are provided to Executive under such sections following termination of Executive’s employment to the extent the Company reasonably determines is necessary for purposes of satisfying Code Section 105(h)(2) or avoiding the imposition of an excise tax on the Company or any of its Affiliates, provided that such alterations do not materially decrease coverage or increase the after-tax cost to Executive of such benefits.
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(3) Code Section 280G Tax Gross-up . If the Termination Date occurs within three (3) years after the Effective Date, the Accounting Firm shall determine if any of the payments or benefits received or to be received by Executive (including, without limitation, any payment or benefits received in connection with a Change in Control or Executive’s termination of employment, whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement), constitute “parachute payments” within the meaning of Code Section 280G as a result of a “change in ownership or control,” under and within the meaning of Treasury Regulation Section 1.280G-1, of Silver Run or any of its subsidiaries, including the Company, but excluding as a result of the closing of the Transaction (all such payments and benefits collectively referred to herein as the “ 280G Payments ”) that are subject to the excise tax imposed under Code Section 4999 (the “ Excise Tax ”). If the Accounting Firm determines any of the 280G Payments are subject to the Excise Tax, the Company shall pay to Executive, as soon as reasonably practicable following such determination but in any event no later than the end of the year following the year in which the Executive pays the relevant taxes, an additional amount equal to the sum of the Excise Tax payable by Executive plus the amount that the Accounting Firm determines is necessary to put Executive in the same after-tax position (taking into account all applicable federal, state and local excise, income and other taxes) as if no Excise Tax had been imposed.
All determinations required to be made under this Section 6(b)(3) , including whether a payment would result in an “excess parachute payment” within the meaning of Code Section 280G and the assumptions utilized in arriving at such determination, shall be made by the Accounting Firm. All fees and expenses of the Accounting Firm shall be paid solely by the Company. The final determination by the Accounting Firm shall be binding on the Parties absent manifest error.
Executive agrees to reasonably cooperate with the Company to minimize the amount of any excess parachute payments, including, without limitation, assisting the Company in establishing that some or all of the payments received by Executive which are “contingent on a change”, as described in Code Section 280G(b)(2)(A), are reasonable compensation for personal services actually rendered by Executive before the date of such change or to be rendered by Executive on or after the date of such change. Notwithstanding the foregoing, Executive shall not be required to take any action which his attorney or tax advisor advises him in writing exposes the Executive to material personal liability.
(4) Other Termination of Employment . For purposes of clarity, in the event that (i) Executive voluntarily resigns or otherwise voluntarily terminates employment, except due to death, Disability or for Good Reason, or (ii) Executive’s employment is terminated due to a No Severance Benefits Event then, in any such event under clause (i) or (ii), the Company shall have no obligation to provide the severance benefits described in paragraphs (1), (2) and (3) (above) of this Section 6(b) , except to offer COBRA coverage (as required by COBRA law) but not at the rate described in paragraph (2). However, Executive shall still be entitled to the minimum benefits provided under Section 6(a) .
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(5) No Duplication of Severance Benefits . The severance payments provided under Section 6(b) shall supersede and replace any severance payments under any severance pay plan or similar agreement that the Company or any Affiliate maintains for key management employees or employees generally.
(c) Release Agreement . Notwithstanding any provision of the Agreement to the contrary, in order to receive the vesting acceleration provided under Section 6(a)(4)(A) or the severance benefits provided under Section 6(b)(1) , (2) , or (3) , the Executive must first execute an appropriate release agreement (on a form provided by the Company) whereby the Executive agrees to release and waive, in return for such vesting acceleration or severance benefits, any claims that Executive may have against the Company or any of its Affiliates including, without limitation, for unlawful discrimination ( e.g. , Title VII of the Civil Rights Act); provided, however, such release agreement shall not release any claim or cause of action by or on behalf of the Executive for (a) any payment or benefit that may be due or payable under this Agreement or any vested benefits under any employee benefit plan or program or (b) non-payment of salary or benefits to which Executive is entitled from the Company as of the Termination Date. The release agreement must be provided to Executive within five (5) days following the Termination Date, and signed by Executive and returned to the Company, and any applicable revocation period must have expired, no later than sixty (60) days following the Termination Date; provided, however, the second release agreement required for an Anticipatory Termination Payment under Section 6(b)(1)(B) must be provided to Executive within five (5) days following the Change in Control Date, and signed by Executive and returned to the Company, and any applicable revocation period must have expired, no later than sixty (60) days following the Change in Control Date. Any payments to which Executive becomes entitled pursuant to Section 6(b)(1) , shall be paid within ten (10) days after the executed release agreement (or executed second release agreement with respect to an Anticipatory Termination Payment) has been timely returned to the Company for counter-signature and become effective and non-revocable by Executive under the terms of the release agreement. Notwithstanding anything in this Agreement to the contrary, to the extent that any severance payments or benefits provided under Section 6(a)(4)(A) or Section 6(b) are deferred compensation under Code Section 409A, and are not otherwise exempt from the application of Section 409A, then, if the period during which Executive may consider and sign the release agreement spans two calendar years, the severance payments or benefits will not be made or begin until the later calendar year.
(d) Definitions .
(1) “ Accounting Firm ” means any nationally recognized, certified public accounting firm selected by the Company and reasonably acceptable to the Executive; provided, however, the firm selected must be within the top 20 in the United States at such time based on annual revenues for certified public accounting firms in the immediately preceding year.
(2) “ Affiliate ” means any parent or subsidiary entity of the Company, or any other entity in whatever form, of which the Company has any direct or indirect controlling ownership interest or management control, or vice-versa, as determined by the Company. For purposes of clarity and not limitation, (i) Riverstone Investment Group LLC, Bayou City Energy Management, LLC, HPS Investment Partners, LLC, or High Mesa Inc., and their affiliates (other than Silver Run or any of its subsidiaries, to the extent considered an affiliate of any such entity) are not Affiliates for purposes of this Agreement, and (ii) Silver Run is an Affiliate of the Company.
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(3) “ Anticipatory Termination ” means a termination of the Executive’s employment within the three (3) month period ending immediately prior to the Change in Control Date (in which the Change in Control is a “change in control event” within the meaning of Code Section 409A), but only if (a) the Executive’s employment with the Company was (i) terminated by the Company without Cause or (ii) terminated by the Executive for Good Reason, and (b) it is reasonably demonstrated by the Executive that such termination of employment (1) was at the request of a third party who has taken steps reasonably calculated to effect such Change in Control or (2) otherwise arose in connection with or anticipation of such Change in Control.
(4) “ Board ” means the then-current Board of Directors of the Company or, following the closing of the Transaction, the then-current Board of Directors of Silver Run, in each case, including the Compensation Committee (the “ Compensation Committee ”) or another authorized committee thereof.
(5) “ Cause ” means any of the following: (A) the Executive’s final conviction by a court of competent jurisdiction of a felony involving moral turpitude, or entering the plea of nolo contendere to such felony by the Executive; (B) the commission by the Executive of a demonstrable act of material fraud, or a proven and material misappropriation of funds or other property, of or upon the Company or any Affiliate; (C) the engagement by the Executive, without the written approval of the Company, in any material activity which directly competes with the business of the Company or any Affiliate, or which would directly result in a material injury to the business or reputation of the Company or any Affiliate; or (D) the breach by Executive of any material provision of this Agreement. With respect to items (C) and (D) above, in order to constitute “Cause” hereunder, Executive must also fail to cure such breach within a reasonable time period set by the Company but in no event less than twenty (20) calendar days after Executive’s receipt of such notice.
(6) “ Change in Control ” means and includes each of the following:
(A) A transaction or series of transactions (other than an offering of Common Stock to the general public through a registration statement filed with the Securities and Exchange Commission or a transaction or series of transactions that meets the requirements of clauses (1) and (2) of subsection (C) below) whereby any “person” or related “group” of “persons” (as such terms are used in Sections 13(d) and 14(d)(2) of the Exchange Act) (other than Silver Run, any of its subsidiaries, an employee benefit plan maintained by Silver Run or any of its subsidiaries or a “person” that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common control with, Silver Run) directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of securities of Silver Run possessing more than 50% of the total combined voting power of Silver Run’s securities outstanding immediately after such acquisition; or
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(B) During any period of two consecutive years, individuals who, at the beginning of such period, constitute the Board together with any new Director(s) (other than a Director designated by a person who shall have entered into an agreement with Silver Run to effect a transaction described in subsections (A) or (C)) whose election by the Board or nomination for election by Silver Run’s stockholders was approved by a vote of at least two-thirds of the Directors then still in office who either were Directors at the beginning of such two-year period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or
(C) The consummation by Silver Run (whether directly involving Silver Run or indirectly involving Silver Run through one or more intermediaries) of (x) a merger, consolidation, reorganization, or business combination or (y) a sale or other disposition of all or substantially all of Silver Run’s assets in any single transaction or series of related transactions, or (z) the acquisition of assets or stock of another entity, in each case other than a transaction:
(1) which results in Silver Run’s voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of Silver Run or the person that, as a result of the transaction, controls, directly or indirectly, Silver Run or owns, directly or indirectly, all or substantially all of Silver Run’s assets or otherwise succeeds to the business of Silver Run (Silver Run or such person, the “ Successor Entity ”)) directly or indirectly, at least a majority of the combined voting power of the Successor Entity’s outstanding voting securities immediately after the transaction; and
(2) after which no person or group beneficially owns voting securities representing 50% or more of the combined voting power of the Successor Entity; provided, however, that no person or group shall be treated for purposes of this clause (2) as beneficially owning 50% or more of the combined voting power of the Successor Entity solely as a result of the voting power held in Silver Run prior to the consummation of the transaction.
Notwithstanding the foregoing, in no event shall the following constitute a Change in Control: (i) the Transaction or any transactions occurring in connection therewith or (ii) any initial public offering of any subsidiary of Silver Run that owns all or part of Silver Run’s Midstream Assets (as defined in Section 10(d)(1) ) or any other sale or disposition of such Midstream Assets directly or indirectly by Silver Run in connection with such initial public offering.
If a Change in Control constitutes a payment event with respect to any amount, benefit or award (or portion of any amount, benefit or award) that provides for the deferral of compensation that is subject to Section 409A, to the extent required to avoid the imposition of additional taxes under Section 409A, the transaction or event described
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in subsection (A), (B) or (C) above with respect to such amount, benefit or award (or portion thereof) shall only constitute a Change in Control for purposes of the payment timing of such amount, benefit or award if such transaction also constitutes a “change in control event,” as defined in Treasury Regulation Section 1.409A- 3(i)(5).
The Board as in effect immediately prior to the occurrence of a Change in Control shall have full and final authority, which shall be exercised in its discretion, to determine conclusively whether a Change in Control has occurred pursuant to the above definition, the date of the occurrence of such Change in Control and any incidental matters relating thereto; provided that any exercise of such authority in conjunction with a determination regarding whether a Change in Control is a “change in control event” (as defined in Treasury Regulation Section 1.409A-3(i)(5)) shall be determined on a basis consistent with such regulation.
(7) “ Change in Control Date ” means the effective date of the occurrence of a Change in Control.
(8) “ Code ” means the Internal Revenue Code of 1986, as amended or its successor. References herein to any Section of the Code shall include any successor provisions of the Code.
(9) “ Common Stock ” means the Class A common stock of Silver Run, $0.0001 par value per share, and any class of common stock into which such common shares may hereafter be converted, reclassified or recapitalized.
(10) “ Designated Beneficiary ” means the Executive’s surviving spouse, if any. If there is no such surviving spouse at the time of Executive’s death, then the Designated Beneficiary hereunder shall be Executive’s estate after the legal representative of such estate provides satisfactory evidence thereof to the Company (or its delegate).
(11) “ Director ” means a Board member.
(12) “ Disability ” shall mean that (a) Executive is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or last for a continuous period of not less than 12 months, or (b) by reason of any medically determinable physical or mental impairment which can be expected to result in death or to last for a continuous period of not less than 12 months, Executive is receiving income replacement for a period of not less than three months under an accident and health plan covering employees of the Company. Evidence of such Disability shall be certified by a physician acceptable to both the Company and Executive. In the event that the Parties are not able to agree on the choice of a physician, each shall select one physician who, in turn, shall select a third physician to render such certification. All reasonable costs directly relating to the determination of whether Executive has incurred a Disability for purposes of this Agreement shall be paid by the Company. Executive agrees to submit to any examinations that are reasonably required by the attending physician or other healthcare service providers to determine whether Executive has a Disability.
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(13) “ Dispute ” means any dispute, disagreement, claim, or controversy arising from, in connection with, or relating to (a) the employment, or termination of employment, of Executive, or (b) the Agreement, or the validity, interpretation, performance, breach or termination of the Agreement.
(14) “ Exchange Act ” means the Securities Exchange Act of 1934, as amended.
(15) “ Good Reason ” means, other than during the fifteen (15)-month period following a Change in Control, the occurrence of any of the following without the Executive’s prior written consent, if not cured and corrected by the Company or Silver Run, or either of their successor(s), within 60 days after written notice thereof is provided by Executive to the Company or its successor, provided such notice is delivered within 90 days after the occurrence of the applicable condition or event and that Executive resigns from employment with the Company within 90 days following expiration of such 60-day cure period:
(A) the demotion or reduction in title or rank of Executive with the Company or Silver Run, except for any such demotion or reduction that occurs in connection with Executive’s termination of employment for Cause, Disability or death;
(B) the reduction of the Executive’s annual base salary and/or target bonus opportunity, as compared to his aggregate base salary and target bonus opportunity as effective immediately prior to such reduction, if such reduction of base salary and/or target bonus opportunity, on an aggregated basis, is five percent (5%) or greater of the aggregate base salary and target bonus opportunity as effective immediately prior to such reduction; or
(C) a relocation of Executive’s principal work location to a location in excess of 50 miles from its then current location.
During the fifteen (15)-month period following a Change in Control, the definition of “Good Reason” shall have the same meaning as set out above except that clause (A) is replaced in its entirety with “the demotion or reduction in title or rank of Executive with the Company or Silver Run, or the assignment to Executive of duties that are materially inconsistent with Executive’s positions, duties and responsibilities with the Company or Silver Run, or any removal of the Executive from, or any failure to nominate for re-election the Executive to, any of such positions (other than a change due to the Executive’s Disability or as an accommodation under the American with Disabilities Act), except for any such demotion, reduction, assignment, removal or failure that occurs in connection with Executive’s termination of employment for Cause, Disability or death;”. In all other respects, the definition of Good Reason will be the same before and after a Change in Control.
For the avoidance of doubt, the closing of the Transaction will not by itself be deemed to provide a basis for the Executive to resign for Good Reason.
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(16) “ No Severance Benefits Event ” means termination of Executive’s employment by the Company for Cause.
(17) “ Silver Run ” means Silver Run Acquisition Corporation II, a Delaware corporation (whose name will change to Alta Mesa Resources, Inc. at the closing of the Transaction), or its successor in interest.
7. Notice of Termination . Any termination of Executive’s employment by the Company or the Executive other than for death shall be communicated by Notice of Termination to the other Party hereto. For purposes of this Agreement, the term “ Notice of Termination ” means a written notice which indicates the specific termination provision of this Agreement relied upon, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated and specifies a Termination Date which, if submitted by Executive, shall be at least thirty (30) days following the date of such Notice of Termination unless such termination is for Good Reason (in which case the requirements for a termination due to Good Reason shall apply); provided, however, that in the event that Executive delivers a Notice of Termination to the Company, the Company may, in its sole discretion, change the Date of Termination to any date that occurs following the date of receipt of such Notice of Termination and is prior to the date specified in such Notice of Termination. A Notice of Termination submitted by the Company may provide for a Termination Date on the date Executive receives the Notice of Termination, or any date thereafter elected by the Company in its sole discretion. The failure by the Company or Executive to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Cause or Good Reason shall not waive any right of such Party hereunder or preclude such Party from asserting such fact or circumstance in enforcing such Party’s rights hereunder.
8. No Mitigation . Except as provided in Section 6(b)(2) for continued Health Plan coverage or Section 6(b)(3) regarding excess parachute payments, Executive shall not be required to mitigate the amount of any payment or other benefits provided under this Agreement by seeking other employment or in any other manner.
9. Restrictive Covenants . As an inducement to the Company to enter into this Agreement, Executive represents to, and covenants with or in favor of, the Company that Executive will comply with all of the restrictive covenants in Sections 9 through 17 , as a condition to the Company’s obligation to provide any benefits to Executive under this Agreement.
10. Trade Secrets .
(a) Access to Trade Secrets . As of the Effective Date and on an ongoing basis, the Company agrees to give Executive access to Trade Secrets which the Executive did not have access to, or knowledge of, before Executive’s commencement of employment with the Company.
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(b) Agreement Not to Use or Disclose Trade Secrets . In exchange for the Company’s promises to provide Executive with access to Trade Secrets, and the other consideration and benefits provided to Executive under this Agreement, Executive agrees, during the Employment Period, and any time thereafter, not to disclose to anyone, including, without limitation, any person, firm, corporation or other entity, or publish or use for any purpose, any Trade Secrets, except (1) as required in the ordinary course of the business of the Company or an Affiliate or (2) as authorized by the Company or Affiliate, as applicable. Executive acknowledges that Trade Secrets (A) have been and will be developed or acquired by the Company (or an Affiliate) through the expenditure of substantial time, effort and money and (B) provide the Company (or an Affiliate) with an advantage over competitors who do not know or use Trade Secrets.
Executive shall hold in a fiduciary capacity for the benefit of the Company (or its Affiliate, as applicable) any Trade Secret relating to the Company or any of its Affiliates, and their respective businesses, which (a) has been obtained by Executive during his employment by the Company (or any Affiliate) and (b) is not public knowledge other than via an unauthorized disclosure made by Executive in violation of this Agreement. Executive acknowledges and agrees that all Trade Secrets are, and will continue to be, the exclusive property of the Company or Affiliate, as applicable.
Executive shall not at any time disclose to any person or entity, or publish, or use for any unauthorized purpose, any Trade Secret, except as the Company directs or under compulsion of law. Executive agrees to give notice to the Company of any attempt to compel disclosure of any Trade Secret within five (5) business days after Executive is informed that such disclosure is being, or will be, compelled. Any such notice shall contain a copy of the subpoena, order or other process used to compel disclosure.
The agreements and covenants in this Section 10(b) apply to all Trade Secrets, whether now known or later to become known to Executive. In addition, these provisions shall be in addition to, and not limit or restrict in any way, any other confidentiality agreement or covenant between the Executive and the Company or any of its Affiliates.
(c) Agreement to Refrain from Defamatory Statements . Executive shall refrain, both during the Employment Period and thereafter, from publishing any oral or written statements about any directors, partners, officers, employees, agents, investors or representatives of the Company or any Affiliate that are (1) slanderous, libelous, or defamatory; (2) disclose private or confidential information about the business affairs, directors, partners, officers, employees, agents, investors or representatives of the Company or any Affiliate; (3) constitute an intrusion into the seclusion or private lives of any such person; (4) give rise to unreasonable publicity about the private life of any such person; (5) place any such person in a false light before the public; or (6) constitute a misappropriation of the name or likeness of any such person. A violation or threatened violation of these restrictive covenants may be enjoined by a court of law notwithstanding the arbitration provisions of Section 31 .
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(d) Definitions . The following terms, when used in this Agreement, are defined below:
(1) “ Restricted Territory ” means any county, or equivalent political or governmental subdivision, of any state, district, or territory of North America in which the Company or any of its Affiliates conducts its business; and any area adjacent to such counties, or equivalent political or governmental subdivision, to the extent such adjacent areas are within a 50-mile radius of any (x) producing property or leasehold of the Company or any of its Affiliates or (y) assets relating to the gathering, processing, storage, treating or transmission of oil or natural gas or otherwise generally considered “midstream” in nature in accordance with generally accepted U.S. oil and gas industry practices and customs (“ Midstream Assets ”) of the Company or any of its Affiliates.
(2) “ Trade Secrets ” means any and all information and materials (in any form or medium) that are proprietary to the Company or an Affiliate, or are treated as confidential by the Company or an Affiliate as part of, or relating to, any portion of its or their businesses (whether or not owned or developed by the Company or an Affiliate) and that are not generally known by other persons or entities in the same type of business.
For purposes of the Agreement, Trade Secrets include, without limitation, the following: all of the Company’s or Affiliate’s research, technical and business information, whether patentable or not, which is of a confidential, trade secret or proprietary character, and which is either developed by the Executive alone, or with others or by others; all non-public information that the Company or an Affiliate has marked as confidential or has otherwise described to Executive (either in writing or orally) as confidential; all non-public information concerning the Company’s or Affiliate’s products, services, prospective products or services, research, prospects, leases, surveys, seismic data, drilling data, designs, prices, costs, marketing plans, marketing techniques, studies, test data, leasehold and royalty owners, investors, suppliers and contracts; all business records and plans; all personnel files; all financial information of or concerning the Company or an Affiliate; all information relating to the Company’s operating system software, application software, software and system methodology, hardware platforms, technical information, inventions, computer programs and listings, source codes, object codes, copyrights and other intellectual property; all technical specifications; any proprietary information belonging to the Company or an Affiliate; all computer hardware or software manuals of the Company or an Affiliate; all Company or Affiliate training or instruction manuals; all Company or Affiliate electronic data; and all computer system passwords and user codes.
11. Duty to Return Company Documents and Property . Upon the Termination Date, Executive shall immediately return and deliver to the Company any and all papers, books, records, documents, memoranda and manuals, e-mail, electronic or magnetic recordings or data, including all copies thereof, belonging to the Company or relating to its business, in Executive ’ s possession, whether prepared by Executive or others. If at any time after the Termination Date, Executive determines that Executive has any Trade Secrets in Executive ’ s possession or control, Executive shall immediately return them to the Company, including all copies thereof.
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12. Best Efforts and Disclosure . Executive agrees that, while employed with the Company under this Agreement, Executive’s services shall be devoted on a full time basis to the Company’s business, and Executive shall use best efforts to promote its success. Further, Executive shall promptly disclose to the Company all ideas, inventions, computer programs, and discoveries, whether or not patentable or copyrightable, which Executive may conceive or make, alone or with others, during Executive’s period of employment with the Company or its Affiliates, whether or not during working hours, and which directly or indirectly:
| (a) | relate to a matter within the scope, field, duties or responsibility of Executive’s employment with the Company or within the scope or field of the Company’s or an Affiliate’s business; or |
| (b) | are based on any knowledge of the actual or anticipated business or interests of the Company; or |
| (c) | are aided by the use of time, materials, facilities or information of the Company or an Affiliate. |
Executive assigns to the Company, without further compensation, any and all rights, titles and interest in all such ideas, inventions, computer programs and discoveries in all countries of the world. Executive recognizes that all ideas inventions, computer programs and discoveries of the type described above, conceived or made by Executive alone or with others within 12 months after the Termination Date (voluntary or otherwise), are likely to have been conceived in significant part either while employed by the Company or as a direct result of knowledge Executive had of proprietary information or Trade Secrets. Accordingly, Executive agrees that such ideas, inventions or discoveries shall be presumed to have been conceived during Executive’s period of employment with the Company or its Affiliates, unless and until the contrary is clearly established by the Executive.
13. Inventions and Other Works . Any and all writings, computer software, inventions, improvements, processes, procedures and/or techniques which Executive may make, conceive, discover, or develop, either solely or jointly with any other person or persons, at any time during Executive’s period of employment with the Company or its Affiliates, whether at the request or upon the suggestion of the Company or otherwise, which relate to or are useful in connection with any business now or hereafter carried on or contemplated by the Company, including developments or expansions of its present fields of operations, shall be the sole and exclusive property of the Company. Executive agrees to take any and all actions necessary or appropriate so that the Company can prepare and present applications for copyright or letters patent therefor, and secure such copyright or letters patent wherever possible, as well as reissue renewals, and extensions thereof, and obtain the record title to such copyright or patents. Executive shall not be entitled to any additional or special compensation or reimbursement regarding any such writings, computer software, inventions, improvements, processes, procedures and techniques. Executive acknowledges that the Company from time to time may have agreements with other persons or entities which impose obligations or restrictions on the Company regarding inventions made during the course of work thereunder or regarding the confidential nature of such work. Executive agrees to be bound by all such obligations and restrictions, and to take all action necessary to discharge the obligations of the Company.
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14. Non-Solicitation Restriction . Executive hereby agrees that in order to protect Trade Secrets, it is necessary to enter into the following restrictive covenant, which is ancillary to the enforceable promises between the Company and Executive in Sections 9 through 13 and other provisions of this Agreement. During the Executive ’ s employment and for a period of one (1) year following the Termination Date (regardless of the reason for termination), Executive hereby covenants and agrees that he will not, directly or indirectly, without obtaining the express written consent of the Board, either individually or as a principal, partner, agent, consultant, contractor, employee, or as a director or officer of any entity, or in any other manner or capacity whatsoever, except on behalf of the Company, solicit business, attempt to solicit business, or conduct business, in products or services competitive with any products or services offered or performed by the Company or its Affiliates in any business which the Company or any of its Affiliates does business, prepared to conduct business as of the Termination Date (or if the applicable activity occurs before the Termination, Date, then as of the date on which such activity occurs), or has any business interest within the Restricted Territory as of the Termination Date (or if the applicable activity occurs before the Termination, Date, then as of the date on which such activity occurs), (a) from those individuals or entities with whom the Company or Affiliate conducted or prepared to conduct business in the Restricted Territory during the Executive ’ s employment with the Company or (b) with respect to any assets or holdings in which the Company or Affiliate had any interest in the Restricted Territory at any time during the two-year period ending on the earlier of the Termination Date or the date on which such activity occurs.
15. Non-Competition Restriction . Executive hereby agrees that in order to protect Trade Secrets, it is necessary to enter into the following restrictive covenant, which is ancillary to the enforceable promises between the Company and Executive in Sections 9 through 14 and other provisions of this Agreement. Executive hereby covenants and agrees that during Executive’s period of employment with the Company or its Affiliates, and for a period of one (1) year following the Termination Date (regardless of the reason for termination), Executive will not, without obtaining the express written consent of the Company, engage in any capacity, directly or indirectly (whether as proprietor, stockholder, director, partner, employee, agent, independent contractor, consultant, trustee, or in any other capacity), with respect to any entity engaged or preparing to engage in the business of oil and gas exploration and production, the acquisition, development or operation of Midstream Assets or any other aspect of the Company’s or an Affiliate’s business, in each case, within the Restricted Territory (a “ Competing Enterprise ”); provided, however, Executive shall not be deemed to be participating or engaging in a Competing Enterprise solely by virtue of the ownership of not more than one percent (1%) of any class of stock or other securities which are publicly traded on a national securities exchange or in a recognized over-the-counter market.
16. No Recruitment Restriction . Executive agrees that during Executive’s period of employment with the Company or its Affiliates, and for a period of one (1) year following the Termination Date (regardless of the reason for termination), without obtaining the express written consent of the Company, Executive shall not, either directly or indirectly, or by acting in concert with another person or entity, (a) hire any employee or independent contractor performing services for the Company or any Affiliate, or any such individual who performed services for the Company or any Affiliate at any time during the one-year period ending on the earlier of the Termination Date or the date on which such hiring occurs, or (b) solicit or influence or seek to solicit or influence, any employee or independent contractor performing services for the Company or any Affiliate, or any such individual who performed services for the Company or any Affiliate at any time during the one-year period ending on the earlier of the Termination Date or the date on which such activity occurs, to terminate, reduce or otherwise adversely affect such individual’s employment or other relationship with the Company or any Affiliate.
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17. Business Opportunities . During Executive’s period of employment with the Company or its Affiliates and for a period of one (1) year following the Termination Date (regardless of the reason for termination), the Executive assigns and agrees to assign without further compensation to the Company, its Affiliates and its successors, assigns or designees, all of the Executive’s right, title and interest in and to all Business Opportunities (defined below), and further acknowledges and agrees that all Business Opportunities constitute the exclusive property of the Company. The Executive shall present all Business Opportunities to the Company, and shall not exploit a Business Opportunity. For purposes of this Agreement, “ Business Opportunities ” means all business ideas, prospects, or proposals pertaining to oil and gas exploration and production, the acquisition, development or operation of Midstream Assets or any other aspect of the Company’s or an Affiliate’s business, and any business the Company or any Affiliate prepared to conduct, or contemplated conducting during Executive’s employment with the Company, which are developed by the Executive or originated by any third party and brought to the attention of the Executive, together with information relating thereto; provided however, that for the one (1) year period following the Termination Date, “Business Opportunities” shall be limited to those Business Opportunities in the Restricted Territory. For the avoidance of doubt, this Section 17 is not intended to limit or narrow the Executive’s duties or obligations under federal or state law with respect to corporate opportunities.
18. Tolling . If Executive violates any of the restrictions contained in Sections 9 through 17 , then notwithstanding any provision hereof to the contrary, the restrictive period will be suspended and will not run in favor of Executive from the time of the commencement of any such violation, unless and until such time when the Executive cures the violation to the reasonable satisfaction of the Company.
19. Reformation . If a court or arbitrator rules that any time period or the geographic area specified in any restrictive covenant in Sections 9 through 17 is unenforceable, then the time period will be reduced by the number of months, or the geographic area will be reduced by the elimination of such unenforceable portion, or both, so that the restrictions may be enforced in the geographic area and for the time to the full extent permitted by law.
20. No Previous Restrictive Agreements . Executive represents that, except as disclosed in writing to the Company as of the Effective Date, Executive is not bound by the terms of any agreement with any previous employer or other third party to (a) refrain from using or disclosing any confidential or proprietary information in the course of Executive ’ s employment by the Company or (b) refrain from competing, directly or indirectly, with the business of such previous employer or any other person or entity. Executive further represents that Executive ’ s performance under this Agreement and work duties for the Company do not, and will not, breach any agreement to keep in confidence any proprietary information, knowledge or data acquired by Executive in confidence or in trust prior to Executive ’ s employment with the Company, and Executive will not disclose to the Company or induce the Company to use any confidential or proprietary information or material belonging to any previous employer or others.
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21. Conflicts of Interest . In keeping with Executive’s fiduciary duties to the Company, Executive hereby agrees that Executive shall not become involved in a conflict of interest, or upon discovery thereof, allow such a conflict to continue at any time during Executive’s period of employment with the Company or its Affiliates. In this respect, Executive agrees to fully comply with the conflict of interest agreement entered into by Executive as an employee, officer or director of the Company or an Affiliate. In the instance of a violation of the conflict of interest agreement to which Executive is a party, it may be necessary for the Company to terminate Executive’s employment for Cause.
22. Remedies . Executive acknowledges that the restrictions contained in Sections 9 through 21 of this Agreement, in view of the nature of the Company’s business, are reasonable and necessary to protect the Company’s legitimate business interests, and that any violation of this Agreement would result in irreparable injury to the Company. Notwithstanding the arbitration provisions in Section 31 , in the event of a breach or a threatened breach by Executive of any provision of Sections 9 through 21 of this Agreement, the Company shall be entitled to a temporary restraining order and injunctive relief restraining Executive from the commission of any breach, and to recover the Company’s attorneys’ fees, costs and expenses related to the breach or threatened breach. Nothing contained in this Agreement shall be construed as prohibiting the Company from pursuing any other remedies available to it for any such breach or threatened breach, including, without limitation, the recovery of money damages, attorneys’ fees, and costs. These covenants and agreements shall each be construed as independent of any other provisions in this Agreement, and the existence of any claim or cause of action by Executive against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of such covenants and agreements.
23. No Interference . Notwithstanding any other provision of this Agreement, (a) Executive may disclose confidential information when required to do so by a court of competent jurisdiction, by any governmental agency having authority over Executive or the business of the Company or by any administrative body or legislative body (including a committee thereof) with jurisdiction to order Executive to divulge, disclose or make accessible such information, in each case, subject to Executive’s obligations to notify the Company under Section 10(b) ; and (b) nothing in this Agreement is intended to interfere with Executive’s right to (1) report possible violations of state or federal law or regulation to any governmental or law enforcement agency or entity; (2) make other disclosures that are protected under the whistleblower provisions of state or federal law or regulation (including the right to receive an award for information provided to any such government agencies); (3) file a claim or charge any governmental agency or entity; or (4) testify, assist, or participate in an investigation, hearing, or proceeding conducted by any governmental or law enforcement agency or entity, or any court. For purposes of clarity, in making or initiating any such reports or disclosures or engaging in any of the conduct outlined in subsection (b) above, Executive may disclose confidential information to the extent necessary to such governmental or law enforcement agency or entity or such court, need not seek prior authorization from the Company, and is not required to notify the Company of any such reports, disclosures or conduct.
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24. Defend Trade Secrets Act . Executive is hereby notified in accordance with the Defend Trade Secrets Act of 2016 that Executive will not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that (a) is made (1) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (2) solely for the purpose of reporting or investigating a suspected violation of law; or (b) is made in a complaint or other document that is filed under seal in a lawsuit or other proceeding. If Executive files a lawsuit for retaliation against the Company for reporting a suspected violation of law, Executive may disclose the Company’s trade secrets to Executive’s attorney and use the trade secret information in the court proceeding if Executive files any document containing the trade secret under seal, and does not disclose the trade secret, except pursuant to court order.
25. Withholdings; Right of Offset . The Company may withhold and deduct from any benefits and payments made or to be made pursuant to this Agreement (a) all federal, state, local and other taxes as may be required pursuant to any law or governmental regulation or ruling, (b) all other normal employee deductions made with respect to Company’s employees generally, and (c) any advances made to Executive and owed to Company.
26. Nonalienation . The right to receive payments under this Agreement shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge or encumbrance by Executive, dependents or beneficiaries of Executive, or to any other person who is or may become entitled to receive such payments hereunder. The right to receive payments hereunder shall not be subject to or liable for the debts, contracts, liabilities, engagements or torts of any person who is or may become entitled to receive such payments, nor may the same be subject to attachment or seizure by any creditor of such person under any circumstances, and any such attempted attachment or seizure shall be void and of no force and effect.
27. Incompetent or Minor Payees . Should the Company determine, in its discretion, that any person to whom any payment is payable under this Agreement has been determined to be legally incompetent or is a minor, any payment due hereunder, notwithstanding any other provision of this Agreement to the contrary, may be made in any one or more of the following ways: (a) directly to such minor or person; (b) to the legal guardian or other duly appointed personal representative of the person or estate of such minor or person; or (c) to such adult or adults as have, in the good faith knowledge of the Company, assumed custody and support of such minor or person; and any payment so made shall constitute full and complete discharge of any liability under this Agreement in respect to the amount paid.
28. Severability . It is the desire of the Parties hereto that this Agreement be enforced to the maximum extent permitted by law, and should any provision contained herein be held unenforceable by a court of competent jurisdiction or arbitrator (pursuant to Section 31 ), the Parties hereby agree and consent that such provision shall be reformed to create a valid and enforceable provision to the maximum extent permitted by law; provided, however, if such provision cannot be reformed, it shall be deemed ineffective and deleted herefrom without affecting any other provision of this Agreement. This Agreement should be construed by limiting and reducing it only to the minimum extent necessary to be enforceable under then applicable law.
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29. Title and Headings; Construction . In the interpretation of the Agreement, except where the context clearly otherwise requires:
(a) “including” or “include” does not denote or imply any limitation;
(b) “or” has the inclusive meaning “and/or”;
(c) the singular includes the plural, and vice versa, and each gender includes each of the others;
(d) captions or headings are only for reference and are not to be considered in interpreting the Agreement;
(e) “Section” refers to a Section of the Agreement, unless otherwise stated in the Agreement;
(f) the words “herein”, “hereof”, “hereunder” and other compounds of the word “here” shall refer to the entire Agreement and not to any particular provision; and
(g) a reference to any statute, rule, or regulation includes any amendment thereto or any statute, rule, or regulation enacted or promulgated in replacement thereof or as the successor thereto.
30. Governing Law; Jurisdiction . All matters or issues relating to the interpretation, construction, validity, and enforcement of this Agreement shall be governed by the laws of the State of Texas, without giving effect to any choice-of-law principle that would cause the application of the laws of any jurisdiction other than Texas. Jurisdiction and venue of any action or proceeding relating to this Agreement or any Dispute (to the extent arbitration is not required under Section 31 ) shall be exclusively in Harris County, Texas.
31. Mandatory Arbitration . Except as provided in subsection (h) of this Section 31 , any Dispute must be resolved by binding arbitration in accordance with the following:
(a) Either Party may begin arbitration by filing a demand for arbitration in accordance with the Commercial Arbitration Rules of the AAA (the “ Arbitration Rules ”) and concurrently notifying the other Party of that demand. If the Parties are unable to agree upon a panel of three neutral arbitrators within twenty days after the demand for arbitration was filed (the Parties agree to a reasonable, one-time extension of that twenty-day period), either Party may request the Houston, Texas office of the American Arbitration Association (“ AAA ”) to appoint the arbitrator or arbitrators necessary to complete the panel in accordance with the Arbitration Rules. Each arbitrator so appointed shall be deemed accepted by the Parties as part of the panel. Notwithstanding the foregoing, the Parties, by mutual consent, may agree to a single arbitrator instead of a panel of three arbitrators and, in such event, references herein to “panel” shall refer to the single appointed arbitrator.
(b) The arbitration shall be conducted in the Houston, Texas metropolitan area at a place and time agreed upon by the Parties with the panel, or if the Parties cannot agree, as designated by the panel. The panel may, however, call and conduct hearings and meetings at such other places as the Parties may agree or as the panel may, on the motion of one Party, determine to be necessary to obtain significant testimony or evidence.
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(c) The panel may authorize any and all forms of discovery upon a Party’s showing of need that the requested discovery is likely to lead to material evidence needed to resolve the Dispute and is not excessive in scope, timing, or cost.
(d) The arbitration shall be subject to the Federal Arbitration Act and conducted in accordance with the Arbitration Rules to the extent that they do not conflict with this Section 31 . The Parties and the panel may, however, agree to vary to provisions of this Section 31 or the matters otherwise governed by the Arbitration Rules as permitted by law.
(e) The arbitration hearing shall be held within 60 days after the appointment of the panel. The panel’s final decision or award shall be made within 30 days after the hearing. That final decision or award shall be made by unanimous or majority vote or consent of the arbitrators constituting the panel, and shall be deemed issued at the place of arbitration. The panel’s final decision or award shall be based on the terms and conditions of this Agreement and applicable law.
(f) The panel’s final decision or award may include injunctive relief in response to any actual or impending breach of this Agreement or any other actual or impending action or omission of a Party under or in connection with this Agreement.
(g) The panel’s final decision or award shall be final and binding upon the Parties, and judgment upon that decision or award may be entered in any court having jurisdiction. The Parties waive any right to apply or appeal to any court for relief from the preceding sentence or from any decision of the panel that is made before the final decision or award.
(h) Nothing in this Section 31 limits the right of either Party to apply to a court having jurisdiction to (i) enforce the agreement to arbitrate in accordance with this Section 31 , (ii) seek provisional or temporary injunctive relief, in response to an actual or impending breach of the Agreement or otherwise so as to avoid an irreparable damage or maintain the status quo, until a final arbitration decision or award is rendered or the Dispute is otherwise resolved, or challenge or vacate any final arbitration decision or award that does not comply with this Section 31 . In addition, nothing in this Section 31 prohibits the Parties from resolving any Dispute (in whole or in part) at any time by mutual agreement or compromise. This Section 31 shall also not preclude the Parties at any time from mutually agreeing to pursue non-binding mediation of the Dispute.
(i) The panel may proceed to an award notwithstanding the failure of any Party to participate in such proceedings. The prevailing Party in the arbitration proceeding may be entitled to an award of reasonable attorneys’ fees incurred in connection with the arbitration in such amount, if any, as determined by the panel in its discretion. The costs of the arbitration shall be borne equally by the Parties unless otherwise determined by the panel in its award.
(j) The panel shall be empowered to impose sanctions and to take such other actions as it deems necessary to the same extent a judge could impose sanctions or take such other actions pursuant to the Federal Rules of Civil Procedure and applicable law. Each Party agrees to keep all Disputes and arbitration proceedings strictly confidential except for disclosure of information required by applicable law which cannot be waived.
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32. Binding Effect; Third Party Beneficiaries . Subject to Section 37 , this Agreement shall be binding upon and inure to the benefit of the Parties hereto, and to their respective heirs, executors, beneficiaries, personal representatives, successors and permitted assigns hereunder; otherwise this Agreement shall not be for the benefit of any third parties.
33. Entire Agreement; Amendment and Termination . This Agreement contains the entire agreement of the Parties hereto with respect to the matters covered herein; moreover, this Agreement supersedes all prior and contemporaneous agreements and understandings, oral or written, between the Parties concerning the subject matter hereof, including any employment agreement between the Company and Executive as in effect immediately before the Effective Date. This Agreement may be amended, waived or terminated only by a written instrument that is identified as an amendment, waiver or termination hereto, and is executed on behalf of both Parties. Executive hereby acknowledges and represents that in executing this Agreement, he did not rely on, has not relied on, and specifically disavows any reliance on any communications, promises, statements, inducements, or representation(s), oral or written, by the Company, except as expressly contained in this Agreement. The Parties represent that they relied on their own judgment in entering into this Agreement.
34. Section 409A .
(a) General . Any provisions of the Agreement that are subject to Section 409A of the Code and the regulations and other authoritative guidance issued thereunder (“ Section 409A ”), are intended to comply with all applicable requirements of Section 409A, or an exemption from the application of Section 409A, and shall be interpreted and administered accordingly. Notwithstanding any provision of this Agreement to the contrary, a termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amount or benefit that constitutes “non-qualified deferred compensation” (within the meaning of Section 409A) upon or following a termination of the Executive’s employment unless such termination is also a “separation from service” (as defined under Section 409A) (a “ Separation from Service ”) and, for purposes of any such provision, references herein to a “termination,” “termination of employment” or like terms shall mean a Separation from Service, if applicable. Each payment under this Agreement shall be treated as a separate payment for purposes of Section 409A. In no event may the Executive, directly or indirectly, designate the calendar year of any payment to be made under this Agreement.
(b) Specified Employee . Notwithstanding any provision of this Agreement to the contrary, if any payment or other benefit provided hereunder would be subject to additional taxes and interest under Section 409A because the timing of such payment is not delayed as required by Section 409A for a “specified employee” (as defined under Section 409A), then if the Executive is on the date of Executive ’ s Separation from Service a specified employee, any such payment or benefit that Executive would otherwise be entitled to receive during the first six months following the Separation from Service shall be accumulated and paid in a lump sum within ten (10) days after the date that is six months following the date of the Separation from Service, or such earlier date upon which such amount can be paid under Section 409A without being subject to such additional taxes and interest such as, for example, upon the Executive’s death. Any remaining payments due to Executive under this Agreement shall be paid as otherwise provided in this Agreement.
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(c) Reimbursements and In-Kind Benefits . Notwithstanding any provision of this Agreement to the contrary, any reimbursements or in-kind benefits provided under this Agreement that constitute “nonqualified deferred compensation” within the meaning of Section 409A shall be paid to Executive no later than December 31 of the year following the year in which the expense was incurred, the amount of expenses reimbursed in one year shall not affect the amount eligible for reimbursement in any subsequent year, other than medical expenses referred to in Section 105(b) of the Code, and Executive ’ s right to reimbursement under this Agreement will not be subject to liquidation or exchange for other benefits.
(d) No Section 409A Representations . Notwithstanding the foregoing, the Company makes no representations, warranties, or guarantees regarding the tax consequences of this Agreement, or any payments made hereunder, under Section 409A or otherwise, and has advised the Executive to consult with Executive ’ s own tax advisor.
35. Survival of Certain Provisions . Provisions of this Agreement which by their terms must survive the termination of this Agreement shall survive any such termination or expiration of this Agreement or termination of Executive’s employment, as applicable, including, without limitation, Executive’s obligations under Sections 9 through 18 and the Company’s obligations under Section 6 .
36. Waiver of Breach . No waiver by any party hereto of a breach of any provision of this Agreement by any other party, or of compliance with any condition or provision of this Agreement to be performed by such other party, will operate or be construed as a waiver of any subsequent breach by such other party or any similar or dissimilar provision or condition at the same or any subsequent time. The failure of any party hereto to take any action by reason of any breach will not deprive such party of the right to take action at any time while such breach continues.
37. Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of the Company and its Affiliates (and its and their successors), as well as upon any person or entity acquiring, whether by merger, consolidation, purchase of assets, dissolution or otherwise, all or substantially all of the capital stock, business and/or assets of the Company (or its successor) regardless of whether the Company is the surviving or resulting entity. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation, dissolution or otherwise) to all or substantially all of the capital stock, business or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had occurred; provided, however, no such assumption shall relieve the Company or any of its Affiliates (or any successor thereof) of any of its duties or obligations hereunder unless otherwise agreed, in writing, by Executive.
This Agreement shall inure to the benefit of and be enforceable by Executive’s personal or legal representative, executors, administrators, successors, and heirs. In the event of the death of Executive while any amount is payable hereunder, all such amounts shall be paid to the Designated Beneficiary.
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38. Notice . Each notice or other communication required or permitted under this Agreement shall be in writing and transmitted, delivered, or sent by personal delivery, prepaid courier or messenger service (whether overnight or same-day), or prepaid certified United States mail (with return receipt requested), addressed (in any case) to the other party at the address for that party set forth below that party’s signature on this Agreement, or at such other address as the recipient has designated by Notice to the other party, by electronic mail, delivery and read receipt required, or by facsimile, confirmation of delivery required.
Each notice or communication so transmitted, delivered, or sent (a) in person, by courier or messenger service, or by certified United States mail shall be deemed given, received, and effective on the date delivered to or refused by the intended recipient (with the return receipt, or the equivalent record of the courier or messenger, being deemed conclusive evidence of delivery or refusal), or (b) by telecopy or facsimile shall be deemed given received) and effective on the date of actual receipt (with the confirmation of transmission being deemed conclusive evidence of receipt, except where the intended recipient has promptly notified the other party that the transmission is illegible). Nevertheless, if the date of delivery or transmission is not a business day, or if the delivery or transmission is after 5:00 p.m. (local time) on a business day, the notice or other communication shall be deemed given, received, and effective on the next business day.
39. Executive Acknowledgment . Executive acknowledges (a) being knowledgeable and sophisticated as to business matters, including the subject matter of this Agreement, (b) having read this Agreement and understanding its terms and conditions, (c) having been given an ample opportunity to discuss this Agreement with his personal legal counsel prior to execution, and (d) that no strict rules of construction shall apply for or against the drafter or any other party. Executive hereby represents that he is free to enter into this Agreement including, without limitation, that he is not subject to any covenant not to compete or confidentiality agreement that conflicts with this Agreement.
40. Counterparts . This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute one and the same instrument. Each counterpart may consist of a copy hereof containing multiple signature pages, each signed by one party hereto, but together signed by both Parties.
41. Parent Acknowledgment and Guarantee . Alta Mesa is the direct or indirect parent of the Company. Alta Mesa hereby unconditionally guarantees full and timely performance of the obligations of the Company and its Affiliates under this Agreement. The foregoing guarantee shall include the guarantee of the payment of all benefits and payments due Executive hereunder as a result of the nonperformance of any of such obligations or agreements so guaranteed or as a result of the nonperformance of this guarantee. Executive may, at his option, proceed against Alta Mesa for damages for default in the performance thereof, without first proceeding against the Company or against any of its properties or Affiliates. Alta Mesa further agrees that its guarantee shall be an irrevocable guarantee and shall continue in effect notwithstanding any extension or modification of any guaranteed obligation, any assumption of any such guaranteed obligation by any other party, or any other act or thing which might otherwise operate as a legal or equitable discharge of a guarantor, and Alta Mesa hereby waives all special suretyship defenses and notice requirements. This guarantee shall also be binding upon all successors and assigns of all of substantially all of the business or assets of Alta Mesa. Section 31 shall apply to Disputes between Alta Mesa and Executive mutatis mutandis .
[ Signature pages follow .]
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IN WITNESS WHEREOF , Executive has executed this Agreement, the Company has caused this Agreement to be executed in its name and on its behalf by its duly authorized officer, and Alta Mesa has caused this Agreement to be executed in its name and on its behalf by its duly authorized officer solely for purposes of Section 41 of the Agreement, to be effective as of the Effective Date.
| EXECUTIVE: |
|
/s/ F. David Murrell |
| F. David Murrell |
| Address for Notices: |
| Most recent mailing address for Executive in the Company’s personnel files |
[ Signature pages continue .]
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[ Signature pages continue .]
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[End of Signatures.]
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Exhibit 10.18
Execution Copy
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the “ Agreement ”), is made and entered into as of February 9, 2018 (the “ Effective Date ”), by and between Alta Mesa Services, LP, a Texas limited partnership (the “ Company ”), Ronald J. Smith (hereafter “ Executive ”) and, solely with respect to Section 41 , Alta Mesa Holdings, LP, a Texas limited partnership (“ Alta Mesa ”). The Company and Executive may sometimes hereafter be referred to singularly as a “ Party ” or collectively as the “ Parties .”
WITNESSETH:
WHEREAS , Alta Mesa Holdings, L.P. (the “ Parent ”), has entered into a Contribution Agreement by and among High Mesa Holdings, LP, High Mesa Holdings GP, LLC, Alta Mesa Holdings GP, LLC, Silver Run and certain other parties thereto, dated as of August 16, 2017, as the same may be amended from time to time, pursuant to which Silver Run will acquire certain of the outstanding equity interests in Parent (the “ Transaction ”); and
WHEREAS , the Company desires to continue to secure the employment services of Executive subject to the terms and conditions hereafter set forth;
NOW, THEREFORE, in consideration of Executive’s continued employment with the Company, and the premises and mutual covenants contained herein, the Parties hereto agree as follows:
1. Employment Position and Defined Terms . During the Employment Period (as defined in Section 4 ), the Company shall employ Executive, and Executive shall serve, as a Vice President of the Company. During the Employment Period, Executive shall also serve in the same positions of employment with Silver Run as he does with the Company for no additional compensation. Executive’s principal place of employment shall be at the main business offices of the Company in Houston, Texas. Defined terms used in the Agreement that are not otherwise defined herein when first used are defined in Sections 6(d) and 10(d) .
2. Compensation .
(a) Base Salary . The Company shall pay to Executive during the Employment Period a base salary of Two Hundred Seventy Thousand dollars ($270,000) per year, as adjusted pursuant to the subsequent provisions of this paragraph (the “ Base Salary ”). The Base Salary shall be payable in accordance with the Company’s normal payroll schedule and procedures for its executives. Nothing contained herein shall preclude the payment of any other compensation to Executive at any time as determined by the Board.
| R. Smith Agreement |
(b) Annual Bonus .
(1) In addition to the Base Salary in Section 2(a ), for each annual fiscal year of the Company during the Employment Period (each such annual period being referred to as a “ Bonus Period ”), Executive will be eligible to participate in an annual bonus program established by the Board, under which Executive shall receive a bonus equal to a percentage of Executive’s Base Salary paid during each such one-year period (referred to herein as the “ Annual Bonus ”), such percentage to be established by the Board in its sole discretion; provided, however, that the payment of any Annual Bonus will be subject to the Board’s discretion and made only if Executive has met the pre-established performance criteria set by the Board for the Bonus Period.
(2) In the event that the Employment Period ends before the end of the Bonus Period, Executive shall be entitled to a pro rata portion of the Annual Bonus for that year (based on the number of days in which Executive was employed during the year divided by 365), as determined based on satisfaction of the performance criteria for that Bonus Period on a pro rata basis (calculated as if the final day of the Employment Period were the final day of the applicable Bonus Period), unless Executive was terminated for Cause or terminated voluntarily without Good Reason, in any of which events Executive shall not be entitled to any Annual Bonus for that year.
(3) If Executive successfully meets the performance criteria for a Bonus Period, the Company shall pay Executive the Annual Bonus amount determined by the Board within the earlier of: (A) sixty days (60) days after the end of the Bonus Period or (B) sixty days (60) after the end of the Employment Period.
(c) Compensation in Event of Injury or Sickness . In the event that Executive becomes injured or suffers a medically determinable physical or mental illness, as determined by a physician acceptable to both the Company and Executive in the same manner as provided in the definition of Disability in Section 6(d) , during the Employment Period, Executive shall be entitled to receive continued Base Salary (as set forth in Section 2(a) ) for a period of six (6) months following the occurrence of such injury or sickness; provided, however, such Base Salary shall be reduced by any short-term and/or long-term disability income benefits that are received by Executive under such programs sponsored by the Company (or an Affiliate) during such 6-month period.
3. Duties and Responsibilities of Executive . During the Employment Period, Executive shall devote his full working time to (a) the business of the Company and its Affiliates and (b) performance of the duties and responsibilities assigned to Executive to the best of Executive’s ability and with reasonable diligence. In determining Executive’s duties and responsibilities, Executive shall not be assigned duties and responsibilities that are materially inconsistent with Executive’s position. This Section 3 shall not be construed as preventing Executive from (a) engaging in reasonable volunteer services for charitable, educational or civic organizations, or (b) investing personal assets in such a manner that will not require a material amount of the Executive’s time or services in the operation of the businesses in which such investments are made; provided, however, no such other activity shall conflict or materially interfere with Executive’s loyalties, duties or responsibilities to the Company and its Affiliates. Executive shall at all times use his best efforts to comply in good faith with United States laws applicable to Executive’s actions on behalf of the Company and its Affiliates. Executive understands and agrees that Executive may be required to travel from time to time for purposes of the Company’s business. The Parties agree that Executive’s principal work location cannot be relocated further than 50 miles from Executive’s principal work location on the Effective Date, except as mutually agreed by the Parties.
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4. Term of Employment . Executive’s term of employment with the Company under this Agreement shall be for the period from the Effective Date through the date that is two (2) years from the Effective Date, unless earlier terminated in accordance with this Agreement, and if not earlier terminated, this Agreement will expire upon the date that is two (2) years from the Effective Date.
The period from the Effective Date through the earlier of the second (2nd) anniversary of the Effective Date and the date of Executive’s termination of employment with the Company and its Affiliates for whatever reason (the “ Termination Date ”) shall be referred to herein as the “ Employment Period .” Notwithstanding the above, Executive agrees to remain available beyond the Employment Period to provide assistance to the Company or its Affiliate in the event that the Company or an Affiliate become involved in litigation (or another type of dispute or controversy) regarding matters of which Executive has relevant knowledge resulting from Executive’s employment with the Company or an Affiliate. Such post-termination assistance shall be provided by Executive in the capacity of an independent contractor at an agreed-upon, reasonable consulting fee, and shall not be deemed to create or continue an employee-employer or fiduciary relationship, or to represent a continuation of this Agreement.
5. Benefits . Subject to the terms and conditions of this Agreement, during the Employment Period, Executive shall be entitled to all of the following:
(a) Reimbursement of Business Expenses . The Company shall pay or reimburse Executive for all reasonable travel, entertainment and other business expenses paid or incurred by Executive in the performance of duties hereunder. The Company shall also provide Executive with suitable office space, including staff support, paid parking, and necessary equipment, including but not limited to, cellular telephone and laptop computer.
(b) Other Employee Benefits . Executive shall be entitled to participate in any pension, retirement, 401(k), profit-sharing, and other employee benefits plans or programs of the Company to the same extent as available to other senior management employees of the Company under the terms of such plans or programs. Executive shall also be entitled to participate in any group insurance, hospitalization, medical, dental, health, life, accident, disability and other employee benefits plans or programs of the Company to the extent available to other senior management employees of the Company, and their spouses and eligible dependents, under the terms of such plans or programs including any medical expense reimbursement account and post-retirement medical program as made available to other senior management employees of the Company.
(c) Vacation and Holidays . Executive shall be entitled to five (5) weeks of paid vacation per calendar year (prorated in any calendar year during which Executive is employed for less than the entire year based on the number of days in such calendar year in which Executive was employed). Executive shall also be entitled to all paid holidays and personal days provided by the Company for its key management employees under the Company’s personnel policy as then effective. Unused vacation shall not carry over to the following year unless specifically approved by the Company.
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(d) Equity Incentive Awards . Executive shall be eligible to participate in the Alta Mesa Resources, Inc. 2018 Long Term Incentive Plan (the “ LTIP ”) or any other incentive plan sponsored by the Company which provides for equity grants of incentive awards. The terms and conditions of any equity incentive award granted to Executive shall be set forth in the incentive plan document and award agreement governing such award.
(e) Annual Physical . Executive shall be entitled to be reimbursed by the Company for the full cost of an annual physical examination by a physician (1) selected by the Company or (2) selected by Executive and approved by the Company.
(f) Key Man or Company-Owned Life Insurance . The Company may, at any time during the term of this Agreement, apply for and procure as owner, and for its sole benefit, life insurance on the Executive’s life in such amounts and in such forms as the Company may select. Executive hereby acknowledges that he will have no interest whatsoever in any such insurance policy. Executive shall submit to such medical examinations, supply such information, and execute such documents as may be reasonably requested by the insurer to obtain any such key man policy.
(g) Tax Planning, Preparation and Advice . Executive shall be entitled to be reimbursed by the Company for the cost of tax preparation and planning by a certified financial planner or certified public accountant (1) selected by the Company or (2) selected by Executive and approved by the Company, provided that such annual reimbursement shall not exceed $5,000.00.
6. Rights and Payments upon Termination . The Executive’s right to compensation and benefits for periods after the Termination Date shall be determined in accordance with this Section 6 . Except as otherwise expressly required by law or as specifically provided in an employee benefit plan or this Agreement, all of Executive’s rights to salary, severance, benefits, bonuses and other compensatory amounts under this Agreement shall cease upon the Termination Date .
(a) Minimum Payments and Vesting . Executive shall be entitled to the following minimum payments under this Section 6(a) , in addition to any other payments or benefits which Executive is entitled to receive under the terms of any employee benefit plan or program or Section 6(b) :
(1) unpaid salary for the full calendar month in which the Termination Date occurs; provided, however, if Executive is terminated for Cause or terminates his employment voluntarily without Good Reason, Executive shall only be entitled to receive accrued but unpaid salary through the Termination Date;
(2) unpaid vacation days for that year which have accrued through the Termination Date;
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(3) reimbursement of reasonable business expenses that were incurred but unpaid as of the Termination Date; and
(4) to the extent Executive participated in any nonqualified deferred compensation plan or program with vesting criteria, or received any equity incentive grant that is not fully vested, as of the Termination Date, Executive will automatically vest as of the Termination Date as follows:
(A) subject to Section 6(c) , if Executive is involuntarily terminated by the Company other than for Cause (and not including death or termination due to Disability), or if the Executive terminates his employment for Good Reason, Executive shall become immediately 100% vested in (i) any outstanding awards of restricted stock, stock options and any other equity incentive awards granted under the LTIP (or any other equity incentive plan of the Company or Silver Run) that vest solely based on the passage of time (with any such awards that vest based on the attainment of performance-based vesting conditions vesting at the target level); and (ii) any nonqualified deferred compensation account balance or benefit; and
(B) if Executive is terminated by the Company for Cause, or voluntarily terminates his employment without Good Reason, all unvested equity incentive awards shall be treated in accordance with the terms of the outstanding award agreement or plan document, as applicable.
Salary and accrued vacation days under this Section 6(a) shall be paid to Executive within five (5) business days following the Termination Date in a cash lump sum payment, less applicable withholdings. Business expenses shall be reimbursed in accordance with the Company’s normal procedures.
(b) Other Severance Payments . In the event that during the Employment Period (i) Executive’s employment is involuntarily terminated by the Company (except due to a No Severance Benefits Event), (ii) Executive’s employment is terminated due to death or Disability, or (iii) Executive terminates his employment for Good Reason; then in any such event under clause (i), (ii), or (iii), subject to Section 6(c) , the following severance benefits shall be provided to Executive or, in the event of his death before receiving all such benefits, to Executive’s Designated Beneficiary following his death:
(1) Additional Payment . The Company shall pay additional compensation as described in this Section 6(b )( 1) (the “ Additional Payment ”). Subject to Section 6(c) , the Company shall make the Additional Payment to Executive in a cash lump sum, net of applicable withholdings.
(A) Termination Not Following Change in Control . If the Termination Date does not occur within the 15-month period immediately following a Change in Control, the Additional Payment shall be (i) an amount equal to Executive’s Base Salary in effect as of the Termination Date, (ii) an amount equal to the greater of (x) 100% of the “target” bonus for Executive for the year containing
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the Termination Date or (y) the amount of the Annual Bonus paid to the Executive for the year immediately preceding the year containing the Termination Date, and (iii) an additional $20,000.00 lump sum cash payment for outplacement services. In such event, the Additional Payments described in Section 6(b)(1)(C) following a Change in Control shall be inapplicable for Executive.
(B) Anticipatory Termination . If the Executive incurs an Anticipatory Termination, he shall be entitled to receive, in addition to the payment described in Section 6(b)(1)(A) above, an additional amount equal to the sum of (i) fifty percent (50%) of Executive’s Base Salary as in effect as of the Termination Date, plus (ii) fifty percent (50%) times the greater of (x) 100% of the “target” bonus for Executive for the year containing the Termination Date or (y) the amount of the Annual Bonus paid to the Executive for the year immediately preceding the year containing the Termination Date (the “ Anticipatory Termination Payment ”). In such event, the Additional Payments described in Section 6(b)(1)(C) following a Change in Control shall be inapplicable for Executive. The Anticipatory Termination Payment shall be subject to the Executive executing a second release agreement, as described in Section 6(c) , but covering only the period from the Termination Date until the date immediately following the Change in Control.
(C) Termination Following Change in Control . If the Termination Date occurs within the fifteen (15) month period immediately following a Change in Control, the Additional Payment shall be (i) an amount equal to one hundred fifty percent (150%) of Executive’s Base Salary in effect as of the Termination Date, (ii) an amount equal to one hundred fifty percent (150%) times the greater of (x) 100% of the “target” bonus for Executive for the year containing the Termination Date or (y) the amount of the Annual Bonus paid to the Executive for the year immediately preceding the year containing the Termination Date, and (iii) an additional $20,000.00 lump sum cash payment for outplacement services. In such event, the Additional Payments described in Sections 6(b )( 1)(A) and 6(b)(1)(B) above shall be inapplicable for Executive.
(2) COBRA Coverage .
(A) In the event that Executive timely elects continuation coverage under any of the Company’s “group health plans” within the meaning of Treasury Regulations Section 54.4980B-2 Q/A-1 (collectively, the “ Health Plan ”) on behalf of himself and any of his eligible covered dependents (including his spouse) pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“ COBRA ”), following the Termination Date, the Company shall pay directly or reimburse Executive for an amount equal to the monthly premium for such COBRA coverage for each month during which such COBRA coverage is in effect during the period commencing on the Termination Date and ending upon the earliest of (x) the date that is eighteen (18) months following the Termination Date, (y) the date that Executive and Executive’s covered dependents become no longer eligible for COBRA coverage or (z) the date Executive
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becomes eligible to receive group healthcare coverage from a subsequent employer (and Executive agrees to promptly notify the Company of such eligibility). In all other respects, Executive and his dependents shall be treated the same as any other qualified beneficiaries under the Health Plan and COBRA.
(B) Executive and Executive’s spouse, if applicable, consent and agree to acquire and maintain any and all coverage that either or both of them are entitled to at any time during their lives under the Medicare program or any similar program of the United States or any agency thereof. Executive and Executive’s spouse further agree to pay any required premiums for Medicare coverage from their personal funds.
(C) Notwithstanding Section 6(b)(2)(A) to the contrary, the Company may alter the manner in which health benefits are provided to Executive under such section following termination of Executive’s employment to the extent the Company reasonably determines is necessary for purposes of satisfying Code Section 105(h)(2) or avoiding the imposition of an excise tax on the Company or any of its Affiliates, provided that such alterations do not materially decrease coverage or increase the after-tax cost to Executive of such benefits.
(3) Code Section 280G Tax Gross-up . If the Termination Date occurs within two (2) years after the Effective Date, the Accounting Firm shall determine if any of the payments or benefits received or to be received by Executive (including, without limitation, any payment or benefits received in connection with a Change in Control or Executive’s termination of employment, whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement), constitute “parachute payments” within the meaning of Code Section 280G as a result of a “change in ownership or control,” under and within the meaning of Treasury Regulation Section 1.280G-1, of Silver Run or any of its subsidiaries, including the Company, but excluding as a result of the closing of the Transaction (all such payments and benefits collectively referred to herein as the “ 280G Payments ”) that are subject to the excise tax imposed under Code Section 4999 (the “ Excise Tax ”). If the Accounting Firm determines any of the 280G Payments are subject to the Excise Tax, the Company shall pay to Executive, as soon as reasonably practicable following such determination but in any event no later than the end of the year following the year in which the Executive pays the relevant taxes, an additional amount equal to the sum of the Excise Tax payable by Executive plus the amount that the Accounting Firm determines is necessary to put Executive in the same after-tax position (taking into account all applicable federal, state and local excise, income and other taxes) as if no Excise Tax had been imposed.
All determinations required to be made under this Section 6(b)(3) , including whether a payment would result in an “excess parachute payment” within the meaning of Code Section 280G and the assumptions utilized in arriving at such determination, shall be made by the Accounting Firm. All fees and expenses of the Accounting Firm shall be paid solely by the Company. The final determination by the Accounting Firm shall be binding on the Parties absent manifest error.
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Executive agrees to reasonably cooperate with the Company to minimize the amount of any excess parachute payments, including, without limitation, assisting the Company in establishing that some or all of the payments received by Executive which are “contingent on a change”, as described in Code Section 280G(b)(2)(A), are reasonable compensation for personal services actually rendered by Executive before the date of such change or to be rendered by Executive on or after the date of such change. Notwithstanding the foregoing, Executive shall not be required to take any action which his attorney or tax advisor advises him in writing exposes the Executive to material personal liability.
(4) Other Termination of Employment . For purposes of clarity, in the event that (i) Executive voluntarily resigns or otherwise voluntarily terminates employment, except due to death, Disability or for Good Reason, or (ii) Executive’s employment is terminated due to a No Severance Benefits Event then, in any such event under clause (i) or (ii), the Company shall have no obligation to provide the severance benefits described in paragraphs (1), (2) and (3) (above) of this Section 6(b) , except to offer COBRA coverage (as required by COBRA law) but not at the rate described in paragraph (2). However, Executive shall still be entitled to the minimum benefits provided under Section 6(a) .
(5) No Duplication of Severance Benefits . The severance payments provided under Section 6(b) shall supersede and replace any severance payments under any severance pay plan or similar agreement that the Company or any Affiliate maintains for key management employees or employees generally.
(c) Release Agreement . Notwithstanding any provision of the Agreement to the contrary, in order to receive the vesting acceleration provided under Section 6(a)(4)(A) or the severance benefits provided under Section 6(b)(1) , (2) , or (3) , the Executive must first execute an appropriate release agreement (on a form provided by the Company) whereby the Executive agrees to release and waive, in return for such vesting acceleration or severance benefits, any claims that Executive may have against the Company or any of its Affiliates including, without limitation, for unlawful discrimination ( e.g. , Title VII of the Civil Rights Act); provided, however, such release agreement shall not release any claim or cause of action by or on behalf of the Executive for (a) any payment or benefit that may be due or payable under this Agreement or any vested benefits under any employee benefit plan or program or (b) non-payment of salary or benefits to which Executive is entitled from the Company as of the Termination Date. The release agreement must be provided to Executive within five (5) days following the Termination Date, and signed by Executive and returned to the Company, and any applicable revocation period must have expired, no later than sixty (60) days following the Termination Date; provided, however, the second release agreement required for an Anticipatory Termination Payment under Section 6(b)(1)(B) must be provided to Executive within five (5) days following the Change in Control Date, and signed by Executive and returned to the Company, and any applicable revocation period must have expired, no later than sixty (60) days following the Change in Control Date. Any payments to which Executive becomes entitled pursuant to Section 6(b)(1) , shall be paid within ten (10) days after the executed release agreement (or executed second release agreement with respect to an Anticipatory Termination Payment) has been timely returned to the Company for counter-signature and become effective and non-revocable by
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Executive under the terms of the release agreement. Notwithstanding anything in this Agreement to the contrary, to the extent that any severance payments or benefits provided under Section 6(a)(4)(A) or Section 6(b) are deferred compensation under Code Section 409A, and are not otherwise exempt from the application of Section 409A, then, if the period during which Executive may consider and sign the release agreement spans two calendar years, the severance payments or benefits will not be made or begin until the later calendar year.
(d) Definitions .
(1) “ Accounting Firm ” means any nationally recognized, certified public accounting firm selected by the Company and reasonably acceptable to the Executive; provided, however, the firm selected must be within the top 20 in the United States at such time based on annual revenues for certified public accounting firms in the immediately preceding year.
(2) “ Affiliate ” means any parent or subsidiary entity of the Company, or any other entity in whatever form, of which the Company has any direct or indirect controlling ownership interest or management control, or vice-versa, as determined by the Company. For purposes of clarity and not limitation, (i) Riverstone Investment Group LLC, Bayou City Energy Management, LLC, HPS Investment Partners, LLC, or High Mesa Inc., and their affiliates (other than Silver Run or any of its subsidiaries, to the extent considered an affiliate of any such entity) are not Affiliates for purposes of this Agreement, and (ii) Silver Run is an Affiliate of the Company.
(3) “ Anticipatory Termination ” means a termination of the Executive’s employment within the three (3) month period ending immediately prior to the Change in Control Date (in which the Change in Control is a “change in control event” within the meaning of Code Section 409A), but only if (a) the Executive’s employment with the Company was (i) terminated by the Company without Cause or (ii) terminated by the Executive for Good Reason, and (b) it is reasonably demonstrated by the Executive that such termination of employment (1) was at the request of a third party who has taken steps reasonably calculated to effect such Change in Control or (2) otherwise arose in connection with or anticipation of such Change in Control.
(4) “ Board ” means the then-current Board of Directors of the Company or, following the closing of the Transaction, the then-current Board of Directors of Silver Run, in each case, including the Compensation Committee (the “ Compensation Committee ”) or another authorized committee thereof.
(5) “ Cause ” means any of the following: (A) the Executive’s final conviction by a court of competent jurisdiction of a felony involving moral turpitude, or entering the plea of nolo contendere to such felony by the Executive; (B) the commission by the Executive of a demonstrable act of material fraud, or a proven and material misappropriation of funds or other property, of or upon the Company or any Affiliate; (C) the engagement by the Executive, without the written approval of the Company, in any material activity which directly competes with the business of the Company or any Affiliate, or which would directly result in a material injury to the business or reputation
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of the Company or any Affiliate; or (D) the breach by Executive of any material provision of this Agreement. With respect to items (C) and (D) above, in order to constitute “Cause” hereunder, Executive must also fail to cure such breach within a reasonable time period set by the Company but in no event less than twenty (20) calendar days after Executive’s receipt of such notice.
(6) “ Change in Control ” means and includes each of the following:
(A) A transaction or series of transactions (other than an offering of Common Stock to the general public through a registration statement filed with the Securities and Exchange Commission or a transaction or series of transactions that meets the requirements of clauses (1) and (2) of subsection (C) below) whereby any “person” or related “group” of “persons” (as such terms are used in Sections 13(d) and 14(d)(2) of the Exchange Act) (other than Silver Run, any of its subsidiaries, an employee benefit plan maintained by Silver Run or any of its subsidiaries or a “person” that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common control with, Silver Run) directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of securities of Silver Run possessing more than 50% of the total combined voting power of Silver Run’s securities outstanding immediately after such acquisition; or
(B) During any period of two consecutive years, individuals who, at the beginning of such period, constitute the Board together with any new Director(s) (other than a Director designated by a person who shall have entered into an agreement with Silver Run to effect a transaction described in subsections (A) or (C)) whose election by the Board or nomination for election by Silver Run’s stockholders was approved by a vote of at least two-thirds of the Directors then still in office who either were Directors at the beginning of such two-year period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or
(C) The consummation by Silver Run (whether directly involving Silver Run or indirectly involving Silver Run through one or more intermediaries) of (x) a merger, consolidation, reorganization, or business combination or (y) a sale or other disposition of all or substantially all of Silver Run’s assets in any single transaction or series of related transactions, or (z) the acquisition of assets or stock of another entity, in each case other than a transaction:
(1) which results in Silver Run’s voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of Silver Run or the person that, as a result of the transaction, controls, directly or indirectly, Silver Run or owns, directly or indirectly, all or substantially all of Silver Run’s assets or otherwise succeeds to the business of Silver Run (Silver Run or such person, the “ Successor Entity ”)) directly or indirectly, at least a majority of the combined voting power of the Successor Entity’s outstanding voting securities immediately after the transaction; and
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(2) after which no person or group beneficially owns voting securities representing 50% or more of the combined voting power of the Successor Entity; provided, however, that no person or group shall be treated for purposes of this clause (2) as beneficially owning 50% or more of the combined voting power of the Successor Entity solely as a result of the voting power held in Silver Run prior to the consummation of the transaction.
Notwithstanding the foregoing, in no event shall the following constitute a Change in Control: (i) the Transaction or any transactions occurring in connection therewith or (ii) any initial public offering of any subsidiary of Silver Run that owns all or part of Silver Run’s Midstream Assets (as defined in Section 10(d)(1) ) or any other sale or disposition of such Midstream Assets directly or indirectly by Silver Run in connection with such initial public offering.
If a Change in Control constitutes a payment event with respect to any amount, benefit or award (or portion of any amount, benefit or award) that provides for the deferral of compensation that is subject to Section 409A, to the extent required to avoid the imposition of additional taxes under Section 409A, the transaction or event described in subsection (A), (B) or (C) above with respect to such amount, benefit or award (or portion thereof) shall only constitute a Change in Control for purposes of the payment timing of such amount, benefit or award if such transaction also constitutes a “change in control event,” as defined in Treasury Regulation Section 1.409A- 3(i)(5).
The Board as in effect immediately prior to the occurrence of a Change in Control shall have full and final authority, which shall be exercised in its discretion, to determine conclusively whether a Change in Control has occurred pursuant to the above definition, the date of the occurrence of such Change in Control and any incidental matters relating thereto; provided that any exercise of such authority in conjunction with a determination regarding whether a Change in Control is a “change in control event” (as defined in Treasury Regulation Section 1.409A-3(i)(5)) shall be determined on a basis consistent with such regulation.
(7) “ Change in Control Date ” means the effective date of the occurrence of a Change in Control.
(8) “ Code ” means the Internal Revenue Code of 1986, as amended or its successor. References herein to any Section of the Code shall include any successor provisions of the Code.
(9) “ Common Stock ” means the Class A common stock of Silver Run, $0.0001 par value per share, and any class of common stock into which such common shares may hereafter be converted, reclassified or recapitalized.
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(10) “ Designated Beneficiary ” means the Executive’s surviving spouse, if any. If there is no such surviving spouse at the time of Executive’s death, then the Designated Beneficiary hereunder shall be Executive’s estate after the legal representative of such estate provides satisfactory evidence thereof to the Company (or its delegate).
(11) “ Director ” means a Board member.
(12) “ Disability ” shall mean that (a) Executive is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or last for a continuous period of not less than 12 months, or (b) by reason of any medically determinable physical or mental impairment which can be expected to result in death or to last for a continuous period of not less than 12 months, Executive is receiving income replacement for a period of not less than three months under an accident and health plan covering employees of the Company. Evidence of such Disability shall be certified by a physician acceptable to both the Company and Executive. In the event that the Parties are not able to agree on the choice of a physician, each shall select one physician who, in turn, shall select a third physician to render such certification. All reasonable costs directly relating to the determination of whether Executive has incurred a Disability for purposes of this Agreement shall be paid by the Company. Executive agrees to submit to any examinations that are reasonably required by the attending physician or other healthcare service providers to determine whether Executive has a Disability.
(13) “ Dispute ” means any dispute, disagreement, claim, or controversy arising from, in connection with, or relating to (a) the employment, or termination of employment, of Executive, or (b) the Agreement, or the validity, interpretation, performance, breach or termination of the Agreement.
(14) “ Exchange Act ” means the Securities Exchange Act of 1934, as amended.
(15) “ Good Reason ” means, other than during the fifteen (15)-month period following a Change in Control, the occurrence of any of the following without the Executive’s prior written consent, if not cured and corrected by the Company or Silver Run, or either of their successor(s), within 60 days after written notice thereof is provided by Executive to the Company or its successor, provided such notice is delivered within 90 days after the occurrence of the applicable condition or event and that Executive resigns from employment with the Company within 90 days following expiration of such 60-day cure period:
(A) the demotion or reduction in title or rank of Executive with the Company or Silver Run, except for any such demotion or reduction that occurs in connection with Executive’s termination of employment for Cause, Disability or death;
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(B) the reduction of the Executive’s annual base salary and/or target bonus opportunity, as compared to his aggregate base salary and target bonus opportunity as effective immediately prior to such reduction, if such reduction of base salary and/or target bonus opportunity, on an aggregated basis, is five percent (5%) or greater of the aggregate base salary and target bonus opportunity as effective immediately prior to such reduction; or
(C) a relocation of Executive’s principal work location to a location in excess of 50 miles from its then current location.
During the fifteen (15)-month period following a Change in Control, the definition of “Good Reason” shall have the same meaning as set out above except that clause (A) is replaced in its entirety with “the demotion or reduction in title or rank of Executive with the Company or Silver Run, or the assignment to Executive of duties that are materially inconsistent with Executive’s positions, duties and responsibilities with the Company or Silver Run, or any removal of the Executive from, or any failure to nominate for re-election the Executive to, any of such positions (other than a change due to the Executive’s Disability or as an accommodation under the American with Disabilities Act), except for any such demotion, reduction, assignment, removal or failure that occurs in connection with Executive’s termination of employment for Cause, Disability or death;”. In all other respects, the definition of Good Reason will be the same before and after a Change in Control.
For the avoidance of doubt, the closing of the Transaction will not by itself be deemed to provide a basis for the Executive to resign for Good Reason.
(16) “ No Severance Benefits Event ” means termination of Executive’s employment by the Company for Cause.
(17) “ Silver Run ” means Silver Run Acquisition Corporation II, a Delaware corporation (whose name will change to Alta Mesa Resources, Inc. at the closing of the Transaction), or its successor in interest.
7. Notice of Termination . Any termination of Executive’s employment by the Company or the Executive other than for death shall be communicated by Notice of Termination to the other Party hereto. For purposes of this Agreement, the term “ Notice of Termination ” means a written notice which indicates the specific termination provision of this Agreement relied upon, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated and specifies a Termination Date which, if submitted by Executive, shall be at least thirty (30) days following the date of such Notice of Termination unless such termination is for Good Reason (in which case the requirements for a termination due to Good Reason shall apply); provided, however, that in the event that Executive delivers a Notice of Termination to the Company, the Company may, in its sole discretion, change the Date of Termination to any date that occurs following the date of receipt of such Notice of Termination and is prior to the date specified in such Notice of Termination. A Notice of Termination submitted by the Company may provide for a Termination Date on the date Executive receives the Notice of Termination, or any date thereafter elected by the Company in its sole discretion. The failure by the Company or Executive to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Cause or Good Reason shall not waive any right of such Party hereunder or preclude such Party from asserting such fact or circumstance in enforcing such Party’s rights hereunder.
8. No Mitigation . Except as provided in Section 6(b)(2 ) for continued Health Plan coverage or Section 6(b)(3) regarding excess parachute payments, Executive shall not be required to mitigate the amount of any payment or other benefits provided under this Agreement by seeking other employment or in any other manner.
9. Restrictive Covenants . As an inducement to the Company to enter into this Agreement, Executive represents to, and covenants with or in favor of, the Company that Executive will comply with all of the restrictive covenants in Sections 9 through 17 , as a condition to the Company’s obligation to provide any benefits to Executive under this Agreement.
10. Trade Secrets .
(a) Access to Trade Secrets . As of the Effective Date and on an ongoing basis, the Company agrees to give Executive access to Trade Secrets which the Executive did not have access to, or knowledge of, before Executive’s commencement of employment with the Company.
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(b) Agreement Not to Use or Disclose Trade Secrets . In exchange for the Company’s promises to provide Executive with access to Trade Secrets, and the other consideration and benefits provided to Executive under this Agreement, Executive agrees, during the Employment Period, and any time thereafter, not to disclose to anyone, including, without limitation, any person, firm, corporation or other entity, or publish or use for any purpose, any Trade Secrets, except (1) as required in the ordinary course of the business of the Company or an Affiliate or (2) as authorized by the Company or Affiliate, as applicable. Executive acknowledges that Trade Secrets (A) have been and will be developed or acquired by the Company (or an Affiliate) through the expenditure of substantial time, effort and money and (B) provide the Company (or an Affiliate) with an advantage over competitors who do not know or use Trade Secrets.
Executive shall hold in a fiduciary capacity for the benefit of the Company (or its Affiliate, as applicable) any Trade Secret relating to the Company or any of its Affiliates, and their respective businesses, which (a) has been obtained by Executive during his employment by the Company (or any Affiliate) and (b) is not public knowledge other than via an unauthorized disclosure made by Executive in violation of this Agreement. Executive acknowledges and agrees that all Trade Secrets are, and will continue to be, the exclusive property of the Company or Affiliate, as applicable.
Executive shall not at any time disclose to any person or entity, or publish, or use for any unauthorized purpose, any Trade Secret, except as the Company directs or under compulsion of law. Executive agrees to give notice to the Company of any attempt to compel disclosure of any Trade Secret within five (5) business days after Executive is informed that such disclosure is being, or will be, compelled. Any such notice shall contain a copy of the subpoena, order or other process used to compel disclosure.
The agreements and covenants in this Section 10(b) apply to all Trade Secrets, whether now known or later to become known to Executive. In addition, these provisions shall be in addition to, and not limit or restrict in any way, any other confidentiality agreement or covenant between the Executive and the Company or any of its Affiliates.
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(c) Agreement to Refrain from Defamatory Statements . Executive shall refrain, both during the Employment Period and thereafter, from publishing any oral or written statements about any directors, partners, officers, employees, agents, investors or representatives of the Company or any Affiliate that are (1) slanderous, libelous, or defamatory; (2) disclose private or confidential information about the business affairs, directors, partners, officers, employees, agents, investors or representatives of the Company or any Affiliate; (3) constitute an intrusion into the seclusion or private lives of any such person; (4) give rise to unreasonable publicity about the private life of any such person; (5) place any such person in a false light before the public; or (6) constitute a misappropriation of the name or likeness of any such person. A violation or threatened violation of these restrictive covenants may be enjoined by a court of law notwithstanding the arbitration provisions of Section 31 .
(d) Definitions . The following terms, when used in this Agreement, are defined below:
(1) “ Restricted Territory ” means any county, or equivalent political or governmental subdivision, of any state, district, or territory of North America in which the Company or any of its Affiliates conducts its business; and any area adjacent to such counties, or equivalent political or governmental subdivision, to the extent such adjacent areas are within a 50-mile radius of any (x) producing property or leasehold of the Company or any of its Affiliates or (y) assets relating to the gathering, processing, storage, treating or transmission of oil or natural gas or otherwise generally considered “midstream” in nature in accordance with generally accepted U.S. oil and gas industry practices and customs (“ Midstream Assets ”) of the Company or any of its Affiliates.
(2) “ Trade Secrets ” means any and all information and materials (in any form or medium) that are proprietary to the Company or an Affiliate, or are treated as confidential by the Company or an Affiliate as part of, or relating to, any portion of its or their businesses (whether or not owned or developed by the Company or an Affiliate) and that are not generally known by other persons or entities in the same type of business.
For purposes of the Agreement, Trade Secrets include, without limitation, the following: all of the Company’s or Affiliate’s research, technical and business information, whether patentable or not, which is of a confidential, trade secret or proprietary character, and which is either developed by the Executive alone, or with others or by others; all non-public information that the Company or an Affiliate has marked as confidential or has otherwise described to Executive (either in writing or orally) as confidential; all non-public information concerning the Company’s or Affiliate’s products, services, prospective products or services, research, prospects, leases, surveys, seismic data, drilling data, designs, prices, costs, marketing plans, marketing techniques, studies, test data, leasehold and royalty owners, investors, suppliers and contracts; all business records and plans; all personnel files; all financial information of or concerning the Company or an Affiliate; all information relating to the Company’s operating system software, application software, software and system
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methodology, hardware platforms, technical information, inventions, computer programs and listings, source codes, object codes, copyrights and other intellectual property; all technical specifications; any proprietary information belonging to the Company or an Affiliate; all computer hardware or software manuals of the Company or an Affiliate; all Company or Affiliate training or instruction manuals; all Company or Affiliate electronic data; and all computer system passwords and user codes.
11. Duty to Return Company Documents and Property . Upon the Termination Date, Executive shall immediately return and deliver to the Company any and all papers, books, records, documents, memoranda and manuals, e-mail, electronic or magnetic recordings or data, including all copies thereof, belonging to the Company or relating to its business, in Executive ’ s possession, whether prepared by Executive or others. If at any time after the Termination Date, Executive determines that Executive has any Trade Secrets in Executive ’ s possession or control, Executive shall immediately return them to the Company, including all copies thereof.
12. Best Efforts and Disclosure . Executive agrees that, while employed with the Company under this Agreement, Executive’s services shall be devoted on a full time basis to the Company’s business, and Executive shall use best efforts to promote its success. Further, Executive shall promptly disclose to the Company all ideas, inventions, computer programs, and discoveries, whether or not patentable or copyrightable, which Executive may conceive or make, alone or with others, during Executive’s period of employment with the Company or its Affiliates, whether or not during working hours, and which directly or indirectly:
| (a) | relate to a matter within the scope, field, duties or responsibility of Executive’s employment with the Company or within the scope or field of the Company’s or an Affiliate’s business; or |
| (b) | are based on any knowledge of the actual or anticipated business or interests of the Company; or |
| (c) | are aided by the use of time, materials, facilities or information of the Company or an Affiliate. |
Executive assigns to the Company, without further compensation, any and all rights, titles and interest in all such ideas, inventions, computer programs and discoveries in all countries of the world. Executive recognizes that all ideas inventions, computer programs and discoveries of the type described above, conceived or made by Executive alone or with others within 12 months after the Termination Date (voluntary or otherwise), are likely to have been conceived in significant part either while employed by the Company or as a direct result of knowledge Executive had of proprietary information or Trade Secrets. Accordingly, Executive agrees that such ideas, inventions or discoveries shall be presumed to have been conceived during Executive’s period of employment with the Company or its Affiliates, unless and until the contrary is clearly established by the Executive.
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13. Inventions and Other Works . Any and all writings, computer software, inventions, improvements, processes, procedures and/or techniques which Executive may make, conceive, discover, or develop, either solely or jointly with any other person or persons, at any time during Executive’s period of employment with the Company or its Affiliates, whether at the request or upon the suggestion of the Company or otherwise, which relate to or are useful in connection with any business now or hereafter carried on or contemplated by the Company, including developments or expansions of its present fields of operations, shall be the sole and exclusive property of the Company. Executive agrees to take any and all actions necessary or appropriate so that the Company can prepare and present applications for copyright or letters patent therefor, and secure such copyright or letters patent wherever possible, as well as reissue renewals, and extensions thereof, and obtain the record title to such copyright or patents. Executive shall not be entitled to any additional or special compensation or reimbursement regarding any such writings, computer software, inventions, improvements, processes, procedures and techniques. Executive acknowledges that the Company from time to time may have agreements with other persons or entities which impose obligations or restrictions on the Company regarding inventions made during the course of work thereunder or regarding the confidential nature of such work. Executive agrees to be bound by all such obligations and restrictions, and to take all action necessary to discharge the obligations of the Company.
14. Non-Solicitation Restriction . Executive hereby agrees that in order to protect Trade Secrets, it is necessary to enter into the following restrictive covenant, which is ancillary to the enforceable promises between the Company and Executive in Sections 9 through 13 and other provisions of this Agreement. During the Executive ’ s employment and for a period of one (1) year following the Termination Date (regardless of the reason for termination), Executive hereby covenants and agrees that he will not, directly or indirectly, without obtaining the express written consent of the Board, either individually or as a principal, partner, agent, consultant, contractor, employee, or as a director or officer of any entity, or in any other manner or capacity whatsoever, except on behalf of the Company, solicit business, attempt to solicit business, or conduct business, in products or services competitive with any products or services offered or performed by the Company or its Affiliates in any business which the Company or any of its Affiliates does business, prepared to conduct business as of the Termination Date (or if the applicable activity occurs before the Termination, Date, then as of the date on which such activity occurs), or has any business interest within the Restricted Territory as of the Termination Date (or if the applicable activity occurs before the Termination, Date, then as of the date on which such activity occurs), (a) from those individuals or entities with whom the Company or Affiliate conducted or prepared to conduct business in the Restricted Territory during the Executive ’ s employment with the Company or (b) with respect to any assets or holdings in which the Company or Affiliate had any interest in the Restricted Territory at any time during the two-year period ending on the earlier of the Termination Date or the date on which such activity occurs.
15. Non-Competition Restriction . Executive hereby agrees that in order to protect Trade Secrets, it is necessary to enter into the following restrictive covenant, which is ancillary to the enforceable promises between the Company and Executive in Sections 9 through 14 and other provisions of this Agreement. Executive hereby covenants and agrees that during Executive’s period of employment with the Company or its Affiliates, and for a period of one (1) year following the Termination Date (regardless of the reason for termination), Executive will not, without obtaining the express written consent of the Company, engage in any capacity, directly or indirectly (whether as proprietor, stockholder, director, partner, employee, agent, independent contractor, consultant, trustee, or in any other capacity), with respect to any entity engaged or
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preparing to engage in the business of oil and gas exploration and production, the acquisition, development or operation of Midstream Assets or any other aspect of the Company’s or an Affiliate’s business, in each case, within the Restricted Territory (a “ Competing Enterprise ”); provided, however, Executive shall not be deemed to be participating or engaging in a Competing Enterprise solely by virtue of the ownership of not more than one percent (1%) of any class of stock or other securities which are publicly traded on a national securities exchange or in a recognized over-the-counter market.
16. No Recruitment Restriction . Executive agrees that during Executive’s period of employment with the Company or its Affiliates, and for a period of one (1) year following the Termination Date (regardless of the reason for termination), without obtaining the express written consent of the Company, Executive shall not, either directly or indirectly, or by acting in concert with another person or entity, (a) hire any employee or independent contractor performing services for the Company or any Affiliate, or any such individual who performed services for the Company or any Affiliate at any time during the one-year period ending on the earlier of the Termination Date or the date on which such hiring occurs, or (b) solicit or influence or seek to solicit or influence, any employee or independent contractor performing services for the Company or any Affiliate, or any such individual who performed services for the Company or any Affiliate at any time during the one-year period ending on the earlier of the Termination Date or the date on which such activity occurs, to terminate, reduce or otherwise adversely affect such individual’s employment or other relationship with the Company or any Affiliate.
17. Business Opportunities . During Executive’s period of employment with the Company or its Affiliates and for a period of one (1) year following the Termination Date (regardless of the reason for termination), the Executive assigns and agrees to assign without further compensation to the Company, its Affiliates and its successors, assigns or designees, all of the Executive’s right, title and interest in and to all Business Opportunities (defined below), and further acknowledges and agrees that all Business Opportunities constitute the exclusive property of the Company. The Executive shall present all Business Opportunities to the Company, and shall not exploit a Business Opportunity. For purposes of this Agreement, “ Business Opportunities ” means all business ideas, prospects, or proposals pertaining to oil and gas exploration and production, the acquisition, development or operation of Midstream Assets or any other aspect of the Company’s or an Affiliate’s business, and any business the Company or any Affiliate prepared to conduct, or contemplated conducting during Executive’s employment with the Company, which are developed by the Executive or originated by any third party and brought to the attention of the Executive, together with information relating thereto; provided however, that for the one (1) year period following the Termination Date, “Business Opportunities” shall be limited to those Business Opportunities in the Restricted Territory. For the avoidance of doubt, this Section 17 is not intended to limit or narrow the Executive’s duties or obligations under federal or state law with respect to corporate opportunities.
18. Tolling . If Executive violates any of the restrictions contained in Sections 9 through 17 , then notwithstanding any provision hereof to the contrary, the restrictive period will be suspended and will not run in favor of Executive from the time of the commencement of any such violation, unless and until such time when the Executive cures the violation to the reasonable satisfaction of the Company.
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19. Reformation . If a court or arbitrator rules that any time period or the geographic area specified in any restrictive covenant in Sections 9 through 17 is unenforceable, then the time period will be reduced by the number of months, or the geographic area will be reduced by the elimination of such unenforceable portion, or both, so that the restrictions may be enforced in the geographic area and for the time to the full extent permitted by law.
20. No Previous Restrictive Agreements . Executive represents that, except as disclosed in writing to the Company as of the Effective Date, Executive is not bound by the terms of any agreement with any previous employer or other third party to (a) refrain from using or disclosing any confidential or proprietary information in the course of Executive ’ s employment by the Company or (b) refrain from competing, directly or indirectly, with the business of such previous employer or any other person or entity. Executive further represents that Executive ’ s performance under this Agreement and work duties for the Company do not, and will not, breach any agreement to keep in confidence any proprietary information, knowledge or data acquired by Executive in confidence or in trust prior to Executive ’ s employment with the Company, and Executive will not disclose to the Company or induce the Company to use any confidential or proprietary information or material belonging to any previous employer or others.
21. Conflicts of Interest . In keeping with Executive’s fiduciary duties to the Company, Executive hereby agrees that Executive shall not become involved in a conflict of interest, or upon discovery thereof, allow such a conflict to continue at any time during Executive’s period of employment with the Company or its Affiliates. In this respect, Executive agrees to fully comply with the conflict of interest agreement entered into by Executive as an employee, officer or director of the Company or an Affiliate. In the instance of a violation of the conflict of interest agreement to which Executive is a party, it may be necessary for the Company to terminate Executive’s employment for Cause.
22. Remedies . Executive acknowledges that the restrictions contained in Sections 9 through 21 of this Agreement, in view of the nature of the Company’s business, are reasonable and necessary to protect the Company’s legitimate business interests, and that any violation of this Agreement would result in irreparable injury to the Company. Notwithstanding the arbitration provisions in Section 31 , in the event of a breach or a threatened breach by Executive of any provision of Sections 9 through 21 of this Agreement, the Company shall be entitled to a temporary restraining order and injunctive relief restraining Executive from the commission of any breach, and to recover the Company’s attorneys’ fees, costs and expenses related to the breach or threatened breach. Nothing contained in this Agreement shall be construed as prohibiting the Company from pursuing any other remedies available to it for any such breach or threatened breach, including, without limitation, the recovery of money damages, attorneys’ fees, and costs. These covenants and agreements shall each be construed as independent of any other provisions in this Agreement, and the existence of any claim or cause of action by Executive against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of such covenants and agreements.
23. No Interference . Notwithstanding any other provision of this Agreement, (a) Executive may disclose confidential information when required to do so by a court of competent jurisdiction, by any governmental agency having authority over Executive or the business of the Company or by any administrative body or legislative body (including a committee thereof) with
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jurisdiction to order Executive to divulge, disclose or make accessible such information, in each case, subject to Executive’s obligations to notify the Company under Section 10(b) ; and (b) nothing in this Agreement is intended to interfere with Executive’s right to (1) report possible violations of state or federal law or regulation to any governmental or law enforcement agency or entity; (2) make other disclosures that are protected under the whistleblower provisions of state or federal law or regulation (including the right to receive an award for information provided to any such government agencies); (3) file a claim or charge any governmental agency or entity; or (4) testify, assist, or participate in an investigation, hearing, or proceeding conducted by any governmental or law enforcement agency or entity, or any court. For purposes of clarity, in making or initiating any such reports or disclosures or engaging in any of the conduct outlined in subsection (b) above, Executive may disclose confidential information to the extent necessary to such governmental or law enforcement agency or entity or such court, need not seek prior authorization from the Company, and is not required to notify the Company of any such reports, disclosures or conduct.
24. Defend Trade Secrets Act . Executive is hereby notified in accordance with the Defend Trade Secrets Act of 2016 that Executive will not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that (a) is made (1) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (2) solely for the purpose of reporting or investigating a suspected violation of law; or (b) is made in a complaint or other document that is filed under seal in a lawsuit or other proceeding. If Executive files a lawsuit for retaliation against the Company for reporting a suspected violation of law, Executive may disclose the Company’s trade secrets to Executive’s attorney and use the trade secret information in the court proceeding if Executive files any document containing the trade secret under seal, and does not disclose the trade secret, except pursuant to court order.
25. Withholdings; Right of Offset . The Company may withhold and deduct from any benefits and payments made or to be made pursuant to this Agreement (a) all federal, state, local and other taxes as may be required pursuant to any law or governmental regulation or ruling, (b) all other normal employee deductions made with respect to Company’s employees generally, and (c) any advances made to Executive and owed to Company.
26. Nonalienation . The right to receive payments under this Agreement shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge or encumbrance by Executive, dependents or beneficiaries of Executive, or to any other person who is or may become entitled to receive such payments hereunder. The right to receive payments hereunder shall not be subject to or liable for the debts, contracts, liabilities, engagements or torts of any person who is or may become entitled to receive such payments, nor may the same be subject to attachment or seizure by any creditor of such person under any circumstances, and any such attempted attachment or seizure shall be void and of no force and effect.
27. Incompetent or Minor Payees . Should the Company determine, in its discretion, that any person to whom any payment is payable under this Agreement has been determined to be legally incompetent or is a minor, any payment due hereunder, notwithstanding any other provision of this Agreement to the contrary, may be made in any one or more of the following ways: (a) directly to such minor or person; (b) to the legal guardian or other duly appointed
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personal representative of the person or estate of such minor or person; or (c) to such adult or adults as have, in the good faith knowledge of the Company, assumed custody and support of such minor or person; and any payment so made shall constitute full and complete discharge of any liability under this Agreement in respect to the amount paid.
28. Severability . It is the desire of the Parties hereto that this Agreement be enforced to the maximum extent permitted by law, and should any provision contained herein be held unenforceable by a court of competent jurisdiction or arbitrator (pursuant to Section 31 ), the Parties hereby agree and consent that such provision shall be reformed to create a valid and enforceable provision to the maximum extent permitted by law; provided, however, if such provision cannot be reformed, it shall be deemed ineffective and deleted herefrom without affecting any other provision of this Agreement. This Agreement should be construed by limiting and reducing it only to the minimum extent necessary to be enforceable under then applicable law.
29. Title and Headings; Construction . In the interpretation of the Agreement, except where the context clearly otherwise requires:
(a) “including” or “include” does not denote or imply any limitation;
(b) “or” has the inclusive meaning “and/or”;
(c) the singular includes the plural, and vice versa, and each gender includes each of the others;
(d) captions or headings are only for reference and are not to be considered in interpreting the Agreement;
(e) “Section” refers to a Section of the Agreement, unless otherwise stated in the Agreement;
(f) the words “herein”, “hereof”, “hereunder” and other compounds of the word “here” shall refer to the entire Agreement and not to any particular provision; and
(g) a reference to any statute, rule, or regulation includes any amendment thereto or any statute, rule, or regulation enacted or promulgated in replacement thereof or as the successor thereto.
30. Governing Law; Jurisdiction . All matters or issues relating to the interpretation, construction, validity, and enforcement of this Agreement shall be governed by the laws of the State of Texas, without giving effect to any choice-of-law principle that would cause the application of the laws of any jurisdiction other than Texas. Jurisdiction and venue of any action or proceeding relating to this Agreement or any Dispute (to the extent arbitration is not required under Section 31 ) shall be exclusively in Harris County, Texas.
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31. Mandatory Arbitration . Except as provided in subsection (h) of this Section 31 , any Dispute must be resolved by binding arbitration in accordance with the following:
(a) Either Party may begin arbitration by filing a demand for arbitration in accordance with the Commercial Arbitration Rules of the AAA (the “ Arbitration Rules ”) and concurrently notifying the other Party of that demand. If the Parties are unable to agree upon a panel of three neutral arbitrators within twenty days after the demand for arbitration was filed (the Parties agree to a reasonable, one-time extension of that twenty-day period), either Party may request the Houston, Texas office of the American Arbitration Association (“ AAA ”) to appoint the arbitrator or arbitrators necessary to complete the panel in accordance with the Arbitration Rules. Each arbitrator so appointed shall be deemed accepted by the Parties as part of the panel. Notwithstanding the foregoing, the Parties, by mutual consent, may agree to a single arbitrator instead of a panel of three arbitrators and, in such event, references herein to “panel” shall refer to the single appointed arbitrator.
(b) The arbitration shall be conducted in the Houston, Texas metropolitan area at a place and time agreed upon by the Parties with the panel, or if the Parties cannot agree, as designated by the panel. The panel may, however, call and conduct hearings and meetings at such other places as the Parties may agree or as the panel may, on the motion of one Party, determine to be necessary to obtain significant testimony or evidence.
(c) The panel may authorize any and all forms of discovery upon a Party’s showing of need that the requested discovery is likely to lead to material evidence needed to resolve the Dispute and is not excessive in scope, timing, or cost.
(d) The arbitration shall be subject to the Federal Arbitration Act and conducted in accordance with the Arbitration Rules to the extent that they do not conflict with this Section 31 . The Parties and the panel may, however, agree to vary to provisions of this Section 31 or the matters otherwise governed by the Arbitration Rules as permitted by law.
(e) The arbitration hearing shall be held within 60 days after the appointment of the panel. The panel’s final decision or award shall be made within 30 days after the hearing. That final decision or award shall be made by unanimous or majority vote or consent of the arbitrators constituting the panel, and shall be deemed issued at the place of arbitration. The panel’s final decision or award shall be based on the terms and conditions of this Agreement and applicable law.
(f) The panel’s final decision or award may include injunctive relief in response to any actual or impending breach of this Agreement or any other actual or impending action or omission of a Party under or in connection with this Agreement.
(g) The panel’s final decision or award shall be final and binding upon the Parties, and judgment upon that decision or award may be entered in any court having jurisdiction. The Parties waive any right to apply or appeal to any court for relief from the preceding sentence or from any decision of the panel that is made before the final decision or award.
(h) Nothing in this Section 31 limits the right of either Party to apply to a court having jurisdiction to (i) enforce the agreement to arbitrate in accordance with this Section 31 , (ii) seek provisional or temporary injunctive relief, in response to an actual or impending breach of the Agreement or otherwise so as to avoid an irreparable damage or maintain the status quo,
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until a final arbitration decision or award is rendered or the Dispute is otherwise resolved, or challenge or vacate any final arbitration decision or award that does not comply with this Section 31 . In addition, nothing in this Section 31 prohibits the Parties from resolving any Dispute (in whole or in part) at any time by mutual agreement or compromise. This Section 31 shall also not preclude the Parties at any time from mutually agreeing to pursue non-binding mediation of the Dispute.
(i) The panel may proceed to an award notwithstanding the failure of any Party to participate in such proceedings. The prevailing Party in the arbitration proceeding may be entitled to an award of reasonable attorneys’ fees incurred in connection with the arbitration in such amount, if any, as determined by the panel in its discretion. The costs of the arbitration shall be borne equally by the Parties unless otherwise determined by the panel in its award.
(j) The panel shall be empowered to impose sanctions and to take such other actions as it deems necessary to the same extent a judge could impose sanctions or take such other actions pursuant to the Federal Rules of Civil Procedure and applicable law. Each Party agrees to keep all Disputes and arbitration proceedings strictly confidential except for disclosure of information required by applicable law which cannot be waived.
32. Binding Effect; Third Party Beneficiaries . Subject to Section 37 , this Agreement shall be binding upon and inure to the benefit of the Parties hereto, and to their respective heirs, executors, beneficiaries, personal representatives, successors and permitted assigns hereunder; otherwise this Agreement shall not be for the benefit of any third parties.
33. Entire Agreement; Amendment and Termination . This Agreement contains the entire agreement of the Parties hereto with respect to the matters covered herein; moreover, this Agreement supersedes all prior and contemporaneous agreements and understandings, oral or written, between the Parties concerning the subject matter hereof, including any employment agreement between the Company and Executive as in effect immediately before the Effective Date. This Agreement may be amended, waived or terminated only by a written instrument that is identified as an amendment, waiver or termination hereto, and is executed on behalf of both Parties. Executive hereby acknowledges and represents that in executing this Agreement, he did not rely on, has not relied on, and specifically disavows any reliance on any communications, promises, statements, inducements, or representation(s), oral or written, by the Company, except as expressly contained in this Agreement. The Parties represent that they relied on their own judgment in entering into this Agreement.
34. Section 409A .
(a) General . Any provisions of the Agreement that are subject to Section 409A of the Code and the regulations and other authoritative guidance issued thereunder (“ Section 409A ”), are intended to comply with all applicable requirements of Section 409A, or an exemption from the application of Section 409A, and shall be interpreted and administered accordingly. Notwithstanding any provision of this Agreement to the contrary, a termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amount or benefit that constitutes “non-qualified deferred compensation” (within the meaning of Section 409A) upon or following a termination of the Executive’s
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employment unless such termination is also a “separation from service” (as defined under Section 409A) (a “ Separation from Service ”) and, for purposes of any such provision, references herein to a “termination,” “termination of employment” or like terms shall mean a Separation from Service, if applicable. Each payment under this Agreement shall be treated as a separate payment for purposes of Section 409A. In no event may the Executive, directly or indirectly, designate the calendar year of any payment to be made under this Agreement.
(b) Specified Employee . Notwithstanding any provision of this Agreement to the contrary, if any payment or other benefit provided hereunder would be subject to additional taxes and interest under Section 409A because the timing of such payment is not delayed as required by Section 409A for a “specified employee” (as defined under Section 409A), then if the Executive is on the date of Executive ’ s Separation from Service a specified employee, any such payment or benefit that Executive would otherwise be entitled to receive during the first six months following the Separation from Service shall be accumulated and paid in a lump sum within ten (10) days after the date that is six months following the date of the Separation from Service, or such earlier date upon which such amount can be paid under Section 409A without being subject to such additional taxes and interest such as, for example, upon the Executive’s death. Any remaining payments due to Executive under this Agreement shall be paid as otherwise provided in this Agreement.
(c) Reimbursements and In-Kind Benefits . Notwithstanding any provision of this Agreement to the contrary, any reimbursements or in-kind benefits provided under this Agreement that constitute “nonqualified deferred compensation” within the meaning of Section 409A shall be paid to Executive no later than December 31 of the year following the year in which the expense was incurred, the amount of expenses reimbursed in one year shall not affect the amount eligible for reimbursement in any subsequent year, other than medical expenses referred to in Section 105(b) of the Code, and Executive ’ s right to reimbursement under this Agreement will not be subject to liquidation or exchange for other benefits.
(d) No Section 409A Representations . Notwithstanding the foregoing, the Company makes no representations, warranties, or guarantees regarding the tax consequences of this Agreement, or any payments made hereunder, under Section 409A or otherwise, and has advised the Executive to consult with Executive ’ s own tax advisor.
35. Survival of Certain Provisions . Provisions of this Agreement which by their terms must survive the termination of this Agreement shall survive any such termination or expiration of this Agreement or termination of Executive’s employment, as applicable, including, without limitation, Executive’s obligations under Sections 9 through 18 and the Company’s obligations under Section 6 .
36. Waiver of Breach . No waiver by any party hereto of a breach of any provision of this Agreement by any other party, or of compliance with any condition or provision of this Agreement to be performed by such other party, will operate or be construed as a waiver of any subsequent breach by such other party or any similar or dissimilar provision or condition at the same or any subsequent time. The failure of any party hereto to take any action by reason of any breach will not deprive such party of the right to take action at any time while such breach continues.
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37. Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of the Company and its Affiliates (and its and their successors), as well as upon any person or entity acquiring, whether by merger, consolidation, purchase of assets, dissolution or otherwise, all or substantially all of the capital stock, business and/or assets of the Company (or its successor) regardless of whether the Company is the surviving or resulting entity. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation, dissolution or otherwise) to all or substantially all of the capital stock, business or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had occurred; provided, however, no such assumption shall relieve the Company or any of its Affiliates (or any successor thereof) of any of its duties or obligations hereunder unless otherwise agreed, in writing, by Executive.
This Agreement shall inure to the benefit of and be enforceable by Executive’s personal or legal representative, executors, administrators, successors, and heirs. In the event of the death of Executive while any amount is payable hereunder, all such amounts shall be paid to the Designated Beneficiary.
38. Notice . Each notice or other communication required or permitted under this Agreement shall be in writing and transmitted, delivered, or sent by personal delivery, prepaid courier or messenger service (whether overnight or same-day), or prepaid certified United States mail (with return receipt requested), addressed (in any case) to the other party at the address for that party set forth below that party’s signature on this Agreement, or at such other address as the recipient has designated by Notice to the other party, by electronic mail, delivery and read receipt required, or by facsimile, confirmation of delivery required.
Each notice or communication so transmitted, delivered, or sent (a) in person, by courier or messenger service, or by certified United States mail shall be deemed given, received, and effective on the date delivered to or refused by the intended recipient (with the return receipt, or the equivalent record of the courier or messenger, being deemed conclusive evidence of delivery or refusal), or (b) by telecopy or facsimile shall be deemed given received) and effective on the date of actual receipt (with the confirmation of transmission being deemed conclusive evidence of receipt, except where the intended recipient has promptly notified the other party that the transmission is illegible). Nevertheless, if the date of delivery or transmission is not a business day, or if the delivery or transmission is after 5:00 p.m. (local time) on a business day, the notice or other communication shall be deemed given, received, and effective on the next business day.
39. Executive Acknowledgment . Executive acknowledges (a) being knowledgeable and sophisticated as to business matters, including the subject matter of this Agreement, (b) having read this Agreement and understanding its terms and conditions, (c) having been given an ample opportunity to discuss this Agreement with his personal legal counsel prior to execution, and (d) that no strict rules of construction shall apply for or against the drafter or any other party. Executive hereby represents that he is free to enter into this Agreement including, without limitation, that he is not subject to any covenant not to compete or confidentiality agreement that conflicts with this Agreement.
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40. Counterparts . This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute one and the same instrument. Each counterpart may consist of a copy hereof containing multiple signature pages, each signed by one party hereto, but together signed by both Parties.
41. Parent Acknowledgment and Guarantee . Alta Mesa is the direct or indirect parent of the Company. Alta Mesa hereby unconditionally guarantees full and timely performance of the obligations of the Company and its Affiliates under this Agreement. The foregoing guarantee shall include the guarantee of the payment of all benefits and payments due Executive hereunder as a result of the nonperformance of any of such obligations or agreements so guaranteed or as a result of the nonperformance of this guarantee. Executive may, at his option, proceed against Alta Mesa for damages for default in the performance thereof, without first proceeding against the Company or against any of its properties or Affiliates. Alta Mesa further agrees that its guarantee shall be an irrevocable guarantee and shall continue in effect notwithstanding any extension or modification of any guaranteed obligation, any assumption of any such guaranteed obligation by any other party, or any other act or thing which might otherwise operate as a legal or equitable discharge of a guarantor, and Alta Mesa hereby waives all special suretyship defenses and notice requirements. This guarantee shall also be binding upon all successors and assigns of all of substantially all of the business or assets of Alta Mesa. Section 31 shall apply to Disputes between Alta Mesa and Executive mutatis mutandis .
[ Signature pages follow .]
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IN WITNESS WHEREOF , Executive has executed this Agreement, the Company has caused this Agreement to be executed in its name and on its behalf by its duly authorized officer, and Alta Mesa has caused this Agreement to be executed in its name and on its behalf by its duly authorized officer solely for purposes of Section 41 of the Agreement, to be effective as of the Effective Date.
| EXECUTIVE: |
| /s/ Ronald J. Smith |
| Ronald J. Smith |
| Address for Notices: |
| Most recent mailing address for Executive in the Company’s personnel files |
[ Signature pages continue .]
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Exhibit 10.19
ALTA MESA RESOURCES, INC.
2018 LONG TERM INCENTIVE PLAN
ARTICLE I.
PURPOSE
The Plan’s purpose is to enhance the Company’s ability to attract, retain and motivate persons who make (or are expected to make) important contributions to the Company by providing these individuals with equity ownership opportunities. Capitalized terms used in the Plan are defined in Article XI.
ARTICLE II.
ELIGIBILITY
Service Providers are eligible to be granted Awards under the Plan, subject to the limitations described herein.
ARTICLE III.
ADMINISTRATION AND DELEGATION
3.1 Administration . The Plan is administered by the Administrator. The Administrator has authority to determine which Service Providers receive Awards, grant Awards and set Award terms and conditions, subject to the conditions and limitations in the Plan. The Administrator also has the authority to take all actions and make all determinations under the Plan, to interpret the Plan and Award Agreements and to adopt, amend and repeal Plan administrative rules, guidelines and practices as it deems advisable. The Administrator may correct defects and ambiguities, supply omissions and reconcile inconsistencies in the Plan or any Award as it deems necessary or appropriate to administer the Plan and any Awards. The Administrator’s determinations under the Plan are in its sole discretion and will be final and binding on all persons having or claiming any interest in the Plan or any Award.
3.2 Appointment of Committees . To the extent Applicable Laws permit, the Board may delegate any or all of its powers under the Plan to one or more Committees or officers of the Company or any of its Subsidiaries. The Board may abolish any Committee or re-vest in itself any previously delegated authority at any time.
ARTICLE IV.
STOCK AVAILABLE FOR AWARDS
4.1 Number of Shares . Subject to adjustment under Article VIII and the terms of this Article IV, Awards may be made under the Plan covering up to the Overall Share Limit.
4.2 Share Recycling . If all or any part of an Award expires, lapses or is terminated, exchanged for cash, surrendered, repurchased, canceled without having been fully exercised or forfeited, in any case, in a manner that results in the Company acquiring Shares covered by the Award at a price not greater than the price (as adjusted to reflect any Equity Restructuring) paid by the Participant for such Shares or not issuing any Shares covered by the Award, the unused Shares covered by the Award will again be available for Award grants under the Plan. The payment of Dividend Equivalents in cash in conjunction with any outstanding Awards shall not count against the Overall Share Limit. Notwithstanding anything to the contrary contained herein, the following Shares shall not be added to the Shares authorized for grant under Section 4.1 and shall not be available for future grants of
Awards: (i) Shares tendered by the Participant or withheld by the Company in payment of the exercise price of an Option; (ii) Shares tendered by the Participant or withheld by the Company to satisfy any tax withholding obligation with respect to an Award; (iii) Shares subject to a Stock Appreciation Right that are not issued in connection with the stock settlement of the Stock Appreciation Right on exercise thereof; and (iv) Shares purchased on the open market with the cash proceeds from the exercise of Options.
4.3 Incentive Stock Option Limitations . Notwithstanding anything to the contrary herein, no more than 50,000,000 Shares may be issued pursuant to the exercise of Incentive Stock Options.
4.4 Substitute Awards . In connection with an entity’s merger or consolidation with the Company or any Subsidiary or the Company’s or any Subsidiary’s acquisition of an entity’s property or stock, the Administrator may grant Awards in substitution for any options or other stock or stock-based awards granted before such merger or consolidation by such entity or its affiliate. Substitute Awards may be granted on such terms as the Administrator deems appropriate, notwithstanding limitations on Awards in the Plan. Substitute Awards will not count against the Overall Share Limit (nor shall Shares subject to a Substitute Award be added to the Shares available for Awards under the Plan as provided above), except that Shares acquired by exercise of substitute Incentive Stock Options will count against the maximum number of Shares that may be issued pursuant to the exercise of Incentive Stock Options under the Plan. Additionally, in the event that a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines has shares available under a pre-existing plan approved by stockholders and not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of such pre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to the holders of common stock of the entities party to such acquisition or combination) may be used for Awards under the Plan and shall not reduce the Shares authorized for grant under the Plan (and Shares subject to such Awards shall not be added to the Shares available for Awards under the Plan as provided above); provided that Awards using such available shares shall not be made after the date awards or grants could have been made under the terms of the pre-existing plan, absent the acquisition or combination, and shall only be made to individuals who were not Employees or Directors prior to such acquisition or combination.
4.5 Non-Employee Director Compensation . Notwithstanding any provision to the contrary in the Plan, the Administrator may establish compensation for non-employee Directors from time to time, subject to the limitations in the Plan. The Administrator will from time to time determine the terms, conditions and amounts of all such non-employee Director compensation in its discretion and pursuant to the exercise of its business judgment, taking into account such factors, circumstances and considerations as it shall deem relevant from time to time, provided that the sum of any cash compensation, or other compensation, and the value (determined as of the grant date in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, or any successor thereto) of Awards granted to a non-employee Director as compensation for services as a non-employee Director during any fiscal year of the Company may not exceed $500,000. The Administrator may make exceptions to this limit for individual non-employee Directors in extraordinary circumstances, as the Administrator may determine in its discretion, provided that the non-employee Director receiving such additional compensation may not participate in the decision to award such compensation or in other contemporaneous compensation decisions involving non-employee Directors.
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ARTICLE V.
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
5.1 General . The Administrator may grant Options or Stock Appreciation Rights to Service Providers subject to the limitations in the Plan, including any limitations in the Plan that apply to Incentive Stock Options. The Administrator will determine the number of Shares covered by each Option and Stock Appreciation Right, the exercise price of each Option and Stock Appreciation Right and the conditions and limitations applicable to the exercise of each Option and Stock Appreciation Right, and such terms and conditions shall be included in the Participant’s Award Agreement. A Stock Appreciation Right will entitle the Participant (or other person entitled to exercise the Stock Appreciation Right) to receive from the Company upon exercise of the exercisable portion of the Stock Appreciation Right an amount determined by multiplying the excess, if any, of the Fair Market Value of one Share on the date of exercise over the exercise price per Share of the Stock Appreciation Right by the number of Shares with respect to which the Stock Appreciation Right is exercised, subject to any limitations of the Plan or that the Administrator may impose and payable in cash, Shares valued at Fair Market Value or a combination of the two as the Administrator may determine or provide in the Award Agreement.
5.2 Exercise Price . The Administrator will establish each Option’s and Stock Appreciation Right’s exercise price and specify the exercise price in the Award Agreement. The exercise price will not be less than 100% of the Fair Market Value on the grant date of the Option or Stock Appreciation Right. Notwithstanding the foregoing, if on the last day of the term of an Option or Stock Appreciation Right the Fair Market Value of one Share exceeds the applicable exercise or base price per Share, the Participant has not exercised the Option or Stock Appreciation Right and remains employed by the Company or one of its Subsidiaries and the Option or Stock Appreciation Right has not expired, the Option or Stock Appreciation Right shall be deemed to have been exercised by the Participant on such day with payment made by withholding Shares otherwise issuable in connection with its exercise. In such event, the Company shall deliver to the Participant the number of Shares for which the Option or Stock Appreciation Right was deemed exercised, less the number of Shares required to be withheld for the payment of the total purchase price and required withholding taxes; provided, however, any fractional Share shall be settled in cash.
5.3 Duration . Each Option or Stock Appreciation Right will be exercisable at such times and as specified in the Award Agreement, provided that the term of an Option or Stock Appreciation Right will not exceed ten years. Notwithstanding the foregoing and unless determined otherwise by the Company, in the event that on the last business day of the term of an Option or Stock Appreciation Right (other than an Incentive Stock Option) (i) the exercise of the Option or Stock Appreciation Right is prohibited by Applicable Law, as determined by the Company, or (ii) Shares may not be purchased or sold by the applicable Participant due to any Company insider trading policy (including blackout periods) or a “lock-up” agreement undertaken in connection with an issuance of securities by the Company, the term of the Option or Stock Appreciation Right shall be extended until the date that is thirty (30) days after the end of the legal prohibition, black-out period or lock-up agreement, as determined by the Company; provided, however, in no event shall the extension last beyond the ten year term of the applicable Option or Stock Appreciation Right. Notwithstanding the foregoing, if the Participant, prior to the end of the term of an Option or Stock Appreciation Right, violates the non-competition, non-solicitation, confidentiality or other similar restrictive covenant provisions of any employment contract, confidentiality and nondisclosure agreement or other agreement between the Participant and the Company or any of its Subsidiaries, and such violation results in a material injury to the Company or any of its Subsidiaries (as determined by the Administrator), the right of the Participant and the Participant’s transferees to exercise any Option or Stock Appreciation Right issued to the Participant shall terminate immediately upon such violation, unless the Company otherwise determines. In addition, if, prior to the end of the term of an Option or Stock Appreciation Right, the Participant is given notice by the Company or any of its Subsidiaries of the Participant’s Termination of Service by the Company or any of its Subsidiaries for Cause, and the effective date of such Termination of Service is subsequent to the date of the delivery of such notice, the right of the Participant and the Participant’s transferees to exercise any Option or Stock Appreciation Right issued to the Participant shall be suspended from the time of the delivery of such notice until the earlier of (i) such time as it is determined or otherwise agreed that the
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Participant’s service as a Service Provider will not be terminated for Cause as provided in such notice or (ii) the effective date of the Participant’s Termination of Service by the Company or any of its Subsidiaries for Cause (in which case the right of the Participant and the Participant’s transferees to exercise any Option or Stock Appreciation Right issued to the Participant will terminate immediately upon the effective date of such Termination of Service).
5.4 Exercise . Options and Stock Appreciation Rights may be exercised by delivering to the Company a written notice of exercise, in a form the Administrator approves (which may be electronic), signed by the person authorized to exercise the Option or Stock Appreciation Right, together with, as applicable, payment in full (i) as specified in Section 5.5 for the number of Shares for which the Award is exercised and (ii) as specified in Section 9.5 for any applicable taxes. Unless the Administrator otherwise determines, an Option or Stock Appreciation Right may not be exercised for a fraction of a Share.
5.5 Payment Upon Exercise . Subject to Section 10.8, any Company insider trading policy (including blackout periods) and Applicable Laws, the exercise price of an Option must be paid by:
(a) cash, wire transfer of immediately available funds or by check payable to the order of the Company, provided that the Company may limit the use of one of the foregoing payment forms if one or more of the payment forms below is permitted;
(b) if there is a public market for Shares at the time of exercise, unless the Company otherwise determines, (A) delivery (including telephonically to the extent permitted by the Company) of an irrevocable and unconditional undertaking by a broker acceptable to the Company to deliver promptly to the Company sufficient funds to pay the exercise price, or (B) the Participant’s delivery to the Company of a copy of irrevocable and unconditional instructions to a broker acceptable to the Company to deliver promptly to the Company cash or a check sufficient to pay the exercise price; provided that such amount is paid to the Company at such time as may be required by the Administrator;
(c) to the extent permitted by the Administrator, delivery (either by actual delivery or attestation) of Shares owned by the Participant valued at their Fair Market Value;
(d) to the extent permitted by the Administrator, surrendering Shares then issuable upon the Option’s exercise valued at their Fair Market Value on the exercise date;
(e) to the extent permitted by the Administrator, delivery of a promissory note or any other property that the Administrator determines is good and valuable consideration; or
(f) to the extent permitted by the Company, any combination of the above payment forms approved by the Administrator.
ARTICLE VI.
RESTRICTED STOCK; RESTRICTED STOCK UNITS
6.1 General . The Administrator may grant Restricted Stock, or the right to purchase Restricted Stock, to any Service Provider, subject to the Company’s right to repurchase all or part of such shares at their issue price or other stated or formula price from the Participant (or to require forfeiture of such shares) if conditions the Administrator specifies in the Award Agreement are not satisfied before the end of the applicable restriction period or periods that the Administrator establishes for such Award. In addition, the Administrator may grant to Service Providers Restricted Stock Units, which may be subject to vesting and forfeiture conditions during the applicable restriction period or periods, as set forth in an Award Agreement. The Administrator will determine and set forth in the Award Agreement the terms and conditions for each Restricted Stock and Restricted Stock Unit Award, subject to the conditions and limitations contained in the Plan.
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6.2 Restricted Stock .
(a) Dividends . Participants holding shares of Restricted Stock will be entitled to all ordinary cash dividends paid with respect to such Shares, unless the Administrator provides otherwise in the Award Agreement. In addition, unless the Administrator provides otherwise, if any dividends or distributions are paid in Shares, or consist of a dividend or distribution to holders of Common Stock of property other than an ordinary cash dividend, the Shares or other property will be subject to the same restrictions on transferability and forfeitability as the shares of Restricted Stock with respect to which they were paid. In addition, with respect to a share of Restricted Stock, dividends which are paid prior to vesting shall only be paid out to the Participant to the extent that the vesting conditions are subsequently satisfied and the share of Restricted Stock vests.
(b) Stock Certificates . The Company may require that the Participant deposit in escrow with the Company (or its designee) any stock certificates issued in respect of shares of Restricted Stock, together with a stock power endorsed in blank.
(c) Voting Rights . Participants holding Shares of Restricted Stock will be entitled to all voting rights in such Shares, unless the Administrator provides otherwise in the Award Agreement.
6.3 Restricted Stock Units.
(a) Settlement . The Administrator may provide that settlement of Restricted Stock Units will occur upon or as soon as reasonably practicable after the Restricted Stock Units vest or will instead be deferred, on a mandatory basis or at the Participant’s election, in a manner intended to comply with Section 409A.
(b) Stockholder Rights . A Participant will have no rights of a stockholder with respect to Shares subject to any Restricted Stock Unit unless and until the Shares are delivered in settlement of the Restricted Stock Unit.
(c) Dividend Equivalents . If the Administrator provides, a grant of Restricted Stock Units may provide a Participant with the right to receive Dividend Equivalents. Dividend Equivalents may be paid currently or credited to an account for the Participant, settled in cash or Shares and subject to the same restrictions on transferability and forfeitability as the Restricted Stock Units with respect to which the Dividend Equivalents are granted and subject to other terms and conditions as set forth in the Award Agreement. In addition, Dividend Equivalents with respect to an Award that are based on dividends paid prior to the vesting of such Award shall only be paid out to the Participant to the extent that the vesting conditions are subsequently satisfied and the Award vests.
ARTICLE VII.
OTHER STOCK OR CASH BASED AWARDS
Other Stock or Cash Based Awards may be granted to Participants, including Awards entitling Participants to receive Shares to be delivered in the future and including annual or other periodic or long-term cash bonus awards (whether based on specified Performance Criteria or otherwise), in each case subject to any conditions and limitations in the Plan and the applicable Award Agreement. Such Other
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Stock or Cash Based Awards will also be available as a payment form in the settlement of other Awards, as standalone payments and as payment in lieu of compensation to which a Participant is otherwise entitled. Other Stock or Cash Based Awards may be paid in Shares, cash or other property, as the Administrator determines. Subject to the provisions of the Plan, the Administrator will determine the terms and conditions of each Other Stock or Cash Based Award, including any purchase price, performance goal (which may be based on the Performance Criteria), transfer restrictions, vesting conditions, and payment terms, which will be set forth in the applicable Award Agreement.
ARTICLE VIII.
ADJUSTMENTS FOR CHANGES IN COMMON STOCK
AND CERTAIN OTHER EVENTS
8.1 Equity Restructuring . In connection with any Equity Restructuring, notwithstanding anything to the contrary in this Article VIII, the Administrator will equitably adjust each outstanding Award as it deems appropriate to reflect the Equity Restructuring, which may include adjusting the number and type of securities subject to each outstanding Award and/or the Award’s exercise price or grant price (if applicable), granting new Awards to Participants, and making a cash payment to Participants. The adjustments provided under this Section 8.1 will be final and binding on the affected Participant and the Company; provided that the Administrator will determine whether an adjustment is equitable.
8.2 Corporate Transactions . In the event of any dividend or other distribution (whether in the form of cash, Common Stock, other securities, or other property), reorganization, merger, consolidation, combination, amalgamation, repurchase, recapitalization, liquidation, dissolution, or sale, transfer, exchange or other disposition of all or substantially all of the assets of the Company, or sale or exchange of Common Stock or other securities of the Company, Change in Control, issuance of warrants or other rights to purchase Common Stock or other securities of the Company, other similar corporate transaction or event, other unusual or nonrecurring transaction or event affecting the Company or its financial statements or any change in any Applicable Laws or accounting principles, the Administrator, on such terms and conditions as it deems appropriate, either by the terms of the Award or by action taken prior to the occurrence of such transaction or event (except that action to give effect to a change in Applicable Law or accounting principles may be made within a reasonable period of time after such change) and either automatically, or upon the Participant’s request, is hereby authorized to take any one or more of the following actions whenever the Administrator determines that such action is appropriate in order to (x) prevent dilution or enlargement of the benefits or potential benefits intended by the Company to be made available under the Plan or with respect to any Award granted or issued under the Plan, (y) to facilitate such transaction or event, or (z) give effect to such changes in Applicable Laws or accounting principles:
(a) To provide for the cancellation of any such Award in exchange for either an amount of cash or other property with a value equal to the amount that could have been obtained upon the exercise or settlement of the vested portion of such Award or realization of the Participant’s rights under the vested portion of such Award, as applicable; provided that, if the amount that could have been obtained upon the exercise or settlement of the vested portion of such Award or realization of the Participant’s rights, in any case, is equal to or less than zero, then the Award may be terminated without payment;
(b) To provide that such Award shall vest and, to the extent applicable, be exercisable as to all Shares covered thereby, notwithstanding anything to the contrary in the Plan or the provisions of such Award Agreement;
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(c) To provide that such Award be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted for by awards covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and/or applicable exercise or purchase price, in all cases, as determined by the Administrator to provide substantially equivalent value;
(d) To make adjustments in the number and type of shares of Common Stock (or other securities or property) subject to outstanding Awards and/or with respect to which Awards may be granted under the Plan (including, but not limited to, adjustments of the limitations in Article IV hereof on the maximum number and kind of shares which may be issued) and/or in the terms and conditions of (including the grant or exercise price), and the criteria included in, outstanding Awards; provided that such adjustments result in substantially equivalent value being provided to the holders of outstanding Awards; and/or
(e) To replace such Award with other rights or property of substantially equivalent value as selected by the Administrator, and in such cases, the Administrator may provide that the Award will terminate and cannot vest, be exercised or become payable after the applicable event.
8.3 Administrative Stand Still . In the event of any pending stock dividend, stock split, combination or exchange of shares, merger, consolidation or other distribution (other than normal cash dividends) of Company assets to stockholders, or any other extraordinary transaction or change affecting the Shares or the share price of Common Stock, including any Equity Restructuring or any securities offering or other similar transaction, for administrative convenience, the Administrator may refuse to permit the exercise of any Award for up to thirty days before or after such transaction.
8.4 General . Except as expressly provided in the Plan or the Administrator’s action under the Plan, no Participant will have any rights due to any subdivision or consolidation of Shares of any class, dividend payment, increase or decrease in the number of Shares of any class or dissolution, liquidation, merger, or consolidation of the Company or other corporation. Except as expressly provided with respect to an Equity Restructuring under Section 8.1 above or the Administrator’s action under the Plan, no issuance by the Company of Shares of any class, or securities convertible into Shares of any class, will affect, and no adjustment will be made regarding, the number of Shares subject to an Award or the Award’s grant or exercise price. The existence of the Plan, any Award Agreements and the Awards granted hereunder will not affect or restrict in any way the Company’s right or power to make or authorize (i) any adjustment, recapitalization, reorganization or other change in the Company’s capital structure or its business, (ii) any merger, consolidation, dissolution or liquidation of the Company or sale of Company assets or (iii) any sale or issuance of securities, including securities with rights superior to those of the Shares or securities convertible into or exchangeable for Shares. The Administrator may treat Participants and Awards (or portions thereof) differently under this Article VIII.
ARTICLE IX.
GENERAL PROVISIONS APPLICABLE TO AWARDS
9.1 Transferability . Except as the Administrator may determine or provide in an Award Agreement or otherwise for Awards other than Incentive Stock Options, Awards may not be sold, assigned, transferred, pledged or otherwise encumbered, either voluntarily or by operation of law, except by will or the laws of descent and distribution, or, subject to the Administrator’s consent, pursuant to a domestic relations order, and, during the life of the Participant, will be exercisable only by the Participant. References to a Participant, to the extent relevant in the context, will include references to a Participant’s authorized transferee that the Administrator specifically approves.
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9.2 Documentation . Each Award will be evidenced in an Award Agreement, which may be written or electronic, as the Administrator determines. Each Award may contain terms and conditions in addition to those set forth in the Plan.
9.3 Discretion . Except as the Plan otherwise provides, each Award may be made alone or in addition or in relation to any other Award. The terms of each Award to a Participant need not be identical, and the Administrator need not treat Participants or Awards (or portions thereof) uniformly.
9.4 Termination of Status . Pursuant to the terms of the Award Agreement, the Administrator will determine how the disability, death, retirement, authorized leave of absence or any other change or purported change in a Participant’s Service Provider status affects an Award and the extent to which, and the period during which, the Participant, the Participant’s legal representative, conservator, guardian or Designated Beneficiary may exercise rights under the Award, if applicable.
9.5 Withholding . Each Participant must pay the Company, or make provision satisfactory to the Administrator for payment of, any taxes required by law to be withheld in connection with such Participant’s Awards by the date of the event creating the tax liability. The Company may deduct an amount sufficient to satisfy such tax obligations based on the minimum statutory withholding rates (or such other rate as may be determined by the Company after considering any accounting consequences or costs) from any payment of any kind otherwise due to a Participant. Subject to Section 10.8 and any Company insider trading policy (including blackout periods), Participants may satisfy such tax obligations (i) in cash, by wire transfer of immediately available funds, by check made payable to the order of the Company, provided that the Company may limit the use of the foregoing payment forms if one or more of the payment forms below is permitted, (ii) to the extent permitted by the Administrator, in whole or in part by delivery of Shares, including Shares retained from the Award creating the tax obligation, valued at their Fair Market Value, (iii) if there is a public market for Shares at the time the tax obligations are satisfied, unless the Company otherwise determines, (A) delivery (including telephonically to the extent permitted by the Company) of an irrevocable and unconditional undertaking by a broker acceptable to the Company to deliver promptly to the Company sufficient funds to satisfy the tax obligations, or (B) delivery by the Participant to the Company of a copy of irrevocable and unconditional instructions to a broker acceptable to the Company to deliver promptly to the Company cash or a check sufficient to satisfy the tax withholding; provided that such amount is paid to the Company at such time as may be required by the Administrator, or (iv) to the extent permitted by the Company, any combination of the foregoing payment forms approved by the Administrator. If any tax withholding obligation will be satisfied under clause (ii) of the immediately preceding sentence by the Company’s retention of Shares from the Award creating the tax obligation and there is a public market for Shares at the time the tax obligation is satisfied, the Company may elect to instruct any brokerage firm determined acceptable to the Company for such purpose to sell on the applicable Participant’s behalf some or all of the Shares retained and to remit the proceeds of the sale to the Company or its designee, and each Participant’s acceptance of an Award under the Plan will constitute the Participant’s authorization to the Company and instruction and authorization to such brokerage firm to complete the transactions described in this sentence.
9.6 Amendment of Award; Prohibition on Repricing . The Administrator may amend, modify or terminate any outstanding Award, including by substituting another Award of the same or a different type, changing the exercise or settlement date, and converting an Incentive Stock Option to a Non-Qualified Stock Option. The Participant’s consent to such action will be required unless (i) the action, taking into account any related action, does not materially and adversely affect the Participant’s rights under the Award, or (ii) the change is permitted under Article VIII or pursuant to Section 10.6. Notwithstanding the foregoing or anything in the Plan to the contrary, the Administrator may not except pursuant to Article VIII, without the approval of the stockholders of the Company, reduce the exercise
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price per share of outstanding Options or Stock Appreciation Rights or cancel outstanding Options or Stock Appreciation Rights in exchange for cash, other Awards or Options or Stock Appreciation Rights with an exercise price per share that is less than the exercise price per share of the original Options or Stock Appreciation Rights.
9.7 Conditions on Delivery of Stock . The Company will not be obligated to deliver any Shares under the Plan or remove restrictions from Shares previously delivered under the Plan until such time that (i) all Award conditions have been met or removed to the Company’s satisfaction, (ii) as determined by the Company, all other legal matters regarding the issuance and delivery of such Shares have been satisfied, including any applicable securities laws and stock exchange or stock market rules and regulations, and (iii) the Participant has executed and delivered to the Company such representations or agreements as the Administrator deems necessary or appropriate to satisfy any Applicable Laws. The Company’s inability to obtain authority from any regulatory body having jurisdiction, which the Administrator determines is necessary to the lawful issuance and sale of any securities, will relieve the Company of any liability for failing to issue or sell such Shares as to which such requisite authority has not been obtained.
9.8 Acceleration . The Administrator may provide in any Award Agreement at the time of grant or at any other time provide that any Award will become immediately vested and fully or partially exercisable, free of some or all restrictions or conditions, or otherwise fully or partially realizable, upon a Change in Control or otherwise.
9.9 Additional Terms of Incentive Stock Options . The Administrator may grant Incentive Stock Options only to employees of the Company, any of its present or future parent or subsidiary corporations, as defined in Sections 424(e) or (f) of the Code, respectively, and any other entities the employees of which are eligible to receive Incentive Stock Options under the Code. If an Incentive Stock Option is granted to a Greater Than 10% Stockholder, the exercise price will not be less than 110% of the Fair Market Value on the Option’s grant date, and the term of the Option will not exceed five years. All Incentive Stock Options will be subject to and construed consistently with Section 422 of the Code. By accepting an Incentive Stock Option, the Participant agrees to give prompt notice to the Company of dispositions or other transfers (other than in connection with a Change in Control) of Shares acquired under the Option made within (i) two years from the grant date of the Option or (ii) one year after the transfer of such Shares to the Participant, specifying the date of the disposition or other transfer and the amount the Participant realized, in cash, other property, assumption of indebtedness or other consideration, in such disposition or other transfer. Neither the Company nor the Administrator will be liable to a Participant, or any other party, if an Incentive Stock Option fails or ceases to qualify as an “incentive stock option” under Section 422 of the Code. Any Incentive Stock Option or portion thereof that fails to qualify as an “incentive stock option” under Section 422 of the Code for any reason, including becoming exercisable with respect to Shares having a fair market value exceeding the $100,000 limitation under Treasury Regulation Section 1.422-4, will be a Non-Qualified Stock Option.
ARTICLE X.
MISCELLANEOUS
10.1 No Right to Employment or Other Status . No person will have any claim or right to be granted an Award, and the grant of an Award will not be construed as giving a Participant the right to continued employment or any other relationship with the Company or any Subsidiary. The Company and its Subsidiaries expressly reserve the right at any time to dismiss or otherwise terminate its relationship with a Participant free from any liability or claim under the Plan or any Award, except as expressly provided in an Award Agreement.
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10.2 No Rights as Stockholder; Certificates . Subject to the Award Agreement, no Participant or Designated Beneficiary will have any rights as a stockholder with respect to any Shares to be distributed under an Award until becoming the record holder of such Shares. Notwithstanding any other provision of the Plan, unless the Administrator otherwise determines or Applicable Laws require, the Company will not be required to deliver to any Participant certificates evidencing Shares issued in connection with any Award and instead such Shares may be recorded in the books of the Company (or, as applicable, its transfer agent or stock plan administrator). The Company may place legends on stock certificates issued under the Plan that the Administrator deems necessary or appropriate to comply with Applicable Laws.
10.3 Effective Date and Term of Plan . Unless earlier terminated by the Board, the Plan will become effective upon the consummation of the Company’s initial business combination, subject to the approval of the Company’s stockholders, and will remain in effect until the tenth anniversary of the earlier of (i) the date the Board adopted the Plan or (ii) the date the Company’s stockholders approved the Plan, but Awards previously granted may extend beyond that date in accordance with the Plan. If the Plan is not approved by the Company’s stockholders, the Plan will not become effective and no Awards will be granted under the Plan.
10.4 Amendment of Plan . The Administrator may amend, suspend or terminate the Plan at any time; provided that no amendment, other than an increase to the Overall Share Limit, may materially and adversely affect any Award outstanding at the time of such amendment without the affected Participant’s consent. No Awards may be granted under the Plan during any suspension period or after Plan termination. Awards outstanding at the time of any Plan suspension or termination will continue to be governed by the Plan and the Award Agreement, as in effect before such suspension or termination. The Board will obtain stockholder approval of any Plan amendment to the extent necessary to comply with Applicable Laws.
10.5 Provisions for Foreign Participants . The Administrator may modify Awards granted to Participants who are foreign nationals or employed outside the United States or establish subplans or procedures under the Plan to address differences in laws, rules, regulations or customs of such foreign jurisdictions with respect to tax, securities, currency, employee benefit or other matters.
10.6 Section 409A .
(a) General . The Company intends that all Awards be structured to comply with, or be exempt from, Section 409A, such that no adverse tax consequences, interest, or penalties under Section 409A apply. Notwithstanding anything in the Plan or any Award Agreement to the contrary, the Administrator may, without a Participant’s consent, amend this Plan or Awards, adopt policies and procedures, or take any other actions (including amendments, policies, procedures and retroactive actions) as are necessary or appropriate to preserve the intended tax treatment of Awards, including any such actions intended to (A) exempt this Plan or any Award from Section 409A, or (B) comply with Section 409A, including regulations, guidance, compliance programs and other interpretative authority that may be issued after an Award’s grant date. The Company makes no representations or warranties as to an Award’s tax treatment under Section 409A or otherwise. The Company and its Subsidiaries will have no obligation under this Section 10.6 or otherwise to avoid the taxes, penalties or interest under Section 409A with respect to any Award and will have no liability to any Participant or any other person if any Award, compensation or other benefits under the Plan are determined to constitute noncompliant “nonqualified deferred compensation” subject to taxes, penalties or interest under Section 409A.
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(b) Separation from Service . If an Award constitutes “nonqualified deferred compensation” under Section 409A, any payment or settlement of such Award upon a termination of a Participant’s Service Provider relationship will, to the extent necessary to avoid taxes under Section 409A, be made only upon the Participant’s “separation from service” (within the meaning of Section 409A), whether such “separation from service” occurs upon or after the termination of the Participant’s Service Provider relationship. For purposes of this Plan or any Award Agreement relating to any such payments or benefits, references to a “termination,” “termination of employment” or like terms means a “separation from service.”
(c) Payments to Specified Employees . Notwithstanding any contrary provision in the Plan or any Award Agreement, any payment(s) of “nonqualified deferred compensation” required to be made under an Award to a “specified employee” (as defined under Section 409A and as the Administrator determines) due to his or her “separation from service” will, to the extent necessary to avoid taxes under Section 409A(a)(2)(B)(i) of the Code, be delayed for the six-month period immediately following such “separation from service” (or, if earlier, until the specified employee’s death) and will instead be paid (as set forth in the Award Agreement) on the day immediately following such six-month period or as soon as administratively practicable thereafter (without interest) but not later than 60 days following the end of such six-month period. Any payments of “nonqualified deferred compensation” under such Award payable more than six months following the Participant’s “separation from service” will be paid at the time or times the payments are otherwise scheduled to be made.
10.7 Limitations on Liability and Indemnification . Notwithstanding any other provisions of the Plan, no individual acting as a director, officer, other employee or agent of the Company or any Subsidiary will be liable to any Participant, former Participant, spouse, beneficiary, or any other person for any claim, loss, liability, or expense incurred in connection with the Plan or any Award, and such individual will not be personally liable with respect to the Plan because of any contract or other instrument executed in his or her capacity as an Administrator, director, officer, other employee or agent of the Company or any Subsidiary. The Company will indemnify, defend and hold harmless each past or present director, officer, other employee and agent of the Company or any Subsidiary that has been or will be granted or delegated any duty or power relating to the Plan’s administration or interpretation, against any cost or expense (including attorneys’ fees) or liability (including any sum paid in settlement of a claim with the Administrator’s approval) arising from any act or omission concerning this Plan unless directly arising from such person’s own fraud or bad faith. This indemnification obligation of the Company shall supplement, and not supersede or replace, any other indemnification obligation, policy or agreement of the Company covering such indemnified person.
10.8 Lock-Up Period . The Company may, at the request of any underwriter representative or otherwise, in connection with registering the offering of any Company securities under the Securities Act, prohibit Participants from, directly or indirectly, selling or otherwise transferring any Shares or other Company securities during a period of up to one hundred eighty days following the effective date of a Company registration statement filed under the Securities Act, or such longer period as determined by the underwriter.
10.9 Data Privacy . As a condition for receiving any Award, each Participant explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of personal data as described in this section by and among the Company and its Subsidiaries and affiliates exclusively for implementing, administering and managing the Participant’s participation in the Plan. The Company and its Subsidiaries and affiliates may hold certain personal information about a Participant, including the Participant’s name, address and telephone number; birthdate; social security, insurance number or other identification number; salary; nationality; job title(s); any Shares held in the Company or its Subsidiaries and affiliates; and Award details, to implement, manage and administer the Plan and Awards (the
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“ Data ”). The Company and its Subsidiaries and affiliates may transfer the Data amongst themselves as necessary to implement, administer and manage a Participant’s participation in the Plan, and the Company and its Subsidiaries and affiliates may transfer the Data to third parties assisting the Company with Plan implementation, administration and management. These recipients may be located in the Participant’s country, or elsewhere, and the Participant’s country may have different data privacy laws and protections than the recipients’ country. By accepting an Award, each Participant authorizes such recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, to implement, administer and manage the Participant’s participation in the Plan, including any required Data transfer to a broker or other third party with whom the Company or the Participant may elect to deposit any Shares. The Data related to a Participant will be held only as long as necessary to implement, administer, and manage the Participant’s participation in the Plan. A Participant may, at any time, view the Data that the Company holds regarding such Participant, request additional information about the storage and processing of the Data regarding such Participant, recommend any necessary corrections to the Data regarding the Participant or refuse or withdraw the consents in this Section 10.9 in writing, without cost, by contacting the local human resources representative. If the Participant refuses or withdraws the consents in this Section 10.9, in the Administrator’s discretion, the Company may cancel the Participant’s ability to participate in the Plan. For more information on the consequences of refusing or withdrawing consent, Participants may contact their local human resources representative.
10.10 Severability . If any portion of the Plan or any action taken under it is held illegal or invalid for any reason, the illegality or invalidity will not affect the remaining parts of the Plan, and the Plan will be construed and enforced as if the illegal or invalid provisions had been excluded, and the illegal or invalid action will be null and void.
10.11 Governing Documents . If any contradiction occurs between the Plan and any Award Agreement or other written agreement between a Participant and the Company (or any Subsidiary) that the Administrator has approved, the Plan will govern, unless it is expressly specified in such Award Agreement or other written document that a specific provision of the Plan will not apply.
10.12 Governing Law . The Plan and all Awards will be governed by and interpreted in accordance with the laws of the State of Delaware, disregarding any state’s choice-of-law principles requiring the application of a jurisdiction’s laws other than the State of Delaware.
10.13 Claw-back Provisions . All Awards (including any proceeds, gains or other economic benefit the Participant actually or constructively receives upon receipt or exercise of any Award or the receipt or resale of any Shares underlying the Award) will be subject to any Company claw-back policy, including any claw-back policy adopted to comply with Applicable Laws (including the Dodd-Frank Wall Street Reform and Consumer Protection Act and any rules or regulations promulgated thereunder) as set forth in such claw-back policy or the Award Agreement.
10.14 Titles and Headings . The titles and headings in the Plan are for convenience of reference only and, if any conflict, the Plan’s text, rather than such titles or headings, will control.
10.15 Conformity to Securities Laws . Participant acknowledges that the Plan is intended to conform to the extent necessary with Applicable Laws. Notwithstanding anything herein to the contrary, the Plan and all Awards will be administered only in conformance with Applicable Laws. To the extent Applicable Laws permit, the Plan and all Award Agreements will be deemed amended as necessary to conform to Applicable Laws.
10.16 Relationship to Other Benefits . No payment under the Plan will be taken into account in determining any benefits under any pension, retirement, savings, profit sharing, group insurance, welfare or other benefit plan of the Company or any Subsidiary except as expressly provided in writing in such other plan or an agreement thereunder.
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10.17 Broker-Assisted Sales . In the event of a broker-assisted sale of Shares in connection with the payment of amounts owed by a Participant under or with respect to the Plan or Awards, including amounts to be paid under the final sentence of Section 9.5: (a) any Shares to be sold through the broker-assisted sale will be sold on the day the payment first becomes due, or as soon thereafter as practicable; (b) such Shares may be sold as part of a block trade with other Participants in the Plan in which all participants receive an average price; (c) the applicable Participant will be responsible for all broker’s fees and other costs of sale, and by accepting an Award, each Participant agrees to indemnify and hold the Company harmless from any losses, costs, damages, or expenses relating to any such sale; (d) to the extent the Company or its designee receives proceeds of such sale that exceed the amount owed, the Company will pay such excess in cash to the applicable Participant as soon as reasonably practicable; (e) the Company and its designees are under no obligation to arrange for such sale at any particular price; and (f) in the event the proceeds of such sale are insufficient to satisfy the Participant’s applicable obligation, the Participant may be required to pay immediately upon demand to the Company or its designee an amount in cash sufficient to satisfy any remaining portion of the Participant’s obligation.
10.18 No Fractional Shares . Notwithstanding any provision in the Plan to the contrary, no fractional Shares shall be issued or delivered pursuant to the Plan or any Award, and the Administrator shall determine whether cash, other securities or other property shall be paid or transferred in lieu of any fractional Shares, or whether such fractional Shares or any rights thereto shall be canceled, terminated or otherwise eliminated.
10.19 Section 83(b) Elections Prohibited . No Participant may make an election under Section 83(b) of the Code, or any successor section thereto, with respect to any Award without the consent of the Administrator, which the Administrator may grant or withhold in its discretion.
ARTICLE XI.
DEFINITIONS
As used in the Plan, the following words and phrases will have the following meanings:
11.1 “ Administrator ” means the Board or a Committee to the extent that the Board’s powers or authority under the Plan have been delegated to such Committee.
11.2 “ Applicable Laws ” means the requirements relating to the administration of equity incentive plans under U.S. federal and state securities, tax and other applicable laws, rules and regulations, the applicable rules of any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws and rules of any foreign country or other jurisdiction where Awards are granted.
11.3 “ Award ” means, individually or collectively, a grant under the Plan of Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units or Other Stock or Cash Based Awards.
11.4 “ Award Agreement ” means a written agreement between the Participant and the Company evidencing an Award, which may be electronic, that contains such terms and conditions as the Administrator determines, consistent with and subject to the terms and conditions of the Plan.
11.5 “ Board ” means the Board of Directors of the Company.
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11.6 “ Cause ” means (i) if a Participant is a party to a written employment or consulting agreement with the Company or any of its Subsidiaries or an Award Agreement in which the term “cause” is defined (a “ Relevant Agreement ”), “Cause” as defined in the Relevant Agreement, or (ii) if no Relevant Agreement exists, (A) the Administrator’s determination that the Participant failed to substantially perform the Participant’s material duties (other than a failure resulting from the Participant’s illness or incapacity); (B) the Administrator’s determination that the Participant willfully failed to carry out, or comply with any lawful and reasonable material directive of the Board or the Participant’s immediate supervisor; (C) the occurrence of any act or omission by the Participant that results in the Participant’s conviction, plea of no contest, plea of nolo contendere , or imposition of unadjudicated probation for any felony or crime involving moral turpitude; (D) the Participant’s unlawful use (including being under the influence) or possession of illegal drugs on the premises of the Company or any of its Subsidiaries or while in the course and scope of performing the Participant’s duties and responsibilities for the Company or any of its Subsidiaries; or (E) the Participant’s commission of an act of fraud, embezzlement, misappropriation, intentional misconduct or gross negligence, or breach of fiduciary duty against the Company or any of its Subsidiaries. Notwithstanding the foregoing, if the Participant is an Employee, “Cause” shall not exist under sub-clause (ii)(A) or (ii)(B) until after written notice from the Company has been given to the Employee of such material breach or nonperformance and the Employee has failed to cure such breach or nonperformance within the time period set by the Company, but in no event less than thirty (30) business days after the Employee’s receipt of such notice.
11.7 “ Change in Control ” means and includes each of the following:
(a) A transaction or series of transactions (other than an offering of Common Stock to the general public through a registration statement filed with the Securities and Exchange Commission or a transaction or series of transactions that meets the requirements of clauses (i) and (ii) of subsection (c) below) whereby any “person” or related “group” of “persons” (as such terms are used in Sections 13(d) and 14(d)(2) of the Exchange Act) (other than the Company, any of its Subsidiaries, an employee benefit plan maintained by the Company or any of its Subsidiaries or a “person” that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common control with, the Company) directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company possessing more than 50% of the total combined voting power of the Company’s securities outstanding immediately after such acquisition; or
(b) During any period of two consecutive years, individuals who, at the beginning of such period, constitute the Board together with any new Director(s) (other than a Director designated by a person who shall have entered into an agreement with the Company to effect a transaction described in subsections (a) or (c)) whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds of the Directors then still in office who either were Directors at the beginning of the two-year period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or
(c) The consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or more intermediaries) of (x) a merger, consolidation, reorganization, or business combination or (y) a sale or other disposition of all or substantially all of the Company’s assets in any single transaction or series of related transactions or (z) the acquisition of assets or stock of another entity, in each case other than a transaction:
(i) which results in the Company’s voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of the Company or the person that, as a result of the transaction, controls, directly or indirectly, the Company or owns, directly or indirectly, all or substantially all of the
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Company’s assets or otherwise succeeds to the business of the Company (the Company or such person, the “ Successor Entity ”)) directly or indirectly, at least a majority of the combined voting power of the Successor Entity’s outstanding voting securities immediately after the transaction, and
(ii) after which no person or group beneficially owns voting securities representing 50% or more of the combined voting power of the Successor Entity; provided , however , that no person or group shall be treated for purposes of this clause (ii) as beneficially owning 50% or more of the combined voting power of the Successor Entity solely as a result of the voting power held in the Company prior to the consummation of the transaction.
Notwithstanding the foregoing, in no event shall the Company’s initial business combination or the transactions occurring in connection therewith constitute a Change in Control and, if a Change in Control constitutes a payment event with respect to any Award (or portion of any Award) that provides for the deferral of compensation that is subject to Section 409A, to the extent required to avoid the imposition of additional taxes under Section 409A, the transaction or event described in subsection (a), (b) or (c) with respect to such Award (or portion thereof) shall only constitute a Change in Control for purposes of the payment timing of such Award if such transaction also constitutes a “change in control event,” as defined in Treasury Regulation Section 1.409A-3(i)(5).
The Administrator shall have full and final authority, which shall be exercised in its discretion, to determine conclusively whether a Change in Control has occurred pursuant to the above definition, the date of the occurrence of such Change in Control and any incidental matters relating thereto; provided that any exercise of authority in conjunction with a determination of whether a Change in Control is a “change in control event” as defined in Treasury Regulation Section 1.409A-3(i)(5) shall be consistent with such regulation.
11.8 “ Code ” means the Internal Revenue Code of 1986, as amended, and the regulations issued thereunder.
11.9 “ Committee ” means one or more committees or subcommittees of the Board, which may include one or more Company directors or executive officers, to the extent Applicable Laws permit. To the extent required to comply with the provisions of Rule 16b-3, it is intended that each member of the Committee will be, at the time the Committee takes any action with respect to an Award that is subject to Rule 16b-3, a “non-employee director” within the meaning of Rule 16b-3; however, a Committee member’s failure to qualify as a “non-employee director” within the meaning of Rule 16b-3 will not invalidate any Award granted by the Committee that is otherwise validly granted under the Plan.
11.10 “ Common Stock ” means the Class A common stock of the Company, $.0001 par value per Share, and any class of common stock into which such common shares may hereafter be converted, reclassified or recapitalized.
11.11 “ Company ” means Alta Mesa Resources, Inc. (known prior to the consummation of the Company’s initial business combination as Silver Run Acquisition Corporation II), a Delaware corporation, or any successor.
11.12 “ Consultant ” means any person, including any adviser, engaged by the Company or its parent or Subsidiary to render services to such entity if the consultant or adviser: (i) renders bona fide services to the Company; (ii) renders services not in connection with the offer or sale of securities in a capital-raising transaction and does not directly or indirectly promote or maintain a market for the Company’s securities; and (iii) is a natural person.
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11.13 “ Designated Beneficiary ” means the beneficiary or beneficiaries the Participant designates, in a manner the Administrator determines, to receive amounts due or exercise the Participant’s rights if the Participant dies. Without a Participant’s effective designation, “Designated Beneficiary” will mean the Participant’s estate.
11.14 “ Director ” means a Board member.
11.15 “ Disability ” means a permanent and total disability under Section 22(e)(3) of the Code, as amended.
11.16 “ Dividend Equivalents ” means a right granted to a Participant under the Plan to receive the equivalent value (in cash or Shares) of dividends paid on Shares.
11.17 “ Employee ” means any employee of the Company or its Subsidiaries within the meaning of Section 3401(c) of the Code including, without limitation, officers who are members of the Board.
11.18 “ Equity Restructuring ” means a nonreciprocal transaction between the Company and its stockholders, such as a stock dividend, stock split, spin-off or recapitalization through a large, nonrecurring cash dividend, that affects the number or kind of Shares (or other Company securities) or the share price of Common Stock (or other Company securities) and causes a change in the per share value of the Common Stock underlying outstanding Awards.
11.19 “ Exchange Act ” means the Securities Exchange Act of 1934, as amended.
11.20 “ Fair Market Value ” means, as of any date, the value of Common Stock determined as follows: (i) if the Common Stock is listed on any established stock exchange, its Fair Market Value will be the closing sales price for such Common Stock as quoted on such exchange for such date, or if no sale occurred on such date, the last day preceding such date during which a sale occurred, as reported in The Wall Street Journal or another source the Administrator deems reliable; (ii) if the Common Stock is not traded on a stock exchange but is quoted on a national market or other quotation system, the closing sales price on such date, or if no sales occurred on such date, then on the last date preceding such date during which a sale occurred, as reported in The Wall Street Journal or another source the Administrator deems reliable; or (iii) without an established market for the Common Stock, the Administrator will determine the Fair Market Value in its discretion.
11.21 “ Greater Than 10% Stockholder ” means an individual then owning (within the meaning of Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company or its parent or subsidiary corporation, as defined in Section 424(e) and (f) of the Code, respectively.
11.22 “ Incentive Stock Option ” means an Option intended to qualify as an “incentive stock option” as defined in Section 422 of the Code.
11.23 “ Non-Qualified Stock Option ” means an Option not intended or not qualifying as an Incentive Stock Option.
11.24 “ Option ” means an option to purchase Shares.
11.25 “ Other Stock or Cash Based Awards ” means cash awards, awards of Shares, and other awards valued wholly or partially by referring to, or are otherwise based on, Shares or other property.
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11.26 “ Overall Share Limit ” means 50,000,000 Shares.
11.27 “ Participant ” means a Service Provider who has been granted an Award.
11.28 “ Performance Criteria ” mean the criteria (and adjustments) that the Administrator may select for an Award to establish performance goals for a performance period, which may include the following: net earnings or losses (either before or after one or more of interest, taxes, depreciation, amortization, and non-cash equity-based compensation expense); gross or net sales or revenue or sales or revenue growth; net income (either before or after taxes) or adjusted net income; profits (including but not limited to gross profits, net profits, profit growth, net operation profit or economic profit), profit return ratios or operating margin; budget or operating earnings (either before or after taxes or before or after allocation of corporate overhead and bonus); cash flow (including operating cash flow and free cash flow or cash flow return on capital); return on assets; return on capital or invested capital; cost of capital; return on stockholders’ equity; total stockholder return; return on sales; costs, reductions in costs and cost control measures; expenses; working capital; earnings or loss per share; adjusted earnings or loss per share; price per share or dividends per share (or appreciation in or maintenance of such price or dividends); regulatory achievements or compliance; implementation, completion or attainment of objectives relating to research, development, regulatory, commercial, or strategic milestones or developments; market share; economic value or economic value added models; division, group or corporate financial goals; individual business objectives; production or growth in production; reserves or added reserves; growth in reserves per share; inventory growth; environmental, health and/or safety performance; effectiveness of hedging programs; improvements in internal controls and policies and procedures; customer satisfaction/growth; customer service; employee satisfaction; recruitment and maintenance of personnel; human resources management; supervision of litigation and other legal matters; strategic partnerships and transactions; financial ratios (including those measuring liquidity, activity, profitability or leverage); debt levels or reductions; sales-related goals; financing and other capital raising transactions; cash on hand; acquisition activity; investment sourcing activity; drilling results; proved reserves, reserve replacement, drillbit reserve replacement or reserve growth; exploration and development costs, capital expenditures, finding and development costs, drillbit finding and development costs, operating costs (including, but not limited to, lease operating expenses, severance taxes and other production taxes, gathering and transportation costs and other components of operating expenses), based operating costs or production costs; production volumes, production growth, or debt-adjusted production growth, which may be of oil, gas, natural gas liquids or any combination thereof; and marketing initiatives, any of which may be measured in absolute terms or as compared to any incremental increase or decrease. Such performance goals also may be based solely by reference to the Company’s performance or the performance of a Subsidiary, division, business segment or business unit of the Company or a Subsidiary, or based upon performance relative to performance of other companies or upon comparisons of any of the indicators of performance relative to performance of other companies. Any performance goals that are financial metrics may be determined in accordance with U.S. Generally Accepted Accounting Principles, in accordance with accounting principles established by the International Accounting Standards Board, or may be adjusted when established to include or exclude any items otherwise includable or excludable under U.S. Generally Accepted Accounting Principles or under the accounting principles established by the International Accounting Standards Board. The Committee may provide for exclusion of the impact of an event or occurrence which the Committee determines should appropriately be excluded, including (a) restructurings, discontinued operations, extraordinary items, and other unusual, infrequently occurring or non-recurring charges or events, (b) asset write-downs, (c) litigation or claim judgments or settlements, (d) acquisitions or divestitures, (e) reorganization or change in the corporate structure or capital structure of the Company, (f) an event either not directly related to the operations of the Company, Subsidiary, division, business segment or business unit or not within the reasonable control of management, (g) foreign exchange gains and losses, (h) a change in the fiscal year of the Company, (i) the refinancing or repurchase of bank loans or debt securities,
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(j) unbudgeted capital expenditures, (k) the issuance or repurchase of equity securities and other changes in the number of outstanding shares, (l) conversion of some or all of convertible securities to Common Stock, (m) any business interruption event, (n) the cumulative effects of tax or accounting changes in accordance with U.S. generally accepted accounting principles, or (o) the effect of changes in other laws or regulatory rules affecting reported results.
11.29 “ Plan ” means this 2018 Long Term Incentive Plan, as amended from time to time.
11.30 “ Restricted Stock ” means Shares awarded to a Participant under Article VI subject to certain vesting conditions and other restrictions.
11.31 “ Restricted Stock Unit ” means an unfunded, unsecured right to receive, on the applicable settlement date, one Share or an amount in cash or other consideration determined by the Administrator to be of equal value as of such settlement date, subject to certain vesting conditions and other restrictions as set forth in the Plan or the Participant’s Award Agreement.
11.32 “ Rule 16b-3 ” means Rule 16b-3 promulgated under the Exchange Act.
11.33 “ Section 409A ” means Section 409A of the Code and all regulations, guidance, compliance programs and other interpretative authority thereunder.
11.34 “ Securities Act ” means the Securities Act of 1933, as amended.
11.35 “ Service Provider ” means an Employee, Consultant or Director.
11.36 “ Shares ” means shares of Common Stock.
11.37 “ Stock Appreciation Right ” means a stock appreciation right granted under Article V.
11.38 “ Subsidiary ” means any entity (other than the Company), whether domestic or foreign, in an unbroken chain of entities beginning with the Company if each of the entities other than the last entity in the unbroken chain beneficially owns, at the time of the determination, securities or interests representing at least 50% of the total combined voting power of all classes of securities or interests in one of the other entities in such chain.
11.39 “ Substitute Awards ” shall mean Awards granted or Shares issued by the Company in assumption of, or in substitution or exchange for, awards previously granted, or the right or obligation to make future awards, in each case by a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines.
11.40 “ Termination of Service ” means the date the Participant ceases to be a Service Provider.
* * * * *
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Exhibit 10.20
ALTA MESA RESOURCES, INC.
2018 LONG TERM INCENTIVE PLAN
STOCK OPTION GRANT NOTICE
Capitalized terms not specifically defined in this Stock Option Grant Notice (the “ Grant Notice ”) have the meanings given to them in the 2018 Long Term Incentive Plan (as amended from time to time, the “ Plan ”) of Alta Mesa Resources, Inc. (the “ Company ”).
The Company has granted to the participant listed below (“ Participant ”) the stock option described in this Grant Notice (the “ Option ”), subject to the terms and conditions of the Plan and the Stock Option Agreement attached as Exhibit A (the “ Agreement ”), both of which are incorporated into this Grant Notice by reference.
| Participant: |
| Grant Date: |
| Exercise Price per Share: |
| Shares Subject to the Option: |
| Final Expiration Date: |
| Vesting Commencement Date: |
| Vesting Schedule: |
| Type of Option |
By Participant’s signature below, Participant agrees to be bound by the terms of this Grant Notice, the Plan and the Agreement. Participant has reviewed the Plan, this Grant Notice and the Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Grant Notice and fully understands all provisions of the Plan, this Grant Notice and the Agreement. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan, this Grant Notice or the Agreement.
| ALTA MESA RESOURCES, INC. | PARTICIPANT | |||||
| By: | ||||||
| Name: | ||||||
| Title: | ||||||
Exhibit A
STOCK OPTION AGREEMENT
Capitalized terms not specifically defined in this Agreement have the meanings specified in the Grant Notice or, if not defined in the Grant Notice, in the Plan.
ARTICLE I.
GENERAL
1.1 Grant of Option . The Company has granted to Participant the Option effective as of the grant date set forth in the Grant Notice (the “ Grant Date ”).
1.2 Incorporation of Terms of Plan . The Option is subject to the terms and conditions set forth in this Agreement and the Plan, which is incorporated herein by reference. In the event of any inconsistency between the Plan and this Agreement, the terms of the Plan will control.
ARTICLE II.
PERIOD OF EXERCISABILITY
2.1 Commencement of Exercisability . The Option will vest and become exercisable according to the vesting schedule in the Grant Notice (the “ Vesting Schedule ”) except that any fraction of a Share as to which the Option would be vested or exercisable will be accumulated and will vest and become exercisable only when a whole Share has accumulated. Notwithstanding anything in the Grant Notice, the Plan or this Agreement to the contrary, unless the Administrator otherwise determines, the Option will immediately expire and be forfeited as to any portion that is not vested and exercisable as of Participant’s Termination of Service for any reason.
2.2 Duration of Exercisability . The Vesting Schedule is cumulative. Any portion of the Option which vests and becomes exercisable will remain vested and exercisable until the Option expires. The Option will be forfeited immediately upon its expiration.
2.3 Expiration of Option . The Option may not be exercised to any extent by anyone after, and will expire on, the first of the following to occur:
(a) The final expiration date in the Grant Notice;
(b) Except as the Administrator may otherwise approve, the expiration of three (3) months from the date of Participant’s Termination of Service, unless Participant’s Termination of Service is for Cause or by reason of Participant’s death or Disability;
(c) Except as the Administrator may otherwise approve, the expiration of one (1) year from the date of Participant’s Termination of Service by reason of Participant’s death or Disability; and
(d) Except as the Administrator may otherwise approve, Participant’s Termination of Service for Cause.
ARTICLE III.
EXERCISE OF OPTION
3.1 Person Eligible to Exercise . During Participant’s lifetime, only Participant may exercise the Option. After Participant’s death, any exercisable portion of the Option may, prior to the time the Option expires, be exercised by Participant’s Designated Beneficiary as provided in the Plan.
3.2 Partial Exercise . Any exercisable portion of the Option or the entire Option, if then wholly exercisable, may be exercised, in whole or in part, according to the procedures in the Plan at any time prior to the time the Option or portion thereof expires, except that the Option may only be exercised for whole Shares.
3.3 Tax Withholding .
(a) The Company has the right and option, but not the obligation, to treat Participant’s failure to provide timely payment in accordance with the Plan of any withholding tax arising in connection with the Option as Participant’s election to satisfy all or any portion of the withholding tax by requesting the Company retain Shares otherwise issuable under the Option.
(b) Participant acknowledges that Participant is ultimately liable and responsible for all taxes owed in connection with the Option, regardless of any action the Company or any Subsidiary takes with respect to any tax withholding obligations that arise in connection with the Option. Neither the Company nor any Subsidiary makes any representation or undertaking regarding the treatment of any tax withholding in connection with the awarding, vesting or exercise of the Option or the subsequent sale of Shares. The Company and the Subsidiaries do not commit and are under no obligation to structure the Option to reduce or eliminate Participant’s tax liability.
ARTICLE IV.
OTHER PROVISIONS
4.1 Adjustments . Participant acknowledges that the Option is subject to adjustment, modification and termination in certain events as provided in this Agreement and the Plan.
4.2 Notices . Any notice to be given under the terms of this Agreement to the Company must be in writing and addressed to the Company in care of the Company’s Secretary at the Company’s principal office or the Secretary’s then-current email address or facsimile number. Any notice to be given under the terms of this Agreement to Participant must be in writing and addressed to Participant (or, if Participant is then deceased, to the person entitled to exercise the Option) at Participant’s last known mailing address, email address or facsimile number in the Company’s personnel files. By a notice given pursuant to this Section, either party may designate a different address for notices to be given to that party. Any notice will be deemed duly given when actually received, when sent by email, when sent by certified mail (return receipt requested) and deposited with postage prepaid in a post office or branch post office regularly maintained by the United States Postal Service, when delivered by a nationally recognized express shipping company or upon receipt of a facsimile transmission confirmation.
4.3 Titles . Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.
4.4 Conformity to Securities Laws . Participant acknowledges that the Plan, the Grant Notice and this Agreement are intended to conform to the extent necessary with all Applicable Laws and, to the extent Applicable Laws permit, will be deemed amended as necessary to conform to Applicable Laws.
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4.5 Successors and Assigns . The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement will inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth in the Plan, this Agreement will be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.
4.6 Limitations Applicable to Section 16 Persons . Notwithstanding any other provision of the Plan or this Agreement, if Participant is subject to Section 16 of the Exchange Act, the Plan, the Grant Notice, this Agreement and the Option will be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3) that are requirements for the application of such exemptive rule. To the extent Applicable Laws permit, this Agreement will be deemed amended as necessary to conform to such applicable exemptive rule.
4.7 Entire Agreement . The Plan, the Grant Notice and this Agreement (including any exhibit hereto) constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof.
4.8 Agreement Severable . In the event that any provision of the Grant Notice or this Agreement is held illegal or invalid, the provision will be severable from, and the illegality or invalidity of the provision will not be construed to have any effect on, the remaining provisions of the Grant Notice or this Agreement.
4.9 Limitation on Participant’s Rights . Participation in the Plan confers no rights or interests other than as herein provided. This Agreement creates only a contractual obligation on the part of the Company as to amounts payable and may not be construed as creating a trust. Neither the Plan nor any underlying program, in and of itself, has any assets. Participant will have only the rights of a general unsecured creditor of the Company with respect to amounts credited and benefits payable, if any, with respect to the Option, and rights no greater than the right to receive the Shares as a general unsecured creditor with respect to the Option, as and when exercised pursuant to the terms hereof.
4.10 Not a Contract of Employment . Nothing in the Plan, the Grant Notice or this Agreement confers upon Participant any right to continue in the employ or service of the Company or any Subsidiary or interferes with or restricts in any way the rights of the Company and its Subsidiaries, which rights are hereby expressly reserved, to discharge or terminate the services of Participant at any time for any reason whatsoever, with or without Cause, except to the extent expressly provided otherwise in a written agreement between the Company or a Subsidiary and Participant.
4.11 Counterparts . The Grant Notice may be executed in one or more counterparts, including by way of any electronic signature, subject to Applicable Law, each of which will be deemed an original and all of which together will constitute one instrument.
4.12 Incentive Stock Options . If the Option is designated as an Incentive Stock Option:
(a) Participant acknowledges that to the extent the aggregate fair market value of shares (determined as of the time the option with respect to the shares is granted) with respect to which stock options intended to qualify as “incentive stock options” under Section 422 of the Code, including the Option, are exercisable for the first time by Participant during any calendar year exceeds $100,000 or if for any other reason such stock options do not qualify or cease to qualify for treatment as “incentive stock options” under Section 422 of the Code, such stock options (including the Option) will be treated as non-qualified stock options. Participant further acknowledges that the rule set forth in the preceding
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sentence will be applied by taking the Option and other stock options into account in the order in which they were granted, as determined under Section 422(d) of the Code. Participant also acknowledges that if the Option is exercised more than three (3) months after Participant’s Termination of Service, other than by reason of death or disability, the Option will be taxed as a Non-Qualified Stock Option.
(b) Participant will give prompt written notice to the Company of any disposition or other transfer of any Shares acquired under this Agreement if such disposition or other transfer is made (a) within two (2) years from the Grant Date or (b) within one (1) year after the transfer of such Shares to Participant. Such notice will specify the date of such disposition or other transfer and the amount realized, in cash, other property, assumption of indebtedness or other consideration, by Participant in such disposition or other transfer.
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Exhibit 10.21
ALTA MESA RESOURCES, INC.
2018 LONG TERM INCENTIVE PLAN
RESTRICTED STOCK UNIT GRANT NOTICE
Capitalized terms not specifically defined in this Restricted Stock Unit Grant Notice (the “ Grant Notice ”) have the meanings given to them in the 2018 Long Term Incentive Plan (as amended from time to time, the “ Plan ”) of Alta Mesa Resources, Inc. (the “ Company ”).
The Company has granted to the participant listed below (“ Participant ”) the Restricted Stock Units described in this Grant Notice (the “ RSUs ”), subject to the terms and conditions of the Plan and the Restricted Stock Unit Agreement attached as Exhibit A (the “ Agreement ”), both of which are incorporated into this Grant Notice by reference.
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Participant: |
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Grant Date: |
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Number of RSUs: |
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Vesting Commencement Date: |
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Vesting Schedule: |
By Participant’s signature below, Participant agrees to be bound by the terms of this Grant Notice, the Plan and the Agreement. Participant has reviewed the Plan, this Grant Notice and the Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Grant Notice and fully understands all provisions of the Plan, this Grant Notice and the Agreement. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan, this Grant Notice or the Agreement.
| ALTA MESA RESOURCES, INC. | PARTICIPANT | |||||||
| By: |
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| Name: |
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Exhibit A
RESTRICTED STOCK UNIT AGREEMENT
Capitalized terms not specifically defined in this Agreement have the meanings specified in the Grant Notice or, if not defined in the Grant Notice, in the Plan.
ARTICLE I.
GENERAL
1.1 Award of RSUs and Dividend Equivalents .
(a) The Company has granted the RSUs to Participant effective as of the grant date set forth in the Grant Notice (the “ Grant Date ”). Each RSU represents the right to receive one Share or, at the option of the Company, an amount of cash, in either case, as set forth in this Agreement. Participant will have no right to the distribution of any Shares or payment of any cash until the time (if ever) the RSUs have vested.
(b) The Company hereby grants to Participant, with respect to each RSU, a Dividend Equivalent for ordinary cash dividends paid to substantially all holders of outstanding Shares with a record date after the Grant Date and prior to the date the applicable RSU is settled, forfeited or otherwise expires. Each Dividend Equivalent entitles Participant to receive the equivalent value of any such ordinary cash dividends paid on a single Share. The Company will establish a separate Dividend Equivalent bookkeeping account (a “ Dividend Equivalent Account ”) for each Dividend Equivalent and credit the Dividend Equivalent Account (without interest) on the applicable dividend payment date with the amount of any such cash paid.
1.2 Incorporation of Terms of Plan . The RSUs are subject to the terms and conditions set forth in this Agreement and the Plan, which is incorporated herein by reference. In the event of any inconsistency between the Plan and this Agreement, the terms of the Plan will control.
1.3 Unsecured Promise . The RSUs and Dividend Equivalents will at all times prior to settlement represent an unsecured Company obligation payable only from the Company’s general assets.
ARTICLE II.
VESTING; FORFEITURE AND SETTLEMENT
2.1 Vesting; Forfeiture . The RSUs will vest according to the vesting schedule in the Grant Notice except that any fraction of an RSU that would otherwise be vested will be accumulated and will vest only when a whole RSU has accumulated. In the event of Participant’s Termination of Service for any reason, all unvested RSUs will immediately and automatically be cancelled and forfeited, except as otherwise determined by the Administrator or provided in a binding written agreement between Participant and the Company. Dividend Equivalents (including any Dividend Equivalent Account balance) will vest or be forfeited, as applicable, upon the vesting or forfeiture of the RSU with respect to which the Dividend Equivalent (including the Dividend Equivalent Account) relates.
2.2 Settlement .
(a) RSUs and Dividend Equivalents (including any Dividend Equivalent Account balance) will be paid in Shares or cash at the Company’s option as soon as administratively practicable after the vesting of the applicable RSU, but in no event more than sixty (60) days after the RSU’s vesting date. Notwithstanding the foregoing, the Company may delay any payment under this Agreement that the Company reasonably determines would violate Applicable Law until the earliest date the Company reasonably determines the making of the payment will not cause such a violation (in accordance with Treasury Regulation Section 1.409A-2(b)(7)(ii)), provided the Company reasonably believes the delay will not result in the imposition of excise taxes under Section 409A.
(b) If an RSU is paid in cash, the amount of cash paid with respect to the RSU will equal the Fair Market Value of a Share on the day immediately preceding the payment date. If a Dividend Equivalent is paid in Shares, the number of Shares paid with respect to the Dividend Equivalent will equal the quotient, rounded down to the nearest whole Share, of the Dividend Equivalent Account balance divided by the Fair Market Value of a Share on the day immediately preceding the payment date.
ARTICLE III.
TAXATION AND TAX WITHHOLDING
3.1 Representation . Participant represents to the Company that Participant has reviewed with Participant’s own tax advisors the tax consequences of this Award and the transactions contemplated by the Grant Notice and this Agreement. Participant is relying solely on such advisors and not on any statements or representations of the Company or any of its agents.
3.2 Tax Withholding .
(a) The Company has the right and option, but not the obligation, to treat Participant’s failure to provide timely payment in accordance with the Plan of any withholding tax arising in connection with the RSUs or Dividend Equivalents as Participant’s election to satisfy all or any portion of the withholding tax by requesting the Company retain Shares otherwise issuable under the Award.
(b) Participant acknowledges that Participant is ultimately liable and responsible for all taxes owed in connection with the RSUs and the Dividend Equivalents, regardless of any action the Company or any Subsidiary takes with respect to any tax withholding obligations that arise in connection with the RSUs or Dividend Equivalents. Neither the Company nor any Subsidiary makes any representation or undertaking regarding the treatment of any tax withholding in connection with the awarding, vesting or payment of the RSUs or the Dividend Equivalents or the subsequent sale of Shares. The Company and the Subsidiaries do not commit and are under no obligation to structure the RSUs or Dividend Equivalents to reduce or eliminate Participant’s tax liability.
ARTICLE IV.
OTHER PROVISIONS
4.1 Adjustments . Participant acknowledges that the RSUs, the Shares subject to the RSUs and the Dividend Equivalents are subject to adjustment, modification and termination in certain events as provided in this Agreement and the Plan.
4.2 Notices . Any notice to be given under the terms of this Agreement to the Company must be in writing and addressed to the Company in care of the Company’s Secretary at the Company’s principal office or the Secretary’s then-current email address or facsimile number. Any notice to be given under the terms of this Agreement to Participant must be in writing and addressed to Participant at Participant’s last known mailing address, email address or facsimile number in the Company’s personnel files. By a notice given pursuant to this Section, either party may designate a different address for notices to be given to that party. Any notice will be deemed duly given when actually received, when sent by email, when sent by certified mail (return receipt requested) and deposited with postage prepaid in a post office or branch post office regularly maintained by the United States Postal Service, when delivered by a nationally recognized express shipping company or upon receipt of a facsimile transmission confirmation.
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4.3 Titles . Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.
4.4 Conformity to Securities Laws . Participant acknowledges that the Plan, the Grant Notice and this Agreement are intended to conform to the extent necessary with all Applicable Laws and, to the extent Applicable Laws permit, will be deemed amended as necessary to conform to Applicable Laws.
4.5 Successors and Assigns . The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement will inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth in the Plan, this Agreement will be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.
4.6 Limitations Applicable to Section 16 Persons . Notwithstanding any other provision of the Plan or this Agreement, if Participant is subject to Section 16 of the Exchange Act, the Plan, the Grant Notice, this Agreement, the RSUs and the Dividend Equivalents will be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3) that are requirements for the application of such exemptive rule. To the extent Applicable Laws permit, this Agreement will be deemed amended as necessary to conform to such applicable exemptive rule.
4.7 Entire Agreement . The Plan, the Grant Notice and this Agreement (including any exhibit hereto) constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof.
4.8 Agreement Severable . In the event that any provision of the Grant Notice or this Agreement is held illegal or invalid, the provision will be severable from, and the illegality or invalidity of the provision will not be construed to have any effect on, the remaining provisions of the Grant Notice or this Agreement.
4.9 Limitation on Participant’s Rights . Participation in the Plan confers no rights or interests other than as herein provided. This Agreement creates only a contractual obligation on the part of the Company as to amounts payable and may not be construed as creating a trust. Neither the Plan nor any underlying program, in and of itself, has any assets. Participant will have only the rights of a general unsecured creditor of the Company with respect to amounts credited and benefits payable, if any, with respect to the RSUs and Dividend Equivalents, and rights no greater than the right to receive cash or the Shares as a general unsecured creditor with respect to the RSUs and Dividend Equivalents, as and when settled pursuant to the terms of this Agreement.
4.10 Not a Contract of Employment . Nothing in the Plan, the Grant Notice or this Agreement confers upon Participant any right to continue in the employ or service of the Company or any Subsidiary or interferes with or restricts in any way the rights of the Company and its Subsidiaries, which rights are hereby expressly reserved, to discharge or terminate the services of Participant at any time for any reason whatsoever, with or without Cause, except to the extent expressly provided otherwise in a written agreement between the Company or a Subsidiary and Participant.
4.11 Counterparts . The Grant Notice may be executed in one or more counterparts, including by way of any electronic signature, subject to Applicable Law, each of which will be deemed an original and all of which together will constitute one instrument.
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Exhibit 10.22
ALTA MESA RESOURCES, INC.
2018 LONG TERM INCENTIVE PLAN
RESTRICTED STOCK GRANT NOTICE
Capitalized terms not specifically defined in this Restricted Stock Grant Notice (the “ Grant Notice ”) have the meanings given to them in the 2018 Long Term Incentive Plan (as amended from time to time, the “ Plan ”) of Alta Mesa Resources, Inc. (the “ Company ”).
The Company has granted to the participant listed below (“ Participant ”) the shares of Restricted Stock described in this Grant Notice (the “ Restricted Shares ”), subject to the terms and conditions of the Plan and the Restricted Stock Agreement attached as Exhibit A (the “ Agreement ”), both of which are incorporated into this Grant Notice by reference.
| Participant: |
| Grant Date: |
| Number of Restricted Shares: |
| Vesting Commencement Date: |
| Vesting Schedule: |
By Participant’s signature below, Participant agrees to be bound by the terms of this Grant Notice, the Plan and the Agreement. Participant has reviewed the Plan, this Grant Notice and the Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Grant Notice and fully understands all provisions of the Plan, this Grant Notice and the Agreement. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan, this Grant Notice or the Agreement.
| ALTA MESA RESOURCES, INC. | PARTICIPANT | |||||||
| By: |
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| Name: |
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| Title: |
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Exhibit A
RESTRICTED STOCK AGREEMENT
Capitalized terms not specifically defined in this Agreement have the meanings specified in the Grant Notice or, if not defined in the Grant Notice, in the Plan.
ARTICLE I.
GENERAL
1.1 Issuance of Restricted Shares . The Company will issue the Restricted Shares to the Participant effective as of the grant date set forth in the Grant Notice and will cause (a) a stock certificate or certificates representing the Restricted Shares to be registered in Participant’s name or (b) the Restricted Shares to be held in book-entry form. If a stock certificate is issued, the certificate will be delivered to, and held in accordance with this Agreement by, the Company or its authorized representatives and will bear the restrictive legends required by this Agreement. If the Restricted Shares are held in book-entry form, then the book-entry will indicate that the Restricted Shares are subject to the restrictions of this Agreement.
1.2 Incorporation of Terms of Plan . The Restricted Shares are subject to the terms and conditions set forth in this Agreement and the Plan, which is incorporated herein by reference. In the event of any inconsistency between the Plan and this Agreement, the terms of the Plan will control.
ARTICLE II.
VESTING, FORFEITURE AND ESCROW
2.1 Vesting . The Restricted Shares will become vested Shares (the “ Vested Shares ”) according to the vesting schedule in the Grant Notice except that any fraction of a Share that would otherwise become a Vested Share will be accumulated and will become a Vested Share only when a whole Vested Share has accumulated.
2.2 Forfeiture . In the event of Participant’s Termination of Service for any reason, Participant will immediately and automatically forfeit to the Company any Shares that are not Vested Shares (the “ Unvested Shares ”) at the time of Participant’s Termination of Service, except as otherwise determined by the Administrator or provided in a binding written agreement between Participant and the Company. Upon forfeiture of Unvested Shares, the Company will become the legal and beneficial owner of the Unvested Shares and all related interests and Participant will have no further rights with respect to the Unvested Shares.
2.3 Escrow .
(a) Unvested Shares will be held by the Company or its authorized representatives until (i) they are forfeited, (ii) they become Vested Shares or (iii) this Agreement is no longer in effect. By accepting this Award, Participant appoints the Company and its authorized representatives as Participant’s attorney(s)-in-fact to take all actions necessary to effect any transfer of forfeited Unvested Shares (and Retained Distributions (as defined below), if any, paid on such forfeited Unvested Shares) to the Company as may be required pursuant to the Plan or this Agreement and to execute such representations or other documents or assurances as the Company or such representatives deem necessary or advisable in connection with any such transfer. The Company, or its authorized representative, will not be liable for any good faith act or omission with respect to the holding in escrow or transfer of the Restricted Shares.
(b) All cash dividends and other distributions made or declared with respect to Unvested Shares (“ Retained Distributions ”) will be held by the Company until the time (if ever) when the Unvested Shares to which such Retained Distributions relate become Vested Shares. The Company will establish a separate Retained Distribution bookkeeping account (“ Retained Distribution Account ”) for each Unvested Share with respect to which Retained Distributions have been made or declared in cash and credit the Retained Distribution Account (without interest) on the date of payment with the amount of such cash made or declared with respect to the Unvested Share. Retained Distributions (including any Retained Distribution Account balance) will immediately and automatically be forfeited upon forfeiture of the Unvested Share with respect to which the Retained Distributions were paid or declared.
(c) As soon as reasonably practicable following the date on which an Unvested Share becomes a Vested Share, the Company will (i) cause the certificate (or a new certificate without the legend required by this Agreement, if Participant so requests) representing the Share to be delivered to Participant or, if the Share is held in book-entry form, cause the notations indicating the Share is subject to the restrictions of this Agreement to be removed and (ii) pay to Participant the Retained Distributions relating to the Share.
2.4 Rights as Stockholder . Except as otherwise provided in this Agreement or the Plan, upon issuance of the Restricted Shares by the Company, Participant will have all the rights of a stockholder with respect to the Restricted Shares, including the right to vote the Restricted Shares and to receive dividends or other distributions paid or made with respect to the Restricted Shares.
ARTICLE III.
TAXATION AND TAX WITHHOLDING
3.1 Representation . Participant represents to the Company that Participant has reviewed with Participant’s own tax advisors the tax consequences of the Restricted Shares and the transactions contemplated by the Grant Notice and this Agreement. Participant is relying solely on such advisors and not on any statements or representations of the Company or any of its agents.
3.2 Section 83(b) Election Prohibited . Participant shall not make an election under Section 83(b) of the Code, or any successor section thereto, with respect to the Restricted Shares without the Administrator’s consent, which the Administrator may grant or withhold in its discretion. If Participant makes such election without the Administrator’s consent, this Award will immediately and automatically be canceled without consideration as of the date of such election, and any proceeds, gains or other economic benefit actually or constructively received by Participant in connection with this Award must be promptly repaid by Participant to the Company upon request.
3.3 Tax Withholding .
(a) The Company has the right and option, but not the obligation, to treat Participant’s failure to provide timely payment in accordance with the Plan of any withholding tax arising in connection with the Restricted Shares as Participant’s election to satisfy all or any portion of the withholding tax by requesting the Company retain Shares otherwise deliverable under the Award.
(b) Participant acknowledges that Participant is ultimately liable and responsible for all taxes owed in connection with the Restricted Shares, regardless of any action the Company or any Subsidiary takes with respect to any tax withholding obligations that arise in connection with the Restricted Shares. Neither the Company nor any Subsidiary makes any representation or undertaking regarding the treatment of any tax withholding in connection with the awarding, vesting or payment of the Restricted Shares or the subsequent sale of the Restricted Shares. The Company and the Subsidiaries do not commit and are under no obligation to structure this Award to reduce or eliminate Participant’s tax liability.
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ARTICLE IV.
RESTRICTIVE LEGENDS AND TRANSFERABILITY
4.1 Legends . Any certificate representing a Restricted Share will bear the following legend until the Restricted Share becomes a Vested Share:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO FORFEITURE IN FAVOR OF THE COMPANY AND MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF A RESTRICTED STOCK AGREEMENT BETWEEN THE COMPANY AND THE STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.
4.2 Transferability . The Restricted Shares and any Retained Distributions are subject to the restrictions on transfer in the Plan and may not be sold, assigned or transferred in any manner unless and until they become Vested Shares. Any attempted transfer or disposition of Unvested Shares or related Retained Distributions prior to the time the Unvested Shares become Vested Shares will be null and void. The Company will not be required to (a) transfer on its books any Restricted Share that has been sold or otherwise transferred in violation of this Agreement or (b) treat as owner of such Restricted Share or accord the right to vote or pay dividends to any purchaser or other transferee to whom such Restricted Share has been so transferred. The Company may issue appropriate “stop transfer” instructions to its transfer agent, if any, or make appropriate notations to the same effect in its records.
ARTICLE V.
OTHER PROVISIONS
5.1 Adjustments . Participant acknowledges that the Restricted Shares are subject to adjustment, modification and termination in certain events as provided in this Agreement and the Plan.
5.2 Notices . Any notice to be given under the terms of this Agreement to the Company must be in writing and addressed to the Company in care of the Company’s Secretary at the Company’s principal office or the Secretary’s then-current email address or facsimile number. Any notice to be given under the terms of this Agreement to Participant must be in writing and addressed to Participant at Participant’s last known mailing address, email address or facsimile number in the Company’s personnel files. By a notice given pursuant to this Section, either party may designate a different address for notices to be given to that party. Any notice will be deemed duly given when actually received, when sent by email, when sent by certified mail (return receipt requested) and deposited with postage prepaid in a post office or branch post office regularly maintained by the United States Postal Service, when delivered by a nationally recognized express shipping company or upon receipt of a facsimile transmission confirmation.
5.3 Titles . Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.
5.4 Conformity to Securities Laws . Participant acknowledges that the Plan, the Grant Notice and this Agreement are intended to conform to the extent necessary with all Applicable Laws and, to the extent Applicable Laws permit, will be deemed amended as necessary to conform to Applicable Laws.
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5.5 Successors and Assigns . The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement will inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth in this Agreement or the Plan, this Agreement will be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.
5.6 Limitations Applicable to Section 16 Persons . Notwithstanding any other provision of the Plan or this Agreement, if Participant is subject to Section 16 of the Exchange Act, the Plan, the Grant Notice, this Agreement and the Restricted Shares will be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3) that are requirements for the application of such exemptive rule. To the extent Applicable Laws permit, this Agreement will be deemed amended as necessary to conform to such applicable exemptive rule.
5.7 Entire Agreement . The Plan, the Grant Notice and this Agreement (including any exhibit hereto) constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof.
5.8 Agreement Severable . In the event that any provision of the Grant Notice or this Agreement is held illegal or invalid, the provision will be severable from, and the illegality or invalidity of the provision will not be construed to have any effect on, the remaining provisions of the Grant Notice or this Agreement.
5.9 Limitation on Participant’s Rights . Participation in the Plan confers no rights or interests other than as herein provided. This Agreement creates only a contractual obligation on the part of the Company as to amounts payable and may not be construed as creating a trust. Neither the Plan nor any underlying program, in and of itself, has any assets. Participant will have only the rights of a general unsecured creditor of the Company with respect to amounts credited and benefits payable, if any, with respect to the Award.
5.10 Not a Contract of Employment . Nothing in the Plan, the Grant Notice or this Agreement confers upon Participant any right to continue in the employ or service of the Company or any Subsidiary or interferes with or restricts in any way the rights of the Company and its Subsidiaries, which rights are hereby expressly reserved, to discharge or terminate the services of Participant at any time for any reason whatsoever, with or without cause, except to the extent expressly provided otherwise in a written agreement between the Company or a Subsidiary and Participant.
5.11 Counterparts . The Grant Notice may be executed in one or more counterparts, including by way of any electronic signature, subject to Applicable Law, each of which will be deemed an original and all of which together will constitute one instrument.
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Exhibit 10.23
A LTA M ESA R ESOURCES , I NC .
D IRECTOR C OMPENSATION P ROGRAM
Eligible Directors (as defined below), as members of the board of directors (the “ Board ”) of Alta Mesa Resources, Inc. (the “ Company ”), shall receive cash compensation as set forth in this Director Compensation Program (this “ Program ”). Such compensation shall be paid automatically and without further action of the Board unless such Eligible Director declines the receipt of such cash compensation by written notice to the Company. For purposes herein, an “Eligible Director” is any member of the Board who is not (i) an employee of the Company or any parent or subsidiary of the Company or (ii) affiliated with Riverstone Investment Group LLC, Bayou City Energy Management, LLC, HPS Investment Partners, LLC or AM Equity Holdings, LP. This Program shall remain in effect until it is revised or rescinded by further action of the Board. This Program may be amended, modified or terminated by the Board at any time in its sole discretion. The terms and conditions of this Program shall supersede any prior compensation arrangements for service as a member of the Board between the Company and any of its Eligible Directors. This Program shall become effective on the date of the closing of the Company’s initial business combination.
I. Annual Retainers . Each Eligible Director shall receive an annual retainer of $75,000 for service on the Board.
II. Additional Annual Retainers . In addition, each Eligible Director shall receive the following annual retainers:
A. Audit Committee . An Eligible Director serving as Chairperson of the Audit Committee shall receive an additional annual retainer of $22,500 for such service. An Eligible Director serving as a member other than the Chairperson of the Audit Committee shall receive an additional annual retainer of $10,000 for such service.
B. Compensation Committee . An Eligible Director serving as Chairperson of the Compensation Committee shall receive an additional annual retainer of $15,000 for such service. An Eligible Director serving as a member other than the Chairperson of the Compensation Committee shall receive an additional annual retainer of $6,000 for such service.
C. Nominating and Corporate Governance Committee . An Eligible Director serving as Chairperson of the Nominating and Corporate Governance Committee shall receive an additional annual retainer of $12,500 for such service. An Eligible Director serving as a member other than the Chairperson of the Nominating and Corporate Governance Committee shall receive an additional annual retainer of $5,000 for such service.
III. Meeting Fees . In addition, each Eligible Director shall receive the following per meeting fees:
A. Audit Committee . Each Eligible Director serving as a member of the Audit Committee shall receive a per meeting fee of $1,500 for each Audit Committee meeting attended per calendar year in excess of eight meetings.
B. Compensation Committee . Each Eligible Director serving as a member of the Compensation Committee shall receive a per meeting fee of $1,500 for each Compensation Committee meeting attended per calendar year in excess of six meetings.
C. Nominating and Corporate Governance Committee . Each Eligible Director serving as a member of the Nominating and Corporate Governance Committee shall receive a per meeting fee of $1,500 for each Nominating and Corporate Governance Committee meeting attended per calendar year in excess of six meetings.
IV. Payment of Retainers and Fees . The annual retainers and meeting fees described in herein shall be earned on a quarterly basis based on a calendar quarter and shall be paid in cash by the Company in arrears not later than the fifteenth day following the end of each calendar quarter. In the event an Eligible Director does not serve as an Eligible Director, or in the applicable positions described in Section II, for an entire calendar quarter, the retainer paid to such Eligible Director shall be prorated for the portion of such calendar quarter actually served as an Eligible Director, or in such position, as applicable.
* * * * *
Exhibit 21.1
SUBSIDIARIES
SRII Opco GP, LLC
SRII Opco, LP
Alta Mesa Holdings GP, LLC
Alta Mesa Holdings, LP
Kingfisher Midstream, LLC
Alta Mesa Financial Services Corp.
OEM GP, LLC
Alta Mesa Services, LP
Oklahoma Energy Acquisitions, LP
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