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): March 27, 2015
Sanchez Production Partners LP
(Exact name of registrant as specified in its charter)
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Delaware |
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001-33147 |
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11-3742489 |
(State or other jurisdiction of incorporation) |
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(Commission File Number) |
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(IRS Employer Identification No.) |
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1000 Main Street, Suite 3000 Houston, TX |
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77002 |
(Address of principal executive offices) |
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(Zip Code) |
Registrant’s telephone number, including area code: (713) 783-8000
None
(Former name or former address, if changed since last report.)
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:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 1.01 Entry into a Material Definitive Agreement.
Purchase and Sale Agreement
On March 31, 2015, SEP Holdings IV, LLC (“Buyer”), a wholly-owned subsidiary of Sanchez Production Partners LP (the “Partnership”), and the Partnership entered into that certain Purchase and Sale Agreement (the “Purchase Agreement”) with SEP Holdings III, LLC (“Seller”), a wholly-owned subsidiary of Sanchez Energy Corporation, to purchase oil and gas properties for total consideration of $85.0 million. After $1.4 million in normal and customary closing adjustments, consideration paid at closing consisted of $81.6 million cash paid to the Seller by the Buyer and 1,052,632 Common Units of the Partnership issued to the Seller with an aggregate consideration value of $2,000,000 (the “Common Units”). Components of the acquisition include:
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working interests in 59 wellbores located in the Palmetto Field in Gonzales, Texas; |
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the initial working interest effective as of January 1, 2015 is 18.2% and increases to 47.% on January 1, 2019 for the remaining life of the wellbores; |
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average production of 1,000 BOE/D net to the Partnership’s interest is expected over the period 2015 through 2019; and |
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initially estimated proved reserves of 5.2 MMBoe, 100% of which are proved developed producing, and of which 84% are oil and natural gas liquids and 16% are natural gas. |
While the Partnership believes that the anticipated reserve and production estimates and its assumptions underlying these estimates are reasonable based upon its evaluation of information provided in connection with the acquisition, actual reserve and production information will be dependent on numerous factors, including, but not limited to, well performance and realized commodity prices. The proved reserve estimates were prepared by the Seller’s reserve engineers and are based on benchmark prices and certain future cost variability. Any such estimates are inherently uncertain and are subject to significant business, economic, regulatory, environmental and competitive risks and uncertainties that could cause actual results to differ materially from those that the Partnership anticipates, as described further below.
The foregoing description of the Purchase Agreement is qualified in its entirety by reference to the full text of the Purchase Agreement, a copy of which is filed as Exhibit 2.1 hereto and is incorporated herein by reference.
Seller Registration Rights Agreement
In connection with the Purchase Agreement, on March 31, 2015, the Partnership entered into a Registration Rights Agreement (the “Seller Registration Rights Agreement”) with the Seller pursuant to which the Partnership granted to the Seller certain registration rights related to the Common Unit consideration thereunder (the “Registrable Securities”). Under the Seller Registration Rights Agreement, the Partnership granted the Seller demand registration rights with respect to the preparation and filing with the Securities and Exchange Commission (“SEC”) of one or more registration statements for the purpose of registering the resale of the Registrable Securities.
The Partnership also agreed, among other things, to indemnify and hold harmless the Seller and its controlling persons and their respective officers, directors, members, partners, agents, brokers, investment advisors and employees from and against all losses of the Seller incident to the Partnership’s obligations under the Seller Registration Rights Agreement, including certain liabilities under the Securities Act of 1933, as amended (the “Securities Act”). The Seller has agreed to indemnify and hold harmless the Partnership and its controlling persons and their respective directors, officers, agents and employees from and against all losses that may be based upon written information furnished by the Seller to the Partnership for inclusion in a registration statement pursuant to the Seller Registration Rights Agreement or the Seller’s improper use of a prospectus, including certain liabilities under the Securities Act.
The foregoing description of the Seller Registration Rights Agreement does not purport to be complete and is qualified in its entirety by reference to such document, which is filed as Exhibit 4.1 hereto and incorporated herein by reference.
Credit Agreement
A description of the Credit Agreement is included in Item 2.03 below and incorporated herein by reference.
Class A Preferred Unit Purchase Agreement
A description of the Preferred Unit Purchase Agreement is included in Item 3.02 below and incorporated herein by reference.
Class A Preferred Unit Registration Rights Agreement
On March 31, 2015, the Partnership entered into a Registration Rights Agreement (the “Class A Preferred Registration Rights Agreement”) with the Purchasers (defined below in Item 3.02) relating to the registered resale of Common Units of the Partnership issuable upon conversion of the Class A Preferred Units (described below in Item 3.02). Pursuant to the Class A Preferred Registration Rights Agreement, with respect to Common Units issuable upon conversion of the Class A Preferred Units, the Partnership has agreed to (i) prepare and file a registration statement under the Securities Act (the “Common Unit Registration Statement”) within 120 days following the closing date and (ii) cause the Common Unit Registration Statement to be declared effective no later than 180 days after the initial filing thereof.
If the Common Unit Registration Statement is not declared effective prior to such date as any Class A Preferred Units convert into Common Units pursuant to the Partnership Agreement Amendment (as defined below in Item 5.03) (the “Target Effective Date”), the Partnership will pay liquidated damages to each holder of converted Common Units at the rate of 0.25% of the Liquidated Damages Multiplier (as defined in the Class A Preferred Registration Rights Agreement) per 30 day period, that shall accrue daily, for the first 60 days following such Target Effective Date, increasing by an additional 0.25% of the Liquidated Damages Multiplier per 30 day period, that shall accrue daily, for each subsequent 60 days (i.e., 0.5% for 61-120 days, 0.75% for 121-180 days and 1.0% thereafter), up to a maximum of 1.00% of the Liquidated Damages Multiplier per 30 day period.
In certain circumstances, the Purchasers will have piggyback registration rights as described in the Class A Preferred Registration Rights Agreement.
The foregoing description of the Class A Preferred Registration Rights Agreement does not purport to be complete and is qualified in its entirety by reference to such document, which is filed as Exhibit 4.2 hereto and incorporated herein by reference.
Item 2.01Completion of Acquisition or Disposition of Assets.
On March 31, 2015, the Buyer closed the acquisition contemplated by the Purchase Agreement described in Item 1.01 above, which description is incorporated herein by reference.
Item 2.03Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
Credit Agreement
On March 31, 2015, the Partnership, as borrower, entered into a Third Amended and Restated Credit Agreement with Royal Bank of Canada, as administrative agent and collateral agent and the lenders party thereto (the “Credit Agreement”), providing for a reserve-based credit facility with a maximum commitment of $500,000,000 and a maturity date of March 31, 2020.
Borrowings under the Credit Agreement are secured by various mortgages of oil and natural gas properties that the Partnership and certain of its subsidiaries own as well as various security and pledge agreements among the Partnership and certain of its subsidiaries and the administrative agent.
The amount available for borrowing at any one time under the Credit Agreement is limited to the borrowing base for the Partnership’s oil and natural gas properties. Borrowings under the Credit Agreement are available for acquisition, exploration, operation, maintenance and development of oil and natural gas properties, payment of expenses incurred in connection with the Credit Agreement, working capital and general business purposes. The Credit Agreement has a sub-limit of $15.0 million which may be used for the issuance of letters of credit. The current borrowing base is $110.0 million.
At the Partnership’s election, interest for borrowings under the Credit Agreement are determined by reference to (i) the London interbank rate, or LIBOR, plus an applicable margin between 1.75% and 2.75% per annum based on utilization or (ii) a domestic bank rate (“ABR”) plus an applicable margin between 0.75% and 1.75% per annum based on utilization plus (iii) a commitment fee between 0.375% and 0.500% per annum based on the unutilized borrowing base. Interest on the borrowings for ABR loans and the commitment fee are generally payable quarterly. Interest on the borrowings for LIBOR loans are generally payable at the applicable maturity date.
The Credit Agreement contains various covenants that limit, among other things, the Partnership’s ability and certain of its subsidiaries’ ability to incur certain indebtedness, grant certain liens, merge or consolidate, sell all or substantially all of the Partnership’s assets, make certain loans, acquisitions, capital expenditures and investments, and pay distributions.
In addition, the Partnership is required to maintain the following financial covenants:
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a ratio of Total Net Debt (defined as Debt (generally, indebtedness permitted to be incurred by us under the Credit Agreement) less Available Cash (generally, cash, cash equivalents, and cash reserves of the Partnership)) to Adjusted EBITDA (generally, for any period, the sum of consolidated net income for such period plus (minus) the following expenses or charges to the extent deducted from consolidated net income in such period: interest expense, depreciation, depletion, amortization, write-off of deferred financing fees, impairment of long-lived assets, (gain) loss on sale of assets, (gain) loss from equity investment, accretion of asset retirement obligation, unrealized (gain) loss on derivatives and realized (gain) loss on cancelled derivatives, and other similar charges) of not more than 4.0 to 1.0; and |
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consolidated current assets, including the unused amount of the borrowing base availability but excluding current non-cash assets, to consolidated current liabilities, excluding non-cash liabilities and current maturities of debt (to the extent such payments are not past due), of not less than 1.0 to 1.0. |
The Credit Agreement also includes customary events of default, including events of default relating to non-payment of principal, interest or fees, inaccuracy of representations and warranties when made or when deemed made, violation of covenants, cross-defaults, bankruptcy and insolvency events, certain unsatisfied judgments, loan documents not being valid and a change in control. A change in control is generally defined as the occurrence of one of the following events: (i) the Partnership’s existing general partner (the “General Partner”) ceases to be the sole general partner of the Partnership or (ii) certain specified persons shall cease to own more than 50% of the equity interests of the General Partner or shall cease to control such General Partner. If an event of default occurs, the lenders will be able to accelerate the maturity of the Credit Agreement and exercise other rights and remedies.
The Credit Agreement limits the Partnership’s ability to pay distributions to unitholders. The Partnership has the ability to pay distributions to unitholders from available cash, including cash from borrowings under the Credit Agreement, as long as no event of default exists and provided that no distributions to unitholders may be made if the borrowings outstanding, net of available cash, under the Credit Agreement exceed 90% of the borrowing base, after giving effect to the proposed distribution. The Partnership’s available cash is reduced by any cash reserves established by the board of directors of the General Partner for the proper conduct of the Partnership’s business and the payment of fees and expenses.
The foregoing description of the Credit Agreement does not purport to be complete and is qualified in its entirety by reference to such document, which is filed as Exhibit 10.1 hereto and incorporated herein by reference
Item 3.02Unregistered Sales of Equity Securities.
Issuance of Common Equity
The information set forth under Item 1.01 above with respect to the issuance of the Common Units pursuant to the terms of the Purchase Agreement is incorporated herein by reference, to the extent applicable. The private placement of the Common Units pursuant to the Purchase Agreement was made in reliance upon an exemption from the registration requirements of the Securities Act pursuant to Section 4(2) thereof.
Issuance of Class A Preferred Units
On March 31, 2015, the Partnership entered into a Class A Preferred Unit Purchase Agreement (the “Preferred Unit Purchase Agreement”) with the purchasers named on Schedule A thereto (collectively, the “Purchasers”), pursuant to which the Partnership sold, and the Purchasers purchased, 10,625,000 of the Partnership’s newly created Class A Preferred Units (the “Class A Preferred Units”) in a privately negotiated transaction (the “Private Placement”) for an aggregate cash purchase price of $1.60 per Class A Preferred Unit resulting in gross proceeds to the Partnership of $17,000,000. The Partnership used the net proceeds to pay a portion of the consideration under the Purchase Agreement.
The issuance of the Class A Preferred Units pursuant to the Preferred Unit Purchase Agreement was made in reliance upon an exemption from the registration requirements of the Securities Act pursuant to Section 4(a)(2) thereof. The Preferred Unit Purchase Agreement contains customary representations and warranties by the Partnership and the Purchasers, and the parties have agreed to indemnify each other for losses resulting from the other party’s breach of any representations, warranties or covenants.
The foregoing description of the Preferred Unit Agreement does not purport to be complete and is qualified in its entirety by reference to such document, which is filed as Exhibit 10.2 hereto and 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.
On March 27, 2015, the board of directors of the General Partner elected Gerald F. Willinger as Interim Chief Executive Officer of the General Partner, effective as of April 1, 2015.
Mr. Willinger, 47, has been a member of the board of directors of the General Partner since March 2, 2015 and the board of managers of the Partnership’s predecessor-in-interest since August 2013. Mr. Willinger is currently a Managing Partner of Sanchez Capital Advisors, LLC and Manager and Co-founder of Sanchez Resources, LLC, an oil and gas company, since February 2010. Mr. Willinger currently serves as a Director of Sanchez Resources. From 1998 to 2000, Mr. Willinger was an investment banker with Goldman, Sachs & Co. Mr. Willinger served in various private equity investment management roles at MidOcean Partners, LLC and its predecessor entity, DB Capital Partners, LLC, from 2000 to 2003 and at the Cypress Group, LLC from 2003 to 2006. Prior to joining Sanchez Capital Advisors, LLC, Mr. Willinger was a Senior Analyst for Silver Point Capital, LLC, a credit-opportunity fund, from 2006 to 2009.
Neither the Partnership nor the General Partner has agreed to provide any compensation to Mr. Willinger for his service as Interim Chief Executive Officer, and none of his compensation is allocated to the Partnership for reimbursement under the Partnership’s Amended and Restated Shared Services Agreement, dated March 6, 2015 with SP Holdings, LLC.
Item 5.03.Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.
On March 31, 2015, in connection with the Private Placement, the Partnership entered into Amendment No. 1 to the Agreement of Limited Partnership of the Partnership (the “Partnership Agreement Amendment”) to set forth the terms of the Class A Preferred Units.
Distributions
Under the terms of the Partnership Agreement Amendment, commencing with the quarter ending on June 30, 2015, the Class A Preferred Units will receive a quarterly distribution (the “Class A Preferred Distribution”) of $0.04 per quarter through March 31, 2016, $0.046 per quarter from April 1, 2016 through March 31, 2017 and $0.05 per quarter commencing April 1, 2017 (the “Class A Distribution Amount”). The Class A Distribution Amount is paid on or about the last day of each of February, May, August and November after the end of each Quarter. For the quarter ending June 30, 2015, through the quarter ending June 30, 2016, the Class A Distribution Amount is to be paid in paid-in-kind units (the “PIK Units”). For the quarters from and after September 30, 2016, the Class A Distribution Amount may be paid in cash, in PIK Units or in a combination thereof, as determined by the board of directors of the General Partner in its sole discretion, but shall be paid in PIK Units absent an affirmative determination otherwise by the board of directors
Voting
Except in connection with an amendment to the terms of the Class A Preferred Units, the holders of Class A Preferred Units have no voting rights.
Conversion
Each Class A Preferred Unit will automatically convert at the Conversion Rate on the earlier of March 31, 2018 and the closing date for a firm commitment underwritten public offering by the Partnership that results in gross proceeds of not less than $75,000,000, subject to certain exceptions specified in the Partnership Agreement Amendment. The “Conversion Rate” is equal to the aggregate purchase price for the Class A Preferred Units plus accrued and unpaid distributions thereon, divided by the lesser of the purchase price for the Class A Preferred Units and the lowest price for which the Partnership issues Common Units (other than in connection with an at-the-market offering or the Partnership’s Long-Term Incentive Plan). Each of the holders of Class A Preferred Units have the right, from and after March 31, 2016 at the option of such holder, to request conversion in whole or in part of its Class A Preferred Units. The Partnership has the right to cause all, but not less than all, of the Class A Preferred Units to convert into Common Units at any time beginning March 31, 2016.
The foregoing description of the Partnership Agreement Amendment does not purport to be complete and is qualified in its entirety by reference to such document, which is filed as Exhibit 3.1 hereto and incorporated herein by reference
Item 8.01Other Events.
On March 31, 2015, the Partnership issued a press release regarding certain of the matters described in this Form 8-K. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
Cautionary Note Regarding Forward-Looking Statements
This Form 8-K, including Exhibit 99.1 incorporated by reference herein, contains forward-looking statements that are subject to a number of risks and uncertainties, many of which are beyond the Partnership’s control. In some cases, forward-looking statements can be identified by terminology such as “may,” “will,” “could,” “should,” “expect,” “plan,” “project,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “pursue,” “target,” “continue,” the negative of such terms or other comparable terminology.
The forward-looking statements contained herein are largely based on the Partnership’s expectations, which reflect estimates and assumptions made by the management of the General Partner. These estimates and assumptions reflect management’s best judgment based on currently known market conditions and other factors. Although the Partnership believes that such estimates and assumptions to be reasonable, they are inherently uncertain and involve a number of risks and uncertainties that are beyond the Partnership’s control. In addition, management’s assumptions about future events may prove to be inaccurate. Management cautions all readers that the forward-looking statements contained herein are not guarantees of future performance, and the Partnership cannot assure any
reader that such statements will be realized or the forward-looking events and circumstances will occur. Actual results may differ materially from those anticipated or implied in the forward-looking statements due to factors listed in the “Risk Factors” section in the Partnership’s filings with the Securities and Exchange Commission and elsewhere in those filings. All forward-looking statements speak only as of the date of this report. The Partnership does not intend to publicly update or revise any forward-looking statements as a result of new information, future events or otherwise.
Item 9.01 Financial Statements and Exhibits.
(a) Financial statements of business acquired.
The Partnership intends to file the unaudited consolidated financial statements of the Partnership as required by this Item 9.01(a) under cover of Form 8-K/A no later than 71 calendar days after the date this Current Report on Form 8-K was required to be filed.
(b)Pro Forma Financial Information.
The Partnership intends to file pro forma financial information as required by this Item 9.01(b) under cover of Form 8-K/A no later than 71 calendar days after the date this Current Report on Form 8-K was required to be filed.
(d) Exhibits.
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Exhibit |
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Description |
2.1 |
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Purchase and Sale Agreement, dated as of March 31, 2015, between SEP Holdings III, LLC, Sanchez Production Partners LP and SEP Holdings IV, LLC* |
3.1 |
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Amendment No. 1 to the Agreement of Limited Partnership of Sanchez Production Partners LP, dated as of March 31, 2015 |
4.1 |
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Registration Rights Agreement, dated as of March 31, 2015, between SEP Holdings III, LLC and Sanchez Production Partners LP |
4.2 |
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Registration Rights Agreement, dated as of March 31, 2015, between Sanchez Production Partners LP and the purchasers named therein |
10.1 |
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Third Amended and Restated Credit Agreement, dated as of March 31, 2015, among Sanchez Production Partners LP, Royal Bank of Canada, as administrative agent and collateral agent, and the lenders party thereto |
10.2 |
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Class A Preferred Unit Purchase Agreement, dated as of March 31, 2015, between Sanchez Production Partners LP and the purchasers named therein |
99.1 |
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Press Release dated March 31, 2015
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* The exhibits and schedules to the Purchase and Sale Agreement have been omitted from this filing pursuant to Item 601(b)(2) of Regulation S-K. The Company will furnish copies of such omitted exhibits and schedules to the Securities and Exchange Commission upon request. Descriptions of such exhibits and schedules are in the table of contents of the Purchase and Sale Agreement.
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.
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SANCHEZ PRODUCTION PARTNERS LP
By: Sanchez Production Partners GP LLC, its general partner |
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Date: April 1, 2015 |
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By: |
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/s/ Charles C. Ward |
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Charles C. Ward Chief Financial Officer, Treasurer and Secretary |
EXHIBIT INDEX
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Exhibit Number |
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Description |
2.1 |
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Purchase and Sale Agreement, dated as of March 31, 2015, between SEP Holdings III, LLC, Sanchez Production Partners LP and SEP Holdings IV, LLC* |
3.1 |
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Amendment No. 1 to the Agreement of Limited Partnership of Sanchez Production Partners LP, dated as of March 31, 2015 |
4.1 |
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Registration Rights Agreement, dated as of March 31, 2015, between SEP Holdings III, LLC and Sanchez Production Partners LP |
4.2 |
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Registration Rights Agreement, dated as of March 31, 2015, between Sanchez Production Partners LP and the purchasers named therein |
10.1 |
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Third Amended and Restated Credit Agreement, dated as of March 31, 2015, among Sanchez Production Partners LP, Royal Bank of Canada, as administrative agent and collateral agent, and the lenders party thereto |
10.2 |
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Class A Preferred Unit Purchase Agreement, dated as of March 31, 2015, between Sanchez Production Partners LP and the purchasers named therein |
99.1 |
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Press Release dated March 31, 2015
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* The exhibits and schedules to the Purchase and Sale Agreement have been omitted from this filing pursuant to Item 601(b)(2) of Regulation S-K. The Company will furnish copies of such omitted exhibits and schedules to the Securities and Exchange Commission upon request. Descriptions of such exhibits and schedules are in the table of contents of the Purchase and Sale Agreement.
Exhibit 2.1
between
SEP Holdings III, llc
(“SELLER”)
AND
SEP HOLDINGS IV, LLC
(“BUYER”)
AND
SANCHEZ PRODUCTION PARTNERS LP
(THE “PARTNERSHIP”)
DATED AS OF March 31, 2015
206202541
206202541
EXHIBITS
A.Wellbores
B.Leases
C.Form of Conveyance
D.Allocation Schedule
E.Form of Note
F.Form of Registration Rights Agreement
SCHEDULES
Schedule 1.1Seller Knowledge Individuals
Schedule 4.10Rights to Production
Schedule 4.12Material Agreements
Schedule 4.18Preferential Rights and Transfer Requirements
Schedule 4.21Outstanding AFEs over $100,000
Schedule 4.22Environmental Matters
Schedule 4.24Suspense Funds
Schedule 7.4(c)Hedge Novation
PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement is dated as of March 31, 2015 (the “Closing Date”), by and between SEP Holdings III, LLC, a Delaware limited liability company (“Seller”), on the one hand, and SEP Holdings IV, LLC, a Delaware limited liability company (“Buyer”), and Sanchez Production Partners LP, a Delaware limited partnership (the “Partnership”), on the other hand. Seller, Buyer and, if context requires, the Partnership are sometimes jointly referred to herein as “Parties” and individually referred to as a “Party.”
RECITALS
1.Seller owns various oil and gas properties and interests as more fully described in Exhibits A and B hereto.
2.Seller desires to sell to Buyer, and Buyer desires to purchase from Seller, the Assets, in the manner and upon the terms and conditions hereafter set forth.
3.Sanchez Energy Corporation, a Delaware corporation (“Sanchez”), is the parent of Seller and the Partnership is the parent of Buyer.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and of the mutual promises, representations, warranties, covenants, conditions and agreements contained herein, and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound by the terms hereof, agree as follows:
Section 1.1 Definitions. The following capitalized terms have the meanings given such terms below or elsewhere in this Agreement as set forth below.
“Accounting Arbitrator” is defined in Article 7(f).
“Action” is defined in 0.
“AFE” means authorization for expenditure.
“Affiliate” means, with respect to any specified Person, another Person that directly or indirectly controls, is controlled by, or is under common control with, such specified Person, with “control” in such context meaning the possession, directly or indirectly, of the power to direct the management or policies of a Person, whether through ownership of voting securities, by contract, or otherwise. Notwithstanding anything to the contrary herein, in no event shall the Partnership or any of its subsidiaries (including Buyer) be deemed to be an “Affiliate” of Sanchez or its Affiliates (including Seller).
“Agreement” means this Purchase and Sale Agreement, as amended, restated, supplemented or otherwise modified from time to time.
“Allocation Schedule” is defined in 0.
“Assets” is defined in 0.
“Assumed Obligations” is defined in 0.
“Business Day” means any day other than a Saturday, a Sunday, or a day on which banks are authorized or required by Law to be closed for business in Houston, Texas.
“Buyer” is defined in the preamble of this Agreement.
“Buyer Indemnitees” means Buyer and its Affiliates and their respective officers, directors, managers, employees, agents, partners, representatives, members, shareholders, subsidiaries, successors and assigns.
“Cash Purchase Price” is defined in Article 3(a).
“Certain Reworking Operations” is defined in 0.
“Closing” is defined in 0.
“Closing Date” is defined in the Preamble.
“Code” means the Internal Revenue Code of 1986, as interpreted by applicable Treasury Regulations.
“Common Units” shall have the meaning given such term in the Partnership Agreement.
“Conflicts Committee” is defined in the Partnership Agreement.
“Contract” means any agreement, contract, obligation, promise, understanding or undertaking (whether written or oral and whether express or implied) that is legally binding and (a) under which Seller has or may acquire any rights with respect to the Assets, (b) under which Seller has or may become subject to any Obligation with respect to the Assets, or (c) by which Seller or any of the Assets is or may become bound.
“Conveyance” means that certain conveyance the form of which is more particularly set forth on Exhibit C to this Agreement.
“Eagle Ford Shale Formation” means the stratigraphic equivalent of the formation which is the entire correlative interval from 10,294 feet to 10,590 feet as shown on the log of the EOG Resources, Inc. – Milton Unit, Well No. 1 (API No. 42-255-31608), Section 64, John Randon Survey, A-247, Karnes County, Texas; provided that if a Wellbore is producing from a greater depth as of the Effective Time, the Eagle Ford Shale Formation for that specific Wellbore shall also include all such greater depths at which there are open perforations for such applicable Wellbore.
“Effective Time” means 12:01 a.m. Houston, Texas time on January 1, 2015.
“Environmental Laws” means all Laws pertaining to health or the environment as may be interpreted by applicable court decisions or administrative orders, including the Clean Air Act, the Comprehensive Environmental Response, Compensation and Liability Act, the Federal Water Pollution Control Act, the Occupational Safety and Health Act, the Resources Conservation and Recovery Act, the Safe Drinking Water Act, the Toxic Substances Control Act, the Superfund Amendment and Reauthorization Act of 1986, the Hazardous Materials Transportation Act, and comparable state and local Laws, but excluding all Laws of the Railroad Commission of Texas relating to spacing, density, setbacks, specifications or grades for equipment or materials (including drilling mud or fluid), well integrity or construction, the prevention of physical or economic waste, or the protection of correlative rights in Hydrocarbons, and, in each case, any cause of action or other rights in favor of third Persons arising therefrom, or relating thereto.
“Equipment” means personal property, fixtures and equipment located on or under lands covered by the Leases and used in connection with the Wellbores.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Excluded Taxes” means Taxes measured by (a) net income, gross receipts, profits, capital, capital gains, or similar measures or (b) multiple bases (including corporate, franchise, business and occupation, business license, withholding, payroll, employment, social security, unemployment, stamp, occupation, or similar Taxes) if one or more bases upon which such Tax may be based, measured by, or calculated with respect to, is described in clause (a).
“Fundamental Representations” means the representations and warranties made by (i) Seller in 0, 0, 0, 0, 0 and 0 and (ii) Buyer and the Partnership in 0, 0, 0, 0 and 0.
“GAAP” means accounting principles generally accepted in the United States.
“Governmental Authority” means any federal, state, local, tribal, or foreign government, or any court of competent jurisdiction, regulatory or administrative agency, commission, or other governmental authority that exercises jurisdiction over Seller or any of the Assets.
“Hedge Novation” is defined in Article 7(i).
“Hydrocarbons” is defined in 0.
“Imbalances” means over-production or under-production or over-delivery or under-delivery with respect to Hydrocarbons produced from the Assets, regardless of whether the same arise at the wellhead, pipeline, gathering system, transportation system, processing plant, or any other location, including any imbalances under gas balancing or similar agreements, production handling agreements, processing agreements, and/or gathering or transportation agreements.
“Indemnified Party” is defined in Section 8.5(a).
“Indemnifying Party” is defined in Section 8.5(a).
“JOA” means that certain Joint Operating Agreement dated December 28, 2009, by and between Hilcorp Energy Company, as operator, and SEP Holdings II, LLC, Seller, et al., as non-operators, as amended, restated, supplemented or otherwise modified from time to time.
“Laws” means all laws, statutes, rules, regulations, ordinances, orders, decrees, requirements, judgments, and codes of Governmental Authorities.
“Leases” is defined in 0.
“Legal Right” means, to the extent arising from, or in any way related to the Assets, the legal authority and right, including through the exercise of voting, managerial or other similar authority or right, if any; provided, however, that a Legal Right shall be deemed not to exist with respect to any contemplated conduct unless Seller reasonably determines that such conduct would not constitute a violation, termination or breach of, or require any payment under, or permit any termination under, any agreement, applicable Law, duty or any other obligation.
“Losses” means any and all losses, damages, Obligations, liabilities, claims, demands, causes of action, judgments, settlements, fines, penalties, costs and expenses (including court costs and reasonable attorneys’ and experts’ fees) of any and every kind or character.
“Material Agreements” means, to the extent binding on Seller and which relate to any of the Assets, any Contract, other than the instruments constituting the Leases, which is one or more of the following types:
(a) A Contract for the sale, purchase, exchange, or other disposition of Hydrocarbons which is not cancelable without penalty on 30 days prior written notice; |
(b) A Contract to sell, lease, farmin, farmout, exchange, or otherwise dispose of all or any part of the Assets (including contracts containing rights of first refusal, rights of first offer, or put or call rights, but excluding conventional rights of reassignment upon intent to abandon or release a Well or Lease); |
(c) A joint operating agreement, unit operating agreement, unit agreement, unitization, communitization, or pooling agreement, or other similar agreement; |
(d) A non-competition agreement or any agreement that purports to restrict, limit, or prohibit Seller from engaging in any line of business or the manner in which, or the locations at which Seller conducts business, including area of mutual interest agreements, or that would obligate Seller to purchase or sell any interest in any Asset(s), purchase any leasehold interest or other asset, or employ and pay for a drilling rig; |
(e) A Contract for the gathering, treatment, processing, storage, or transportation of Hydrocarbons which is not cancellable by Seller without penalty upon 30 or less days notice; |
(f) A Contract for the construction and installation or rental of equipment, fixtures, or facilities with guaranteed production throughput requirements or demand
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charges or which cannot be terminated by Seller without penalty on no more than 60 days’ notice; |
(g) An option, swap, hedge, collar or other derivative contract, including any master agreement and confirmation thereunder; |
(h) A contract that involves performance of services or delivery of goods or materials (other than Hydrocarbons) by or to Seller of an amount or value in excess of $250,000 determined on an annual basis; |
(i) A contract that involves expenditures or receipts of Seller in excess of $250,000 determined on an annual basis; |
(j) A seismic or geophysical contract; or |
(k) A material software license or other license agreement related to intellectual property involving expenditures of Seller in excess of $25,000 determined on an annual basis. |
“Material Losses” is defined in Article 8(p).
“Net Revenue Interest” means, with respect to any Wellbore, the interest in and to all Hydrocarbons produced, saved, and sold from or allocated to such Wellbore after giving effect to all royalties, overriding royalties, production payments, carried interests, net profits interests, reversionary interests, and other burdens upon, measured by, or payable out of production therefrom.
“Note” is defined in Article 3(b).
“Novation Transactions” is defined in Article 7(b)(iv).
“Obligations” means duties, liabilities, and obligations, whether vested, absolute, or contingent, known or unknown, asserted or unasserted, accrued or unaccrued, liquidated or unliquidated, due or to become due, and whether contractual, statutory, or otherwise.
“Operating Agreement” means that certain Contract Operating Agreement, dated as of May 8, 2014, by and between SOG and the Partnership, as amended, restated, supplemented or otherwise modified from time to time.
“Partnership” is defined in the preamble to this Agreement.
“Partnership Agreement” means that certain Agreement of Limited Partnership of the Partnership, dated as of March 6, 2015, as amended, restated, supplemented or otherwise modified from time to time.
“Party” and “Parties” are defined in the preamble to this Agreement.
“Permits” means all permits, licenses, approvals and consents from appropriate
Governmental Authorities necessary to conduct operations on or with respect to the Assets.
“Permitted Encumbrances” means any or all of the following:
(a) The terms and conditions of the oil and gas leases covering the lands on which the Wellbores are located and all lessors’ royalties, overriding royalties, net profits interests, carried interests, production payments, reversionary interests and other burdens on or deductions from the proceeds of production created or in existence as of the Effective Time to the extent that such terms and conditions do not, individually or in the aggregate, operate to reduce the Net Revenue Interest of any Wellbore below that set forth on Exhibit A for such Wellbore or increase the Working Interest for any Wellbore above that set forth on Exhibit A for such Wellbore without a proportionate increase in the corresponding Net Revenue Interest for such Wellbore (in each foregoing case, subject to the effective percentage amounts and times set forth on Exhibit A); |
(l) All rights to consent by, required notices to, filings with, or other actions by a Governmental Authority, in connection with the conveyance of the applicable Wellbores if the same are customarily obtained after such conveyance; |
(m) Easements, rights of way, servitudes, permits, surface leases and other similar rights with respect to surface operations, on, over, or in respect of any Wellbore, or restrictions on access thereto, that do not materially interfere with or impair the exploration, development and/or operation of the affected Wellbores; |
(n) The terms and conditions of the Material Agreements, to the extent that such terms and conditions (other than the non-consent provisions of joint operating agreements or calls on production) do not, individually or in the aggregate, reduce the Net Revenue Interest for any Wellbore below that set forth in Exhibit A for such Wellbore or increase the Working Interest for any Wellbore above that set forth in Exhibit A for such Wellbore without a proportionate increase in the corresponding Net Revenue Interest for such Wellbore (in each foregoing case, subject to the effective percentage amounts and times set forth on Exhibit A); |
(o) Materialmens’, mechanics’, operators’ or other similar liens arising in the ordinary course of business incidental to operation of the Wellbores (i) if such liens and charges have not been filed pursuant to law and the time for filing such liens and charges has expired; (ii) if filed, such liens and charges have not yet become delinquent or payment is being withheld as provided by law; or (iii) if their validity is being contested in good faith by appropriate action; |
(p) Errors or omissions in documents related to the Wellbores caused by oversights in drafting, executing, or acknowledging that (i) a prudent operator, when applying industry standards, would regard as immaterial, (ii) do not affect and have not historically affected the operations of or production from the Wellbores, and (iii) do not reduce the Net Revenue Interest for any Wellbore below that set forth in Exhibit A for such Wellbore or increase the Working Interest for any Wellbore above that set forth in Exhibit A for such Wellbore without a proportionate increase in the corresponding Net
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Revenue Interest for such Wellbore (in each foregoing case of (iii), subject to the effective percentage amounts and times set forth on Exhibit A); |
(q) Defects or irregularities of title (i) as to which the relevant statute(s) of limitations or prescription would bar any attack or claim against Seller’s title, (ii) arising out of lack of corporate authorization (unless Buyer provides affirmative evidence that such corporate or other entity action may not be authorized) or a variation in corporate name, (iii) consisting of the failure to recite marital status or omission of heirship proceedings in documents (unless Buyer provides clear and convincing evidence that such failure or omission has resulted in another Person’s actual and superior claim of title to the relevant Wellbore), or (iv) resulting from lack of survey (unless a survey is expressly required by applicable Law) or failure to record releases of liens, production payments or mortgages that have expired by their own terms; |
(r) Imbalances whether resulting from overproduction or underproduction, and plugging and surface restoration obligations; |
(s) Liens for current period Taxes, or assessments not yet delinquent or, if delinquent, that are being contested in good faith in the normal course of business, adequate cash reserves for which are maintained in accordance with GAAP; and |
(t) Conventional rights of reassignment triggered by Seller’s express indication of its intention to release or abandon its interest prior to expiration of the primary term or other termination of such interest. |
“Person” means any individual, firm, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization, Governmental Authority or any other entity.
“Preferential Rights” means any right or agreement that enables any Person to purchase or acquire any Assets or any interest therein or portion thereof as a result of or in connection with (a) the sale, assignment or other transfer of any Asset or any interest therein or portion thereof, or (b) the execution or delivery of this Agreement or the consummation or performance of the transactions contemplated by this Agreement.
“Property Costs” means all capital expenses, joint interest billings, lease operating expenses, lease rental and maintenance costs, royalties, overriding royalties, leasehold payments, Taxes (other than Excluded Taxes), drilling expenses, workover expenses, geological, geophysical and any other exploration or development expenditures chargeable under applicable operating agreements or other agreements consistent with the standards established by the Council of Petroleum Accountant Societies of North America that are attributable to the Assets during the period in question; provided, however, that Property Costs relating to periods prior to the Closing shall not include any liabilities, losses, costs, or expenses that are attributable to: (a) claims, investigations, administrative proceedings, arbitration or litigation directly or indirectly arising out of or resulting from actual or claimed personal injury or other torts, illness or death; (b) property damage (other than damage to structures, fences, irrigation systems and other fixtures, crops, livestock, and other personal property in the ordinary course of business); (c)
violation of any Law (or a private cause or right of action under any Law); (d) environmental damage or liabilities, including Remediation obligations for any contamination of groundwater, surface water, soil, sediments, or Equipment; (e) title and environmental claims (including claims that Leases have terminated); (f) claims of improper calculation or payment of royalties (including overriding royalties and other burdens on production) related to deduction of post-production costs or use of posted or index prices or prices paid by Affiliates; (g) gas balancing and other production balancing obligations; (h) destruction by fire or other casualty or taking in condemnation or under right of eminent domain; or (i) any claims for indemnification, contribution, or reimbursement from any third Person with respect to liabilities, losses, costs and expenses of the type described in the preceding clauses (a) through (h), whether such claims are made pursuant to contract or otherwise.
“Purchase Price” is defined in 0.
“Purchase Price Adjustments” is defined in 0.
“Registration Rights Agreement” is defined in Article 7(h).
“Remediation” means the implementation and completion of any remedial, removal, response, construction, repair, closure, disposal, restoration, or other corrective actions required under Environmental Laws.
“Retained Obligations” is defined in 0.
“Sanchez” is defined in the Recitals.
“Schedule” means any disclosure Schedule attached to this Agreement.
“SEC” means the Securities and Exchange Commission.
“SEC Filings” is defined in Article 5(c).
“SEC Financial Statements” is defined in 0.
“Securities Act” means the Securities Act of 1933, as amended.
“Seller” is defined in the preamble to this Agreement.
“Seller Credit Facility” means the Second Amended and Restated Credit Agreement, dated as of June 30, 2014, among Sanchez Energy Corporation, as borrower, SEP Holdings III, LLC, SN Marquis LLC, SN Cotulla Assets, LLC, SN Operating, LLC, SN TMS, LLC and SN Catarina, LLC, as loan parties, Royal Bank of Canada, as administrative agent, Capital One, National Association, as syndication agent, Compass Bank and SunTrust Bank as co-documentation agents, RBC Capital Markets as sole lead arranger and sole book runner, and the lenders party thereto, as amended, restated, supplemented or otherwise modified from time to time.
“Seller Indemnitees” means Seller and its Affiliates and their respective officers,
directors, managers, employees, agents, partners, representatives, members, shareholders, subsidiaries, successors and assigns.
“Seller’s Knowledge” (or “Knowledge” with respect to Seller) means the actual knowledge of any fact, circumstance or condition by the individuals set forth on Schedule 0, in each case, after due inquiry and the exertion of reasonable diligence.
“Settlement Amount” is defined in Article 6(j).
“Shared Services Agreement” means that certain Shared Services Agreement, dated as of May 8, 2014, by and between SP Holdings, LLC and the Partnership, as amended, restated, supplemented or otherwise modified from time to time.
“SOG” means Sanchez Oil & Gas Corporation, a Delaware corporation.
“SP Holdings” means SP Holdings, LLC, a Texas limited liability company.
“Special Warranty” is defined in 0.
“Specified Date” means each of the Effective Time and the dates on which the Net Revenue Interest and Working Interest automatically increase as specified in Exhibit A.
“Statement” is defined in Article 7(d).
“Stifel Parties” is defined in 0.
“Tax” means:
(u) all interest, penalties, fines, additions to tax, or additional amounts imposed by any Governmental Authority in connection with any item described in subsection (a). |
“Tax Claim” is defined in Article 6(f).
“Tax Return” is defined in Article 4(d).
“Transfer Requirement” means any consent, approval, authorization or permit of, or filing with or notification to, any Person which is required to be obtained, made or complied with for or in connection with the transactions contemplated by this Agreement.
“Treasury Regulations” means the regulations promulgated by the United States Department of the Treasury pursuant to and in respect of provisions of the Internal Revenue
Code of 1986, as amended. All references herein to Sections of the Treasury Regulations shall include any corresponding provision or provisions of Treasury Regulations hereafter proposed or adopted.
“Unit Consideration” is defined in Article 3(c).
“Wellbores” is defined in 0.
“Working Interest” means, with respect to any Wellbore, the interest in and to such Wellbore that is burdened with the obligation to bear and pay costs and expenses of maintenance, development, and operations on or in connection with such Wellbore, but without regard to the effect of any royalties, overriding royalties, production payments, net profits interests, and other similar burdens upon, measured by, or payable out of production therefrom.
Section 1.2 Interpretation and Construction. In interpreting and construing this Agreement, the following principles shall be followed:
(v) If a term is defined as one part of speech (such as a noun), it shall have a corresponding meaning when used as another part of speech (such as a verb). The terms “herein,” “hereof,” “hereby,” and “hereunder,” and other similar terms refer to this Agreement as a whole and not only to the particular Article, Section or subdivision in which any such terms may be employed. The terms “include,” “includes,” and “including” shall be deemed to be followed by “without limitation”. The plural shall be deemed to include the singular, and vice versa. |
(w) Unless the context of this Agreement clearly requires otherwise, references to Articles, Sections, subsections, Exhibits and Schedules refer to the Articles, Sections, and subdivisions of, and Exhibits and Schedules to, this Agreement. |
(x) Any accounting term not otherwise defined herein has the meaning assigned to it under GAAP. Words not otherwise defined herein that have well-known and generally accepted technical or trade meanings in the oil and gas industry are used herein in accordance with such recognized meanings. |
(y) The table of contents and headings contained in this Agreement are for reference purposes only, and shall not affect in any way the meaning or interpretation of this Agreement. |
(z) Each exhibit, attachment, and schedule to this Agreement constitutes a part of this Agreement and is incorporated herein by reference, but if there is any conflict or inconsistency between the main body of this Agreement and any exhibit, attachment, or schedule, the provisions of the main body of this Agreement shall prevail. |
(aa) Every covenant, term and provision of this Agreement shall be construed simply according to its fair meaning and not strictly for or against any Party (notwithstanding any rule of law requiring an agreement to be strictly construed against the drafting party), it being understood that the Parties to this Agreement are
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sophisticated and have had adequate opportunity and means to retain counsel to represent their interests and to otherwise negotiate the provisions of this Agreement. |
(bb) Any reference to a Law shall include any amendment thereof or any successor thereto, and any rules and regulations promulgated thereunder. |
(cc) Without limitation to any restrictions on assignment, transfer or alienation in this Agreement, any reference to a Person shall include its successors and assigns. |
(dd) Any reference to “$” or “dollars” means United States Dollars. |
(ee) The words “shall,” “shall not,” “will” and “will not” are expressions of command and not merely expressions of future intent or expectation. |
. Upon the terms and subject to the conditions of this Agreement, Seller hereby sells to Buyer, and Buyer hereby purchases from Seller, the Assets, in exchange for the Purchase Price and the assumption by Buyer of the Assumed Obligations.
Section 2.2 The Assets. As used herein, the term “Assets” means all of Seller’s respective right, title and interest in, to and under: (i) the undivided Working Interests and Net Revenue Interests of the wellbores of the oil, gas and mineral wells set forth on Exhibit A hereto, in each case, effective in the incremental percentages as of the dates set forth thereon, together with all oil, gas, casinghead gas, condensate, natural gas liquids, and other gaseous and liquid hydrocarbons or any combination thereof and other minerals extracted from or produced with the foregoing (collectively, “Hydrocarbons”) produced therefrom after the applicable Specified Date with respect thereto, insofar and only insofar as such Hydrocarbons are produced from the depths of such wellbores in the Eagle Ford Shale Formation as of the Effective Time (the “Wellbores”); (ii) the oil, gas and mineral leases covering rights in the Wellbores (and all tenements, hereditaments and appurtenances belonging to such leases), including those described on Exhibit B hereto, insofar and only insofar as such leases entitle the owner of such Wellbores to Hydrocarbons produced from such Wellbores and to any pooling rights associated therewith (the “Leases”); (iii) the Material Agreements listed on Schedule 4.12, insofar and only insofar as such Material Agreements relate to the applicable percentage interests in the Wellbores that have been sold to Buyer pursuant to the terms hereof; and (iv) a copy of all files, records and data relating to the foregoing Assets in control of or maintained by Seller, including, without limitation, the following, if and to the extent that such files exist and to the extent Buyer reasonably requests a copy: records of production and maintenance, revenue, sales, expenses, Lease files, land files, Wellbore files and Contract files but excluding those subject to a written unaffiliated third party contractual restriction on disclosure or transfer for which no consent to disclose or transfer has been received, or the extent such disclosure or transfer is subject to payment of a fee or other consideration, for which Buyer has not agreed in writing to pay the fee or other consideration, as applicable.
It is intended that the applicable percentage interests to the Wellbores of the oil, gas and mineral wells set forth on Exhibit A hereto are (upon conveyance at the Closing pursuant to the
Conveyance) presently vested interests in real property and have been owned by Buyer as of the Effective Time. The increase in percentages of Working Interests and Net Revenue Interests are intended to be (pursuant to the Conveyance) self-executing and occur automatically on the applicable Specified Date set forth on Exhibit A, without the need for any further action of any Party.
Section 2.3 Receipts and Credits.
(b) Determinations. The terms “earned” and “incurred,” as used in this Agreement, shall be interpreted in accordance with GAAP and Council of Petroleum Accountants Societies standards. For purposes of this 0, determination of whether Property Costs are attributable to the period before or after the Specified Date shall be based on when services are rendered, when the goods are delivered, or when the work is performed. For clarification, the date on which the item ordered is delivered to the job site, or the date on which the work ordered is performed, shall be the relevant date for settlement purposes. For purposes of allocating Hydrocarbon production (and accounts receivable with respect thereto), under this 0: (i) liquid Hydrocarbons shall be deemed to be “from or attributable to” the Assets if they are or have been in storage above the pipeline connection, or, if there is no such facility, the applicable LACT meters through which they are run; and (ii) gaseous Hydrocarbons shall be deemed to be “from or attributable to” the Assets when they pass through the delivery point sales meters on the pipelines through which they are transported. Buyer shall utilize reasonable interpolative procedures to arrive at an allocation of Hydrocarbon production when exact meter readings or gauging and strapping data is not available. |
(d) Joint Interest Audits. After Closing, each Party shall be entitled to participate in all joint interest audits and other audits of Property Costs for which such Party is responsible or revenues to which such Party is entitled (whether entirely or in part) pursuant to this 0. |
(e) Payments. If Buyer or Seller receives any amount to which the other is entitled pursuant to this 0, such receiving Party will promptly account for and transmit such amount to the other. If Buyer or Seller pays any amount for which the other is obligated pursuant to this 0, such paying Party will notify the other, and such other Party shall promptly reimburse such paying Party for such amount. |
. From and after the Closing Date, Buyer shall assume, pay and discharge the following insofar as allocable to the Assets (“Assumed Obligations”), but excluding the Retained Obligations and the matters for which the Seller Parties owe indemnification under 0:
(f) Any and all Obligations in any way relating to the ownership of the Assets arising during, related to or otherwise attributable to the period commencing with the applicable Specified Date; |
(g) All Property Costs and other costs which are for the account of Buyer pursuant to (a) or 0; |
(h) Subject to the pro ration set forth in (c), ad valorem, property, severance and other similar Taxes or assessments based upon or measured by the ownership of the Assets or the production therefrom attributable to any period from and after the applicable Specified Date; and |
(i) Any and all sales, use, transfer (including real property transfer), stamp, documentary, filing, recordation, and other similar fees and Taxes, together with any interest, additions, or penalties with respect thereto and any interest in respect of such additions or penalties, if any, imposed or required in connection with the sale of the Assets to Buyer or the filing or recording of all assignments related to the sale of the Assets to Buyer. |
Notwithstanding anything to the contrary in this Agreement, there shall be no duplication among the Assumed Obligations, increases to the Purchase Price and Buyer’s obligation to indemnify Seller.
. In consideration for the conveyance of the Assets to Buyer, Buyer hereby pays to Seller consideration (the “Purchase Price”), which consists of:
(a) $65,750,000 in cash (which shall be paid by wire transfer of available funds to an account designated by Seller) (the “Cash Purchase Price”); |
Notwithstanding anything to the contrary set forth above in clauses (a) and (b), if on or prior to the time Closing is deemed to have occurred pursuant to Section 7.1, the Parties acknowledge and agree that prior, to any Purchase Price Adjustments in Sections 7.2(a) or (b), for each dollar of the Cash Purchase Price that Buyer delivers or causes to be delivered to Seller in excess of the amount set forth in clause (a), the principal amount of the Note will be reduced in an amount equal to 19,250,000 divided by 17,250,000 dollars.
Section 3.2 Allocation of Purchase Price. The Parties agree that the unadjusted Purchase Price is allocated in accordance with Section 1060 of the Code among the Assets in the amounts set forth in Exhibit D (the “Allocation Schedule”).
Section 3.3 Purchase Price Adjustment Procedures.
(d) The Purchase Price is subject to adjustment pursuant to 0 and 0 and such adjustments shall be made as set forth in this 0. |
(f) Notwithstanding anything in this Agreement to the contrary, in no event shall the Cash Purchase Price constitute less than 75% of the Purchase Price, by adjustment or otherwise, and if any adjustment or other event would result in the Cash Purchase Price constituting less than 75% of the Purchase Price, the Parties shall
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undertake to promptly adjust the amount of the Cash Purchase Price and/or the Note, as applicable, to ensure that the Cash Purchase Price constitutes at least 75% of the Purchase Price. |
Seller represents and warrants to Buyer as of the date hereof as follows:
Section 4.1 Organization and Standing. Seller is a limited liability company, duly organized, validly existing and in good standing under the Laws of the State of Delaware, and is duly qualified to carry on its business in each jurisdiction in which the nature of its business as now conducted makes such qualification necessary, except where the failure to be so qualified or in good standing would not materially hinder or impede the consummation by Seller of the transactions contemplated by this Agreement.
Section 4.2 Legal Power; No Conflicts. Seller has all requisite power and authority to carry on its business as presently conducted and to execute, deliver and perform this Agreement (and all documents Seller hereby is required to execute and deliver). The execution, delivery and performance of this Agreement (and such documents) and the consummation of the transactions contemplated hereby (and thereby) will not (i) violate, or be in conflict with, (x) any material provision of Seller’s governing documents or any material provisions of any Material Agreement or (y) to Seller’s Knowledge, any material Law applicable to Seller; or (ii) except with respect to the Preferential Rights and Transfer Requirements listed on Schedule 0, result in the creation, imposition or continuation of any material adverse claim or interest, or any material lien, encumbrance, charge, equity or restriction of any nature whatsoever, on or affecting Seller or the Assets.
Section 4.3 Authorization and Enforceability. The execution, delivery and performance by Seller of this Agreement (and all documents Seller hereby is required to execute and deliver), and the consummation of the transactions contemplated hereby and thereby, have been duly and validly authorized by all necessary action on the part of Seller. This Agreement constitutes (and such documents constitute) Seller’s legal, valid and binding obligation, enforceable against Seller in accordance with its terms, subject, however, to the effects of bankruptcy, insolvency, reorganization, moratorium and other Laws for the protection of creditors, as well as to general principles of equity, regardless whether such enforceability is considered in a proceeding in equity or at law.
Section 4.4 Liability for Brokers’ Fees. Seller or its Affiliates have not incurred any liability, contingent or otherwise, for brokers’ or finders’ fees relating to the transactions contemplated hereby for which Buyer or its Affiliates will have any responsibility.
Section 4.5 No Bankruptcy. There are no bankruptcy, reorganization, or receivership proceedings pending, being contemplated by Seller, or, to Seller’s Knowledge, threatened against Seller by any third Person.
Section 4.6 Consents and Approvals. No filing or registration with, and no permit, authorization, certificate, waiver, license, consent or approval of, any Governmental Authority is
necessary for the execution, delivery or performance by Seller of this Agreement (and all documents Seller hereby is required to execute and deliver) (other than existing permits and other existing approvals).
Section 4.7 Litigation.
(a) Seller has not received a written claim or written demand notice that has not been resolved and that would materially and adversely affect Buyer or any Asset; |
(b) There are no actions, suits, governmental investigations, written governmental inquiries or proceedings pending or, to Seller’s Knowledge, threatened in writing against Seller or any of the Assets, in any court or by or before any Governmental Authority or arbitrator with respect to Seller or the Assets or that would affect Seller’s ability to consummate the transactions contemplated by this Agreement, or materially and adversely affect Buyer or any Asset; and |
(c) There is no existing award, decision, injunction, order, ruling, subpoena, or verdict entered, issued, made, or rendered by any Governmental Authority that materially and adversely affects the use and/or ownership of the Assets. |
. There are no unsatisfied judgments or injunctions issued by a Governmental Authority outstanding against Seller or any Assets that would be reasonably expected to materially interfere with the Buyer’s use and/or ownership of the Assets from and after Closing or impair Seller’s ability to consummate the transactions contemplated by this Agreement.
Section 4.9 Compliance with Law. Seller is in compliance with all Laws to which Seller or the Assets are subject (including, all record keeping and reporting requirements thereof). To Seller’s Knowledge, the ownership and operation of the Assets are in compliance with all applicable Laws. Seller has not received written notice of a material violation of any Law applicable to Seller’s business or operations that remains uncured, and that would, individually or in the aggregate, have a material and adverse effect on the Assets. Seller has not engaged in any transaction, maintained any bank account or used any corporate funds except for transactions, bank accounts and funds which have been and are reflected in the normally maintained books and records of Seller. Notwithstanding anything to the contrary contained herein, the use of the words “Law” or “Laws” in this 0 does not include Environmental Laws, which are covered exclusively by 0.
Section 4.10 Rights to Production. To Seller’s Knowledge, except with respect to Imbalances or as set forth on Schedule 0, no Person has any call upon, right to purchase or to market, option to purchase or market, or similar rights with respect to any portion of the Hydrocarbons produced from the Assets that is not terminable without penalty.
Section 4.11 Take-or-Pay Arrangements. Seller has not received any prepayments or buydowns, or entered into any take-or-pay or forward sale arrangements, such that Seller (or, after the Closing, Buyer) will be obligated to make deliveries of Hydrocarbons produced from the Assets without receiving full payment therefor.
. All Material Agreements are listed on Schedule 0. Each Material Agreement is in full force and effect and represents the legal, valid and binding obligation of the parties thereto, enforceable in accordance with its terms. Seller is not and, to Seller’s Knowledge, no other party is, in breach of any Material Agreement. Seller has not received or delivered notice of a default or breach with respect to any Material Agreement. Prior to the Closing Date, Seller made available to Buyer or its representatives complete copies of each Material Agreement and all amendments and other modifications thereto.
Section 4.13 Compliance With Leases. Seller is in compliance in all material respects with the Leases, including all express and implied covenants thereunder, and no written demands or notices of default or non-compliance have been issued to or received by Seller. Except proceeds attributable to interests being held in suspense in accordance with prudent industry practice, all proceeds of production which Seller is disbursing or is required to disburse to third parties have been and are being accounted for under appropriate division orders, transfer orders or similar documents signed by or otherwise clearly binding on the parties receiving such proceeds and reflecting as to each party the decimal interest of such party. Prior to the Closing Date, Seller made available to Buyer or its representatives complete copies of each Lease and all amendments and other modifications thereto.
Section 4.14 Payouts. No Wellbores are subject to a revision or other adjustment at some level of cost recovery or payout other than as expressly set forth on Exhibit A.
Section 4.15 Non-Consent Operations. Seller has not elected not to participate in any operation or activity proposed with respect to any Asset which could result in any of Seller’s interest in such Asset becoming subject to a penalty or forfeiture as a result of such election.
Section 4.16 Royalties and Rentals. To Seller’s Knowledge, all bonuses, delay rentals, minimum royalties and royalties, other than suspended royalties, with respect to the Assets have been timely paid in accordance with applicable Leases and Laws.
Section 4.17 Permits. Seller has maintained and is maintaining all material Permits necessary to operate the Assets as currently conducted by it. The Assets are in material compliance with applicable Permits. Seller has all Permits necessary to operate the Assets in all material respects as currently conducted by it. No event has occurred (including the execution and delivery of this Agreement) which permits, or after the giving of notice or lapse of time or both would permit, the revocation or termination of any Permit or the imposition of any (a) restrictions of such a nature as may limit any of the operations of Seller as historically conducted by it or (b) material fines, costs, or penalties under any Permit.
Section 4.18 Preferential Rights and Transfer Requirements. Except as set forth on Schedule 0 or relating to a consent by, required notices to, filings with, or other actions by a Governmental Authority, in connection with the conveyance of the Assets if the same are customarily delivered, obtained or made, as applicable, after such conveyance, there are no Preferential Rights or Transfer Requirements attributable to or with respect to any of the Assets.
Section 4.19 Taxes and Assessments.
(e) Seller has not received written notice of any pending claim (which remains outstanding) from any applicable Governmental Authority for assessment of Taxes with respect to the Assets. |
(f) The Assets are not subject to a Tax partnership agreement or provision requiring a partnership income Tax Return to be filed under applicable Law. |
(g) There are no Tax liens on any of the Assets except for liens for current period Taxes, or assessments not yet delinquent or, if delinquent, that are being contested in good faith in the normal course of business, adequate cash reserves for which are maintained in accordance with GAAP. |
. To Seller’s Knowledge,
(h) All Wellbores have been drilled and completed at legal locations and within the limits permitted by all applicable Leases, contracts, and pooling or unit agreements; |
(i) No Wellbore is subject to penalties on allowables due to overproduction or any other violation of Law; |
(j) There are no Wellbores or other Equipment located on the Assets that (i) the operator is currently obligated by any Law or contract to currently plug, dismantle or abandon; or (ii) have been plugged, dismantled, or abandoned in a manner that does not comply in all material respects with applicable Law; |
(k) All currently producing Wellbores and Equipment are in an operable state of repair adequate to maintain normal operations in accordance with past practices, ordinary wear and tear excepted; |
(l) There are no shut-in or inactive Wellbores listed on Exhibit A; and |
(m) The operator has all easements, rights of way, licenses, and authorizations from Governmental Authorities necessary to access, construct, operate, maintain, and repair the Equipment in the ordinary course of business as currently conducted and in compliance with all applicable Laws. |
. To Seller’s Knowledge:
(n) As of the Closing Date, there are no outstanding AFEs that are binding on the Assets and that Seller reasonably anticipates will individually require expenditures by Seller or its respective successors-in-interest (including Buyer) from and after the Effective Time in excess of $100,000, other than as shown on Schedule 0; and |
(o) There are no Leases that (i) are currently held by payment of shut-in royalties, reworking operations, any substitute for production in paying quantities, or any other means other than production in paying quantities, or (ii) will expire, terminate, or otherwise be materially impaired absent actions (other than continued production in paying quantities) by or on behalf of Buyer within 60 days after the Closing Date. |
. Except as described on Schedule 0, to Seller’s Knowledge, (a) the Assets are in material compliance with all applicable Environmental Laws, (b) the Assets are not the subject of any outstanding administrative or judicial order, judgment, agreement or arbitration award from any Governmental Authority under any Environmental Law relating to the Assets and requiring remediation or the payment of a fine or penalty, and (c) Seller has not received any written notice of violation of any Environmental Law relating to the Assets where such violation has not been cured or otherwise remedied.
Section 4.23 Buyer Information. The estimates and projections (including those contained in the internal reserve report) provided to Buyer by Seller and its Affiliates as part of Buyer’s review of the transactions contemplated by this Agreement were prepared and delivered in good faith, have a reasonable basis, and are consistent with Seller’s current expectations regarding the Assets. To the extent such information relates to the periods during which Seller owned such Assets, to Seller’s Knowledge, the historical and current information (including that contained in the internal reserve report) relating to the Assets provided to Buyer are correct in all material respects for the respective periods in which Seller owned such Assets, and are derived from Seller’s books and records.
Section 4.24 Suspense Funds. Schedule 0 lists all material suspense funds held in suspense by Seller as of the Effective Time.
Section 4.25 Affiliate Transactions. There are no Contracts binding upon or directly affecting any of the Assets between Seller, on the one hand, and an Affiliate of Seller, on the other hand, that will continue to be binding upon or directly affect the Assets beyond the Closing.
Section 4.26 Investment. Seller is acquiring the Unit Consideration for its own account as an investment without the present intent to sell or offer the same to any other Person or effect a distribution of the Unit Consideration in violation of the Securities Act or state securities laws. Seller is an “accredited investor” as defined under Rule 501 promulgated under the Securities Act. Seller is not acquiring the Unit Consideration as a result of general solicitation or advertisement. Seller acknowledges that the Unit Consideration has not been registered pursuant to the Securities Act or any state securities laws, and that none of the Unit Consideration may be transferred except pursuant to registration or an applicable exemption thereunder. Subject to the immediately preceding sentence, nothing contained herein shall be deemed a representation or warranty by Seller to hold the Unit Consideration for any period of time.
Buyer (as to itself only) and the Partnership (as to itself and Buyer) represent and warrant to Seller as of the date hereof as follows:
Section 5.1 Organization and Standing. Buyer is a limited liability company duly organized, validly existing and in good standing under the Laws of the State of Delaware and is duly qualified to carry on its business in each State where failure to be so qualified could reasonably be expected to adversely affect the Assets or consummation of the transactions contemplated by this Agreement. The Partnership is a limited partnership duly organized, validly existing and in good standing under the Laws of the State of Delaware and is duly qualified to carry on its business in each State where failure to be so qualified could reasonably be expected to adversely affect the consummation of the transactions contemplated by this Agreement.
Section 5.2 Legal Power; No Conflicts. Each of Buyer and the Partnership has all requisite power and authority to carry on its business as presently conducted and to execute, deliver and perform this Agreement (and all documents Buyer hereby is required to execute and deliver). The execution, delivery and performance of this Agreement (and such documents) and the consummation of the transactions contemplated hereby (and thereby) shall not violate, or be in conflict with, any material provision of Buyer or the Partnership’s governing documents or any material provisions of any material agreement or instrument to which it is a party or by which it is bound, or, to its knowledge, any material Law applicable to Buyer or the Partnership.
Section 5.3 Authorization and Enforceability. The execution, delivery and performance by Buyer and the Partnership of this Agreement (and all documents Buyer or the Partnership hereby is required to execute and deliver), and the consummation of the transactions contemplated hereby (and thereby), have been duly authorized by all necessary action on behalf of Buyer and the Partnership. This Agreement constitutes (and such documents constitute) Buyer and the Partnership’s legal, valid and binding obligation, enforceable against Buyer and the Partnership in accordance with its terms, subject, however, to the effects of bankruptcy, insolvency, reorganization, moratorium and similar Laws for the protection of creditors, as well as to general principles of equity, regardless whether such enforceability is considered in a proceeding in equity or at law.
Section 5.4 Liability for Brokers’ Fees. Buyer, the Partnership or their respective Affiliates have not incurred any liability, contingent or otherwise, for brokers’ or finders’ fees relating to the transactions contemplated hereby for which Seller or its Affiliates will have any responsibility.
Section 5.5 No Bankruptcy. There are no bankruptcy, reorganization, or receivership proceedings pending, being contemplated by Buyer or the Partnership, or, to their knowledge, threatened against Buyer or the Partnership by any third Person.
Section 5.6 Litigation. There is no action, suit, proceeding, claim or investigation by any Person or Governmental Authority that impedes or is likely to impede Buyer or the
Partnership’s ability to consummate the transactions contemplated hereby and to assume the liabilities to be assumed by Buyer under this Agreement, including the Assumed Obligations.
Section 5.7 Unit Consideration Matters.
(a) The Unit Consideration has been duly and validly authorized for issuance by the Partnership and when issued in accordance with the terms and conditions contained herein, the Unit Consideration will be duly authorized, validly issued, fully paid (to the extent required under the Partnership Agreement) and non-assessable (except as such nonassessability may be affected by Sections 17-303, 17-607 and 17-804 of the Delaware Revised Uniform Limited Partnership Act), will not be subject to any preemptive or similar rights and will be acquired by Seller at the Closing free and clear of all mortgages, claims, charges, security interests, liens, obligations, encumbrances, imperfections of title or other matters affecting title, and any rights of third parties whatsoever (other than those arising under applicable securities Laws and the Partnership Agreement). |
(b) At the Closing, the Partnership has and will comply with all requirements of NYSE MKT with respect to the issuance of the Unit Consideration. |
. From the execution of this Agreement to January 1, 2019, Seller shall (unless Buyer consents otherwise which shall not be unreasonably withheld), to the extent it has the Legal Right, own and/or operate the portion of the conveyed Assets which is then vested in Buyer but still held by Seller in the usual, regular and ordinary manner consistent with past practice, and use its commercially reasonable efforts to preserve its present business operations relating to such Assets. Without limiting the generality
of the foregoing, until such time, Seller shall with respect to such Assets, to the extent it has the Legal Right:
(a) Comply in all material respects with all applicable Laws; |
(b) Keep and maintain accurate books, records and accounts; and |
(c) Maintain in full force and effect existing insurance policies and binders subject only to variations required by the ordinary course of business, or else obtain, prior to the lapse of any such policy or binder, substantially similar coverage with insurers of recognized standing. |
. Seller acknowledges that the Partnership may be required to include financial statements relating to Seller (“SEC Financial Statements”) in documents filed with the SEC by the Partnership pursuant to the Securities Act or the Exchange Act, and that such SEC Financial Statements may be required to be audited. In that regard, Seller shall reasonably cooperate with the Partnership, and provide the Partnership reasonable access to such records (to the extent such information is available) and personnel of Seller as the Partnership may reasonably request to enable the Partnership, and its representatives and accountants, at the Partnership’s sole cost and expense, to create and audit any SEC Financial Statements that the Partnership deems necessary. Seller hereby consents to the inclusion or incorporation by reference of the SEC Financial Statements in any registration statement, report or other document of the Partnership or any of its Affiliates to be filed with the SEC in which the Partnership or Affiliate reasonably determines that the SEC Financial Statements are required to be included or incorporated by reference to satisfy any rule or regulation of the SEC or to satisfy relevant disclosure obligations under the Securities Act or the Exchange Act. Upon request of the Partnership, Seller shall use commercially reasonable efforts to cause the external audit firm that audits the SEC Financial Statements to consent to the inclusion or incorporation by reference of its audit opinion with respect to any applicable audited financial statements of the Partnership in any such registration statement, report or other document. Seller shall provide the Partnership and its independent accountants with access to (i) any audit work papers of Seller’s independent accountants and (ii) any management representation letters provided by Seller to Seller’s independent accountants.
Section 6.3 Tax Matters.
(d) Except as otherwise provided herein, each Party shall bear all Taxes imposed on it as a result of the transactions contemplated by this Agreement. Each Party shall timely file, to the extent required by or permissible under applicable Law, all Tax Returns and other documentation with respect to any such Taxes. |
(e) All sales, use or other Taxes (other than Taxes on gross income, net income or gross receipts) and duties, levies or other governmental charges incurred by or imposed with respect to the transfer to Buyer undertaken pursuant to this Agreement shall be the responsibility of, and shall be paid by, Buyer. |
(f) If notice of any audit, examination or other proceeding with respect to Taxes of Seller (a “Tax Claim”) shall be received by a Party for which another Party may
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be reasonably expected to be liable pursuant to Article 8, the notified Party shall notify such other Parties in writing of such Tax Claim; provided, however, that the failure of the notified Party to give the other Parties notice as provided herein shall not relieve such failing Party of its obligations under Article 8, except to the extent another Party is actually and materially prejudiced thereby. |
(g) Each Party agrees that for Federal income tax purposes, (i) the transaction contemplated in this Agreement shall be treated as part sale and, to the extent of the Unit Consideration, as part contribution in accordance with Section 721(a) of the Code and (ii) the incremental percentage Working Interests as set forth on Exhibit A will be treated as a purchase money mortgage loan in accordance with Section 636 of the Code, related Code sections and underlying Treasury regulations. Furthermore, the Parties will not take a position inconsistent therewith, and the Parties will reasonably cooperate with each other with respect to the reporting of interest on the purchase money mortgage loan using the method of Treasury Regulation Section 1.1275-4(c). |
. From and after the Closing, SOG, SP Holdings and other Affiliates, as applicable, will provide accounting and management services to Buyer under the terms of the Operating Agreement and the Shared Services Agreement with respect to the Assets, including, but not limited to, handling matters for Buyer under applicable joint operating agreements (including the JOA) and marketing agreements.
Section 6.5 Annual Reconciliation and Settlement Procedure. In each of the four calendar years after Closing, Buyer and Seller shall determine, reconcile, and settle all payments related to the change in Buyer and Seller’s interests as of the last occurring Specified Date as follows:
(i)the aggregate amount of all non-reimbursed Property Costs which are attributable to the amount of the increase in Buyer’s interest in the Assets as of the last occurring Specified Date to the extent paid by Seller from and after the last occurring Specified Date; and
(ii)the net amount of all prepaid expenses related to the amount of the increase in Buyer’s interest in the Assets as of the last occurring Specified Date, (including without limitation prepaid production Taxes, severance Taxes, and other Taxes measured by units of production; bonuses; rentals; cash calls to third Person operators; insurance premiums; and scheduled payments) attributable to periods from and after the last occurring Specified Date to the extent paid by Seller in such prior calendar year.
(k) Buyer and Seller shall undertake to agree on the final statement of charges and credits described in Sections 6(h) and (i) above no later than 60 days after delivery of Seller’s statement. In the event that Buyer and Seller cannot reach agreement within such period of time, either such Party may refer the disputed charges or credits to the Accounting Arbitrator for review and final determination by arbitration. The Accounting Arbitrator shall conduct the arbitration proceedings in Houston, Texas in accordance with the Commercial Arbitration Rules of the American Arbitration Association, to the extent such rules do not conflict with the terms of this 0. The Accounting Arbitrator’s determination shall be made within 45 days after submission of the matters in dispute and shall be final and binding on all Parties, without right of appeal. In determining the proper amount of any charge or credit, the Accounting Arbitrator shall be bound by the terms of this Agreement and may not determine a charge or credit amount higher than the highest amount, or lower than the lowest amount, proposed by Buyer or Seller. The Accounting Arbitrator shall act as an expert for the limited purpose of determining the specific disputed aspects of Settlement Amount submitted by Buyer or Seller and may not award damages, interest or penalties to Buyer or Seller with respect to any matter. Seller and Buyer shall each bear their own legal fees and other costs of presenting its case. Seller shall bear one-half and Buyer shall bear one-half of the costs and expenses of the Accounting Arbitrator. Within 10 days after the earlier of (i) the expiration of Buyer’s 30 day review period without delivery of any written report or (ii) the date on which Buyer and Seller or the Accounting Arbitrator finally determine Settlement Amount, Buyer shall pay to Seller in cash the Settlement Amount (if the Settlement Amount results in a net charge to Buyer), or Seller shall pay to Buyer in cash the Settlement Amount (if the Settlement Amount results in a net credit to Buyer), as applicable. Any payment pursuant to this 0 shall bear interest from January 1 of the applicable calendar year to the date of payment at the lesser of (x) the annual rate of interest published as the “Prime Rate” in the “Money Rates” section of The Wall Street Journal on January 1 of such calendar year plus 3% and (y) the maximum rate allowed by applicable Law. |
. Seller hereby: (a) disclaims any reliance upon Stifel Nicolaus & Company, Incorporated, financial advisor to Buyer, or its officers, directors, employees, attorneys or affiliates (the “Stifel Parties”) with respect to the negotiation, execution or performance of this Agreement or any representation or warranty made by the Stifel Parties in,
in connection with, or as an inducement to this Agreement; (b) agrees that all claims, obligations, liabilities, demands, causes of action or obligations (each, an “Action”) that may be based upon, arise under or relate to this Agreement or its negotiation, execution or performance may not be made against the Stifel Parties to the extent that such Actions are initiated by Seller (but excluding for the avoidance of doubt any Action which is initiated by another security holder of Buyer and which Seller may elect to participate in its capacity as a security holder of Buyer); (c) waives and releases all Actions against the Stifel Parties which are initiated by Seller (but excluding for the avoidance of doubt any Action which is initiated by another security holder of Buyer and which Seller may elect to participate in its capacity as a security holder of Buyer) in connection with this Agreement and the transactions contemplated hereby; and (d) agrees that the Stifel Parties will be a third-party beneficiary of this 0.
Section 6.7 Hydraulic Fracture of the Wellbores Operations. Buyer covenants and agrees that, from and after the Closing, Buyer shall authorize Seller, on behalf of Buyer, to elect whether to participate as a “Consenting Party” (as such term is defined in the JOA) for all hydraulic fracture of the Wellbores operations on the Wellbores proposed by a party to the JOA (“Certain Reworking Operations”), provided that:
(l) Seller shall bear Buyer’s share of costs under the JOA for the Certain Reworking Operations; and |
provided, however, that if Seller does not desire to elect to participate as a “Consenting Party” and Buyer does so desire to make such election, then Seller shall make such election on behalf of Buyer and Buyer shall bear all of Seller’s costs under the JOA for the Certain Reworking Operations.
Section 6.8 Special Warranty. Subject to 0, from and after the Closing, Seller shall warrant title to the Wellbores and Leases conveyed, subject to the Permitted Encumbrances, unto Buyer, its successors and assigns, against all Persons claiming or to claim the same or any part thereof by, through or under Seller, but not otherwise. The Parties acknowledge and agree that the foregoing warranty shall constitute and be considered a special warranty of title by, through and under Seller under the applicable Laws of the State of Texas. EXCEPT AS PROVIDED IN THE FIRST TWO SENTENCES OF THIS SECTION 0 (the “Special Warranty”), BUYER ACKNOWLEDGES THAT SELLER AND ITS REPRESENTATIVES HAVE NOT MADE, AND SELLER HEREBY EXPRESSLY DISCLAIMS AND NEGATES, AND BUYER HEREBY EXPRESSLY WAIVES, ANY REPRESENTATION OR WARRANTY, EXPRESS, IMPLIED, AT COMMON LAW, BY STATUTE OR OTHERWISE, WITH RESPECT TO SELLER’S TITLE TO ANY OF THE ASSETS.
Section 6.9 Transfer Requirements. Buyer’s purchase of the Assets is expressly subject to all validly existing and applicable Transfer Requirements. With respect to all post-Closing Transfer Requirements Seller shall prepare and send notices to holders of any such
Transfer Requirements (which notices shall be in form and substance reasonably satisfactory to Buyer) and otherwise use commercially reasonable efforts to satisfy such Transfer Requirements.
Section 6.10 NYSE Matters. The Partnership shall promptly file a supplemental listing application for the listing of the Unit Consideration on NYSE MKT and shall use commercially reasonable efforts to cause the Unit Consideration to be listed on NYSE MKT as promptly as practicable after the Closing.
Section 7.1 Time and Place of the Closing. The closing of the transactions contemplated by this Agreement (the “Closing”) shall be deemed to occur at 3:01 p.m. Houston, Texas time on the Closing Date at the offices of Seller located at 1000 Main Street, Suite 3000, Houston, Texas 77002.
Section 7.2 Adjustments to Purchase Price at the Closing.
(a) All adjustments to the Purchase Price have been made (i) according to the provisions set forth in this Agreement, (ii) in accordance with GAAP as consistently applied in the oil and gas industry, and (iii) without duplication. |
(i) the aggregate amount of all non-reimbursed Property Costs which are attributable to the Assets for the period from and after the Effective Time through the Business Day prior to the date of the Statement and that have been paid by Seller; |
(ii) the value (determined by the price most recently paid prior to the Closing) of liquid Hydrocarbons in tanks above the pipeline sales connection (exclusive of any brine, sludge or water that may be present in the oil liquid Hydrocarbon storage tanks), less applicable deductions, in each case, for periods from and after the Effective Time through the Business Day prior to the date of the Statement; |
(iii) the net amount of all prepaid expenses related to the Assets (including without limitation prepaid production Taxes, severance Taxes, and other Taxes measured by units of production; bonuses; rentals; cash calls to third Person operators; insurance premiums; and scheduled payments) attributable to periods from and after the Effective Time through the Business Day prior to the date of the Statement; and |
of August 27, 2013, between Sanchez and Royal Bank of Canada (the “Novation Transactions”). |
(c) At the Closing, the Purchase Price has been decreased pursuant to the following adjustments: |
(i) the amount of all revenues, production, proceeds, income and products from or attributable to, and all other income, proceeds, receipts and credits earned (including delay rentals, shut-in royalties and lease bonuses) with respect to, the ownership or operation of the Assets from and after the Effective Time through the Business Day prior to the date of the Statement and that have been received by Seller or its Affiliates; |
(ii) the amount of any Taxes paid by Buyer that are attributable to periods before the Effective Time; and |
(iii) any amount received by Sanchez prior to the Closing Date with respect to the Novation Transactions. |
The adjustments described in this 0 are hereinafter referred to as the “Purchase Price Adjustments.”
Section 7.3 Closing Statement; Post-Closing Adjustment.
The Accounting Arbitrator shall conduct the arbitration proceedings in Houston, Texas in accordance with the Commercial Arbitration Rules of the American Arbitration Association, to the extent such rules do not conflict with the terms of this 0. The Accounting Arbitrator’s determination shall be made within 45 days after submission of the matters in dispute and shall be final and binding on all Parties, without right of appeal. In determining the proper amount of any adjustment to the Purchase Price, the Accounting Arbitrator shall be bound by the terms of this Agreement and may not increase the Purchase Price more than the increase proposed by Seller nor decrease the Purchase Price more than the decrease proposed by Buyer, as applicable. The Accounting Arbitrator shall act as an expert for the limited purpose of determining the specific disputed aspects of Purchase Price adjustments submitted by any Party and may not award damages, interest or penalties to any Party with respect to any matter. Seller and Buyer shall each bear their own legal fees and other costs of presenting its case. Seller shall bear one-half and Buyer shall bear one-half of the costs and expenses of the Accounting Arbitrator. Within ten days after the earlier of (i) the expiration of Buyer’s 30 day review period without delivery of any written report or (ii) the date on which Buyer and Seller or the Accounting Arbitrator finally determine the Purchase Price, Buyer shall remit to Seller the amount by which the Purchase Price exceeds the amount remitted pursuant to Article 7(d) or Seller shall remit to Buyer the amount by which the amount remitted pursuant to Article 7(d) exceeds the Purchase Price, as applicable and in accordance with 0. Any post-Closing payment pursuant to this 0 shall, except to extent effected through an adjustment to the principal amount of the Note, bear interest from the Closing Date to the date of payment at the lesser of (x) the annual rate of interest published as the “Prime Rate” in the “Money Rates” section of The Wall Street Journal on the last Business Day prior to the Closing Date plus 3% and (y) the maximum rate allowed by applicable Law. |
. At the Closing, Seller has:
(g) Executed, acknowledged and delivered to Buyer the Seller counterparts of the Conveyance; |
(j) Executed, acknowledged and delivered to Buyer an affidavit attesting to the non-foreign status of Seller in the form prescribed in Treasury Regulation Section 1.1445-2(b)(2); |
(k) As applicable, delivered to Buyer duly executed and acknowledged releases and/or terminations of any financing statements or mortgages specifically
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referencing and burdening the Assets in favor of the administrative agent under the Seller Credit Facility; and |
(l) Executed, acknowledged and delivered any other documents and agreements contemplated by this Agreement. |
. At the Closing, Buyer and the Partnership, as applicable, have:
(m) Delivered to Seller the Cash Purchase Price, as adjusted by the estimated Purchase Price Adjustments reflected in the Statement, by wire transfer to accounts designated in writing by Seller; |
(n) Executed, acknowledged and delivered the Note to Seller, as adjusted by the estimated Purchase Price Adjustments reflected in the Statement, and caused the execution, acknowledgement and delivery of each of the “Note Guarantees” to be provided thereunder; |
(o) Issued and delivered to Seller the Unit Consideration in book entry form for the account of Seller, duly registered on the books of the transfer agent for Common Units; |
(p) Executed, acknowledged and delivered to Seller the Partnership counterparts of the Registration Rights Agreement; |
(q) Executed, acknowledged and delivered to Seller the Buyer counterparts of the Conveyance; |
(r) Caused the execution, acknowledgement and delivery to Sanchez of the Partnership counterparts of the Hedge Novation; and |
(s) Executed, acknowledged and delivered any other documents and agreements contemplated by this Agreement. |
. Seller shall retain the following (the “Retained Obligations”):
(a) All Property Costs and other costs which are for the account of Seller pursuant to Article 2(a) or 0; |
(b) Ad valorem, property, severance and other similar Taxes or assessments based upon or measured by the ownership or operation of the Assets or the production therefrom attributable to any period prior to the applicable Specified Date; |
(c) Excluded Taxes; and |
(d) All litigation relating to the Assets existing as of the applicable Specified Date. |
. Buyer and the Partnership shall release, defend, indemnify and hold harmless the Seller Indemnitees from and against any and all Losses suffered by such Seller Indemnitees arising out of or related to:
(f) Buyer or the Partnership’s breach of any covenant or agreement made by Buyer or the Partnership in this Agreement; |
(h) The breach of any representation or warranty (other than any Fundamental Representation) made by Buyer or the Partnership in Article 5. |
. Subject to the other provisions of this Article 8, Seller shall release, defend, indemnify and hold harmless the Buyer Indemnitees from and against any and all Losses suffered by such Buyer Indemnitees arising out of or relating to:
(j) Seller’s breach of any covenant or agreement made by Seller in this Agreement; |
(l) The breach of any representation or warranty (other than any Fundamental Representation) made by Seller in Article 4; |
(n) All Obligations attributable to or arising out of (i) Seller’s or its Affiliates’ employment of their respective employees, (ii) Seller’s or its Affiliates’ employee benefit plans, or (iii) Seller’s or its Affiliates’ responsibilities under the Employee Retirement Income Security Act of 1974, as amended, in respect of employee benefit plans applicable to their respective employees. |
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(o) Time Limitations. Notwithstanding anything to the contrary herein: |
(i) Seller’s indemnification obligations under Article 8(k) and Article 8(l) and Buyer’s and the Partnership’s indemnification obligations under Article 8(g) and Article 8(h), shall only apply with respect to any breach of any representation or warranty if the Indemnified Party has provided the Indemnifying Party with written notice claiming indemnification therefor on or before the date on which such representation or warranty expires pursuant to 0; |
(ii) Seller’s indemnification obligations under Article 8(m) shall only apply to any claim thereunder if Buyer has provided Seller with written notice claiming indemnification for such claim on or before 18 months after the Closing Date; and |
(iii) Seller’s indemnification obligations under Article 8(i) for a Tax liability of Seller attributable to a period prior to the applicable Specified Date, and Buyer’s indemnification obligations under Article 8(e) for a Tax liability of Buyer attributable to a period after the applicable Specified Date, shall only apply to any claim thereunder if the Indemnified Party has provided the Indemnifying Party with written notice claiming indemnification for such claim on or before the 60th day after the expiration of any applicable statute of limitations. |
(q) Cap. Notwithstanding anything to the contrary herein, Seller’s aggregate liability under Article 8(l) shall not exceed 20% of the Purchase Price. |
(r) Other. Notwithstanding anything to the contrary in this Agreement, any representation or warranty in Article 4 or Article 5 that is qualified by terms such as “material,” “materiality,” “material adverse effect,” or “in any material respect” or similar qualifying language shall be deemed not to be so qualified for purposes of indemnification pursuant to this 0. The Parties shall treat, for Tax purposes, any amounts paid pursuant to this Article 8 as an adjustment to the Purchase Price. |
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(s) Each Party seeking indemnification (each, an “Indemnified Party”) pursuant to this Article 8 agrees that within a reasonable period of time after it shall become aware of facts giving rise to a claim for indemnification pursuant to this Article 8, it will provide notice thereof in writing to the Party from whom indemnification is sought pursuant to this Article 8 (each, an “Indemnifying Party”) specifying the nature of
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and specific basis for such claim; provided, however, that failure to timely provide such notice shall not affect the right of the Indemnified Party’s indemnification hereunder, except to the extent the Indemnifying Party is materially prejudiced by such delay or omission. |
(t) The Indemnifying Party shall have the right to control all aspects of the defense of (and any counterclaims with respect to) any claims brought against the Indemnified Party that are covered by the indemnification set forth in this Article 8, including the selection of counsel (provided that such counsel shall be reasonably acceptable to the Indemnified Party), determination of whether to appeal any decision of any court and the settling of any such matter or any issues relating thereto; provided, however, that no such settlement shall be entered into without the consent (which consent shall not be unreasonably withheld, conditioned or delayed) of the Indemnified Party unless it includes a full release of the Indemnified Party and their respective Affiliates from such matter or issues, as the case may be. Notwithstanding the immediately foregoing sentence, the Indemnified Party shall be entitled to exercise control in the aforementioned matters (but the Indemnifying Party shall be entitled to participate at its own expense in the defense), (i) as to which the Indemnifying Party fails to assume the defense within a reasonable length of time or (ii) to the extent the third party action seeks an order, injunction, or other equitable relief against the Indemnified Party which, if successful, would materially and adversely affect the business, operations, assets, or financial condition of the Indemnified Party; provided, however, that no such settlement shall be entered into without the consent (which consent shall not be unreasonably withheld, conditioned or delayed) of the Indemnifying Party unless it includes a full release of the Indemnifying Party and its Affiliates from such matter or issues, as the case may be. |
(u) The Indemnified Party agrees to cooperate fully with the Indemnifying Party with respect to all aspects of the defense of any claims covered by the indemnification set forth in this Article 8, including the prompt furnishing to the Indemnifying Party of any correspondence or other notice relating thereto that the Indemnified Party may receive, permitting the names of the Indemnified Party to be utilized in connection with such defense, the making available to the Indemnifying Party of any files, records or other information of the Indemnified Party that Indemnifying Party considers relevant to such defense and the making available to the Indemnifying Party of any employees of the Indemnified Party; provided, however, that in connection therewith Indemnifying Party agrees to use reasonable efforts to minimize the impact thereof on the operations of the Indemnified Party and further agrees to reasonably maintain the confidentiality of all files, records and other information furnished by the Indemnified Party pursuant to this 0; provided, further, that no Indemnified Party shall be obligated to make available any such records, files or other information that is subject to the attorney-client privilege of such Indemnified Party. In no event shall the obligation of the Indemnified Party to cooperate with Indemnifying Party as set forth in the immediately preceding sentence be construed as imposing upon the Indemnified Party an obligation to hire and pay for counsel in connection with the defense of any claims covered by the indemnification set forth in this Article 8; provided, however, that the Indemnified Party may, at its option, cost and expense, hire and pay for counsel in
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connection with any such defense. The Indemnifying Party agrees to keep any such counsel hired by the Indemnified Party reasonably informed as to the status of any such defense, but the Indemnifying Party shall have the right to retain sole control over such defense. |
(v) In determining the amount of any Losses for which the Indemnified Party is entitled to indemnification under this Agreement, the gross amount of the indemnification will be reduced by all amounts recovered by the Indemnified Party under contractual indemnities from third parties. The Indemnified Party hereby agrees to use commercially reasonable efforts to realize any applicable insurance proceeds or amounts recoverable under such contractual indemnities; provided, however, that the costs and expenses (including court costs and reasonable attorneys’, accountants’, and experts’ fees) of the Indemnified Party in connection with such efforts shall be promptly reimbursed by the Indemnifying Party. To the extent that the Indemnifying Party has made any indemnification payment hereunder in respect of a claim for which the Indemnified Party has asserted a related claim for insurance proceeds or under a contractual indemnity, the Indemnifying Party shall be subrogated to the rights of the Indemnified Party to receive the proceeds of such insurance or contractual indemnity. |
. In no event shall a Party be liable to another Party for punitive, exemplary, consequential, or special damages, including lost profits, except where such damages constitute part of a claim of a third Person which is indemnified pursuant to the provisions of this Agreement.
Section 9.1 Disclaimers of Representations and Warranties. The express representations and warranties of Seller contained in this Agreement and the special warranty set forth in the Conveyance are exclusive and are in lieu of all other representations and warranties, express, implied or statutory. EXCEPT FOR THE EXPRESS REPRESENTATIONS AND WARRANTIES OF SELLER IN THIS AGREEMENT AND THE SPECIAL WARRANTY, BUYER AND THE PARTNERSHIP ACKNOWLEDGE THAT SELLER AND ITS REPRESENTATIVES HAVE NOT MADE, AND SELLER HEREBY EXPRESSLY DISCLAIMS AND NEGATES, AND BUYER AND THE PARTNERSHIP HEREBY EXPRESSLY WAIVE, ANY REPRESENTATION OR WARRANTY, EXPRESS, IMPLIED, AT COMMON LAW, BY STATUTE OR OTHERWISE, INCLUDING, WITHOUT LIMITATION, THOSE RELATING TO:
(a) PRODUCTION RATES, RECOMPLETION OPPORTUNITIES, DECLINE RATES, OR THE QUALITY, QUANTITY OR VOLUME OF THE RESERVES OF HYDROCARBONS, IF ANY, ATTRIBUTABLE TO THE ASSETS; |
(b) THE ACCURACY, COMPLETENESS OR MATERIALITY OF ANY INFORMATION, DATA OR OTHER MATERIALS (WRITTEN OR ORAL) NOW, HERETOFORE OR HEREAFTER FURNISHED TO BUYER OR THE PARTNERSHIP BY OR ON BEHALF OF SELLER; AND |
(c) THE ENVIRONMENTAL CONDITION OF THE ASSETS. |
EXCEPT FOR THE EXPRESS REPRESENTATIONS AND WARRANTIES OF SELLER IN THIS AGREEMENT AND THE SPECIAL WARRANTY SET FORTH IN THE CONVEYANCE, SELLER EXPRESSLY DISCLAIMS AND NEGATES, AND BUYER AND THE PARTNERSHIP HEREBY WAIVE, AS TO PERSONAL PROPERTY, EQUIPMENT, INVENTORY, MACHINERY AND FIXTURES CONSTITUTING A PART OF THE ASSETS (i) ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, (ii) ANY IMPLIED OR EXPRESS WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, (iii) ANY IMPLIED OR EXPRESS WARRANTY OF CONFORMITY TO MODELS OR SAMPLES OF MATERIALS, (iv) ANY RIGHTS OF BUYER OR THE PARTNERSHIP UNDER APPROPRIATE STATUTES TO CLAIM DIMINUTION OF CONSIDERATION OR RETURN OF THE PURCHASE PRICE, (v) ANY IMPLIED OR EXPRESS WARRANTY OF FREEDOM FROM DEFECTS, WHETHER KNOWN OR UNKNOWN, (vi) ANY AND ALL IMPLIED WARRANTIES EXISTING UNDER APPLICABLE LAW, AND (vii) ANY IMPLIED OR EXPRESS WARRANTY REGARDING ENVIRONMENTAL LAWS, THE RELEASE OF MATERIALS INTO THE ENVIRONMENT, OR PROTECTION OF THE ENVIRONMENT OR HEALTH, IT BEING THE EXPRESS INTENTION OF THE PARTIES THAT (EXCEPT AS EXPRESSLY COVERED BY A REPRESENTATION, WARRANTY OR COVENANT CONTAINED IN THIS AGREEMENT) THE PERSONAL PROPERTY, EQUIPMENT, INVENTORY, MACHINERY AND FIXTURES INCLUDED IN THE ASSETS SHALL BE CONVEYED TO BUYER, AND BUYER SHALL ACCEPT SAME, AS IS, WHERE IS, WITH ALL FAULTS AND IN THEIR PRESENT CONDITION AND STATE OF REPAIR, AND BUYER AND THE PARTNERSHIP REPRESENT TO SELLER THAT BUYER AND THE PARTNERSHIP SHALL MAKE OR CAUSE TO BE MADE SUCH INSPECTIONS WITH RESPECT TO SUCH PERSONAL PROPERTY, EQUIPMENT, INVENTORY, MACHINERY AND FIXTURES AS BUYER AND THE PARTNERSHIP DEEM APPROPRIATE. FURTHER, BUYER AND THE PARTNERSHIP ACKNOWLEDGE AND AGREE THAT THEY SHALL NOT BE ENTITLED TO MAKE A RECOVERY FOR THE SAME LOSSES UNDER BOTH THE SPECIAL WARRANTY AND THE SPECIAL WARRANTY SET FORTH IN THE CONVEYANCE AND THAT THEY SHALL NOT ASSERT ANY CLAIM UNDER A SPECIAL WARRANTY MADE BY SELLER TO THE EXTENT EITHER HAS ALREADY MADE A RECOVERY FROM SELLER FOR SUCH LOSSES. THE PARTIES AGREE THAT, TO THE EXTENT REQUIRED BY APPLICABLE LAW TO BE EFFECTIVE, THE DISCLAIMERS OF CERTAIN WARRANTIES CONTAINED IN THIS SECTION ARE “CONSPICUOUS” DISCLAIMERS FOR THE PURPOSES OF ANY APPLICABLE LAW.
Section 9.2 Independent Investigation. Buyer and the Partnership represent and acknowledge that each is knowledgeable of the oil and gas business and of the usual and customary practices of producers such as Seller and that it has had access to the Assets, the officers and employees of Seller, and the books, records and files of Seller relating to the Assets, and in making the decision to enter into this Agreement and consummate the transactions contemplated hereby, Buyer and the Partnership have relied solely on the basis of their own independent due diligence investigation of the Assets and upon the representations and warranties made in Article 4 and the special warranty set forth in the Conveyance, and not on any other representations or warranties of Seller or any other Person. Further, Buyer and the
Partnership have no knowledge of any fact that results in the breach of any representation, warranty or covenant of Seller made hereunder or in the Conveyance.
Section 9.3 Survival. The Fundamental Representations shall survive the Closing in perpetuity. The remainder of Buyer’s and the Partnership’s representations and warranties in Article 5 shall survive Closing for a period of 12 months from the Closing, after which Buyer and the Partnership, as applicable, shall have no liability or obligation in relation thereto except as to matters for which Seller has provided Buyer or the Partnership, as applicable, a specific written claim on or before such termination date. Seller’s representations and warranties in 0 shall survive the Closing until 60 days after the expiration of the applicable statute of limitations period. The remainder of Seller’s representations and warranties in Article 4 shall survive Closing for a period of 12 months from the Closing, after which Seller shall have no liability or obligation in relation thereto except as to matters for which Buyer or the Partnership, as applicable, has provided Seller a specific written claim on or before such termination date. All other covenants and obligations contained in this Agreement shall survive the Closing indefinitely, except as specifically provided herein.
Section 10.1 Expenses. Except as otherwise provided in this Agreement or any document to be executed pursuant hereto, regardless of whether the transactions contemplated by this Agreement occur, each Party shall be solely responsible for all expenses, including due diligence expenses, incurred by it in connection with the transactions contemplated hereby, and no Party shall be entitled to any reimbursement for such expenses from another Party. For the purposes of clarity, in the event of a conflict between the terms of this 0 and the terms of Article 8, the terms of Article 8 shall prevail.
Section 10.2 Document Retention. As used in this 0, the term “Documents” shall mean all files, documents, books, records and other data delivered to Buyer by Seller pursuant to the provisions of this Agreement (other than those that Seller has retained either the original or a copy of), including: financial and Tax accounting records; land, title and division of interest files; contracts; engineering and well files; and books and records related to the operation of the Assets prior to the Closing Date. Buyer shall retain and preserve the Documents for a period of no less than seven years following the Closing Date (or for such longer period as may be required by Law), and shall allow Seller or its representatives, at Seller’s expense, to inspect the Documents at reasonable times and upon reasonable notice during regular business hours during such time period. Seller shall have the right during such period to make copies of the Documents at its expense.
Section 10.3 Entire Agreement. This Agreement, the documents to be executed pursuant hereunder, and the Exhibits and Schedules attached hereto constitute the entire agreement between the Parties pertaining to the subject matter hereof and supersede all prior agreements, understandings, negotiations and discussions, whether oral or written, of the Parties pertaining to the subject matter hereof.
. Except as expressly set forth otherwise in this 0, no supplement, amendment, alteration, modification or waiver of this Agreement shall be binding unless executed in writing by the Parties and specifically referencing this Agreement and identified as a supplement, amendment, alteration, modification or waiver.
Section 10.5 Waiver. No waiver or consent, express or implied, by any Party of or to any breach or default by any Person in the performance by such Person of its obligations hereunder shall be deemed or construed to be a consent or waiver of or to any other breach or default in the performance by such Person of the same or any other obligations of such Person hereunder. Failure on the part of a Party to complain of any act of any Person or to declare any Person in default, irrespective of how long such failure continues, shall not constitute a waiver by such Party of its rights hereunder until the applicable statute of limitations period has run.
Section 10.6 Publicity. The Parties hereto shall consult with each other and no Party shall issue any public announcement or statement with respect to this Agreement or the transactions contemplated hereby without the consent of the other Parties, unless such announcement or statement is required by applicable Law or stock exchange requirements.
Section 10.7 No Third Party Beneficiaries. Except as provided in 0, 0 and 0, nothing in this Agreement shall provide any benefit to any third Person or entitle any third Person to any claim, cause of action, remedy or right of any kind, it being the intent of the Parties that this Agreement shall otherwise not be construed as a third Person beneficiary contract. The provisions of this Agreement are enforceable solely by the Parties (including any permitted assignee), and no limited partner, shareholder or member of a Party or other Person shall have the right, separate and apart from the Parties hereto, to enforce any provision of this Agreement or to compel any Party to comply with the terms of this Agreement.
Section 10.8 Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder may be assigned, by operation of law or otherwise, by any Party without the prior written consent of the other Parties (which consent not to be unreasonably denied, withheld or delayed), and any attempted assignment without such consent shall be void. Any assignment by any Party as permitted hereby shall not relieve such Party from any liability hereunder.
Section 10.9 Governing Law; Venue. This Agreement, other documents delivered pursuant hereto (except to the extent otherwise specified in such document) and the legal relations between the Parties shall be governed by and construed and enforced in accordance with the Laws of the State of Texas, without giving effect to principles of conflicts of law that would result in the application of the Laws of another jurisdiction. The Parties hereto irrevocably submit to the jurisdiction of the courts of the State of Texas and the federal courts of the United States of America located in Harris County, Texas over any dispute between the Parties arising out of this Agreement or the transactions contemplated hereby, and each Party irrevocably agrees that all such claims in respect of such dispute shall be heard and determined in such courts. The Parties hereto irrevocably waive, to the fullest extent permitted by Law, any objection which they may now or hereafter have to the venue of any dispute arising out of this Agreement or the transactions contemplated hereby being brought in such court or any defense of inconvenient forum for the maintenance of such dispute. Each Party agrees that a judgment in
any such dispute may be enforced in other jurisdictions by a suit on the judgment or any other manner provided by Law. The Parties hereby waive trial by jury in any action, proceeding or counterclaim brought by any Party against another in any matter whatsoever arising out of or in relation to or in connection with this Agreement.
Section 10.10 Specific Performance. The Parties acknowledge and agree that the remedy of specific performance shall be available to (a) Buyer and the Partnership in the event that Seller willfully breaches this Agreement and (b) Seller in the event that Buyer or the Partnership willfully breaches this Agreement.
Section 10.11 Notices. Any notice, communication, request, instruction or other document by any party to another required or permitted hereunder shall be given in writing and addressed as set forth below. Any such notice, communication, request, instruction or other document shall be deemed to have been duly made or given and the receiving Party charged with notice as follows: (a) if personally delivered, when received; (b) if sent by facsimile, with electronic confirmation of delivery, if sent during normal business hours on a Business Day, and if not sent during normal business hours on a Business Day, on the next subsequent Business Day; (c) if mailed certified mail, return receipt requested, on the day such notice is received, and if such day is not a Business Day, on the next subsequent Business Day, or (d) if sent by overnight courier, the next Business Day after placement into the custody of the overnight courier. All notices shall be addressed as follows:
Seller:
SEP Holdings III, LLC
c/o Sanchez Energy Corporation
1000 Main Street, Suite 3000
Houston, Texas 77002
Attn:President
Fax:(713) 756 - 2784
Buyer or the Partnership:
SEP Holdings IV, LLC / Sanchez Production Partners LP
1000 Main Street, Suite 3000
Houston, Texas 77002
Attn:Chief Financial Officer
Fax:(832) 308 - 3720
A Party may, by written notice so delivered to the other Parties, change its address for notice purposes hereunder.
Section 10.12 Severability. If any term or other provision of this Agreement is held to be invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect, and the Parties shall negotiate in good faith to modify this Agreement so as to effect their
original intention as closely as possible in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible.
Section 10.13 Time of the Essence. Time shall be of the essence with respect to all time periods and notice periods set forth in this Agreement. If the date specified in this Agreement for giving any notice or taking any action is not a Business Day (or if the period during which any notice is required to be given or any action taken expires on a date which is not a Business Day), then the date for giving such notice or taking such action (and the expiration of such period during which notice is required to be given or action taken) shall be the next day which is a Business Day.
Section 10.14 Counterpart Execution. This Agreement may be executed in any number of counterparts. If counterparts of this Agreement are executed, the signature pages from various counterparts may be combined into one composite instrument for all purposes. All counterparts together shall constitute only one Agreement, but each counterpart shall be considered an original. No Party shall be bound until all Parties have executed a counterpart. Facsimile or other electronic copies of signatures shall constitute original signatures for all purposes of this Agreement and any enforcement hereof.
Section 10.15 Further Assurances. After Closing, each Party agrees to take such further actions and to execute, acknowledge and deliver, without further consideration, all such further documents as are reasonably requested by the other for carrying out the purposes of this Agreement or of any document delivered pursuant to this Agreement.
Section 10.16 Transfer Taxes. Buyer shall be responsible for and pay all sales, transfer, use and similar Taxes arising from or associated with the transfer of the Assets (other than Taxes based on income) and all costs and expenses (including recording fees and real estate transfer Taxes and real estate transfer stamps) incurred in connection with obtaining or recording title to the Assets.
Section 10.17 Joint and Several Obligations. All duties, covenants, obligations, indemnities, and liabilities hereunder of Buyer and the Partnership shall be joint and several.
[Signature Pages Follow]
IN WITNESS WHEREOF, the Parties have executed and delivered this Agreement as of the date first set forth above.
1 of 1
Exhibit 3.1
AMENDMENT NO. 1
TO
THE AGREEMENT OF LIMITED PARTNERSHIP
OF
SANCHEZ PRODUCTION PARTNERS LP
This Amendment No. 1 (this “Amendment”) to the Agreement of Limited Partnership of Sanchez Production Partners LP, a Delaware limited partnership (the “Partnership”), dated as of March 6, 2015 (the “Partnership Agreement”), is entered into effective as of March 31, 2015 at the direction of Sanchez Production Partners GP LLC, as the general partner of the Partnership (the “General Partner”), pursuant to authority granted to it in Section 13.1 of the Partnership Agreement. Capitalized terms used but not defined herein have the meanings ascribed to them in the Partnership Agreement.
RECITALS
WHEREAS, Section 5.4(a) of the Partnership Agreement provides that the Partnership may issue additional Partnership Interests for any Partnership purpose at any time and from time to time to such Persons and for such consideration and on such terms and conditions as the General Partner in its sole discretion shall determine, all without the approval of any Limited Partners;
WHEREAS, Section 5.4(b) of the Partnership Agreement provides that the Partnership Interests authorized to be issued by the Partnership pursuant to Section 5.4(a) may be issued in one or more classes, or one or more series of any such classes, with such designations, preferences, rights, powers and duties (which may be senior to existing classes and series of Partnership Interests), as shall be fixed by the General Partner;
WHEREAS, Section 13.1(g) of the Partnership Agreement provides that the General Partner, without the approval of any Limited Partners, may amend any provision of the Partnership Agreement that the General Partner determines to be necessary or appropriate in connection with the creation, authorization or issuance of any class or series of Partnership Interests pursuant to Section 5.4 of the Partnership Agreement; and
WHEREAS, the General Partner deems it advisable and in the best interest of the Partnership to effect this Amendment to provide for (i) the creation of a new class of Units to be designated as Class A Preferred Units and to fix the preferences and the relative participating, optional and other special rights, powers and duties pertaining to the Class A Preferred Units, including, without limitation, the conversion of the Class A Preferred Units into Common Units in accordance with the terms described herein, (ii) the issuance of the Class A Preferred Units to the Unit Purchasers pursuant to one or more Class A Preferred Unit Purchase Agreements and (iii) such other matters as are provided herein.
NOW, THEREFORE, in consideration of the covenants, conditions and agreements contained herein, the General Partner does hereby amend the Partnership Agreement as follows:
A. Amendment. The Partnership Agreement is hereby amended as follows: |
1. Article I of the Partnership Agreement is hereby amended to add or restate, as applicable, the following definitions in the appropriate alphabetical order: |
“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, the Person in question. As used herein, the term “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. For avoidance of doubt, for purposes of this Agreement, the Partnership, on the one hand, and the Unit Purchasers, on the other hand, shall not be considered Affiliates.
“Class A Conversion Notice” has the meaning set forth in Section 5.9(b)(ii).
“Class A Holder Optional Conversion Date” has the meaning set forth in Section 5.9(b)(ii).
“Class A Preferred Distribution Rate” means an amount per Class A Preferred Unit equal to the following percentages of the applicable Class A Preferred Unit Price: (i) from the Class A Preferred Issue Date applicable to such Class A Preferred Unit through and including March 31, 2016, 10.0% per annum (2.5% per quarter), (ii) from April 1, 2016 through and including March 31, 2017, 11.5% per annum (2.875% per quarter) and (iii) from and after April 1, 2017, 12.5% per annum (3.125% per quarter).
“Class A Preferred Holder” means a holder of a Class A Preferred Unit.
“Class A Preferred Issue Date” means, with respect to a Class A Preferred Holder, the definition set forth for the term “Closing Date” in the Class A Preferred Unit Purchase Agreement to which such Class A Preferred Holder is a party.
“Class A Preferred Quarterly Distribution” has the meaning set forth in Section 5.9(c)(i).
“Class A Preferred Unit” means a Partnership Interest representing a fractional part of the Partnership Interests of all Limited Partners and assignees, and having the rights and obligations specified with respect to a Class A Preferred Unit in this Agreement, including PIK Units, provided that such PIK Units shall be subject to such restrictions as are set forth herein. A Class A Preferred Unit that is convertible into a Common Unit shall not constitute a Common Unit until such conversion occurs.
“Class A Preferred Unit Price” means, with respect to a Class A Preferred Unit, the definition set forth for the term “Purchase Price” in the Class A Preferred Unit Purchase Agreement pursuant to which such Class A Preferred Unit was issued.
“Class A Preferred Unit Purchase Agreement” means the applicable purchase agreement between the Partnership and a Class A Preferred Holder with respect to such Class A Preferred Holder’s Class A Preferred Units.
“Common Unit” means a Partnership Interest representing a fractional part of the Partnership Interests of all Limited Partners and assignees, and having the rights and obligations specified with respect to the Common Units in this Agreement. A Class A Preferred Unit will not constitute a Common Unit until the Preferred Conversion Date.
“Conversion Price” means the lesser of (i) the Class A Preferred Unit Price applicable to the Class A Preferred Unit that is converted and (ii) the lowest price after March 31, 2015 and on or prior to the applicable Preferred Conversion Date for which a Common Unit is issued by the Partnership (including pursuant to a Qualified Public Offering), other than in connection with an at-the-market offering or pursuant to the LTIP.
“Conversion Rate” has the meaning set forth in Section 5.9(b)(i).
“Liquidation Preference” means, with respect to each Class A Preferred Unit, the sum of the Class A Preferred Unit Price applicable to such Class A Preferred Unit plus all accrued and unpaid distributions on such Class A Preferred Unit to the applicable Preferred Conversion Date.
“Mandatory Conversion Date” means the earlier of (i) March 31, 2018, and (ii) the closing date for a Qualified Public Offering.
“Outstanding” means, with respect to Partnership Interests, all Partnership Interests that are issued by the Partnership and reflected as outstanding on the Partnership’s books and records as of the date of determination; provided, however, that if at any time any Person or Group (other than the General Partner or its Affiliates) beneficially owns 20% or more of the Outstanding Partnership Interests of any class then Outstanding (other than the Class A Preferred Units), none of the Partnership Interests owned by such Person or Group shall be entitled to be voted on any matter or be considered to be Outstanding when sending notices of a meeting of Limited Partners to vote on any matter (unless otherwise required by law or approved by the Board of Directors), calculating required votes, determining the presence of a quorum or for other similar purposes under this Agreement, except that Partnership Interests so owned shall be considered to be Outstanding for purposes of Section 11.1(b)(iv) (such Partnership Interests shall not, however, be treated as a separate class of Partnership Interests for purposes of this Agreement or the Delaware Act); provided, further, that the foregoing limitation shall not apply to (i) any Person or Group who acquired 20% or more of the Outstanding Partnership Interests of any class then Outstanding directly from the General Partner or its Affiliates (other than the Partnership), (ii) any Person or Group who acquired 20% or more of the Outstanding Partnership Interests of any class then Outstanding directly or indirectly from a Person or Group described in clause (i) provided that the General Partner shall have notified such Person or Group in writing that such limitation shall not apply, or (iii) any Person or Group who acquired 20% or more of any Partnership Interests issued by the Partnership provided that the General Partner shall have notified such Person or Group in writing that such limitation shall not apply; provided, moreover, that if any Person or Group beneficially owns 20% or more of the Outstanding Partnership Interests of any class then Outstanding solely as a result of actions taken by the Partnership, then the 20% threshold specified herein shall be increased, with respect to such Person, to a percentage equal to such Person’s new beneficial ownership after the taking of such action plus the difference between 20% and such Person’s beneficial ownership prior to such action.
“Partnership Interest” means any class or series of equity interest in the Partnership, which shall include any General Partner Interest and Limited Partner Interest (including, for the avoidance of doubt, any Class A Preferred Unit and Incentive Distribution Right), but shall exclude any options, rights, warrants and appreciation rights relating to an equity interest in the Partnership (and, as applicable, Member Interests prior to the Conversion Date).
“Partnership Optional Conversion Date” has the meaning set forth in Section 5.9(b)(v).
“PIK Unit” means a Class A Preferred Unit issued pursuant to a Class A Preferred Unit Distribution in accordance with Section 5.9(c).
“Preferred Conversion Date” means the Mandatory Conversion Date, the Partnership Optional Conversion Date or the Class A Holder Optional Conversion Date, as applicable.
“Qualified Public Offering” means a firm commitment underwritten public offering by the Partnership of Common Units that results in the Partnership receiving gross proceeds (before underwriting discounts, commissions, fees and expenses) of not less than $75,000,000.
“Unit” means a Partnership Interest that is designated as a “Unit” and shall include Common Units and Class A Preferred Units but shall not include (i) the General Partner Interest or (ii) Incentive Distribution Rights.
“Unit Purchasers” means each of the Persons named on Schedule A to a Class A Preferred Unit Purchase Agreement.
2. Section 4.7 of the Partnership Agreement is hereby amended to add a new clause (e) at the end thereof implementing certain transfer restrictions on the Class A Preferred Units: |
(e)Transfer Restrictions on Class A Preferred Units.
(i) Except as otherwise provided in this Section 4.7(e), no Class A Preferred Unit shall be transferrable by any Class A Preferred Holder. |
(ii) Notwithstanding anything to the contrary contained herein, a Class A Preferred Holder shall be permitted to transfer any Class A Preferred Units held by such Class A Preferred Holder to an Affiliate of such Class A Preferred Holder or another Unit Purchaser or its Affiliates, provided that any such transfer would not result in the Partnership being considered terminated for purposes of Section 708 of the Code. |
(iii) Notwithstanding anything to the contrary contained herein, no Class A Preferred Holder shall transfer any Class A Preferred Units to any Person that (a) is an operating company (and not a financial institution) and (b) engages in the upstream energy business or otherwise provides similar services or engages in similar business as the Partnership at any time during the twelve months preceding the proposed transfer. |
(iv) Notwithstanding anything to the contrary contained herein, (A) in connection with any transfer of Class A Preferred Units, the transferring Class A Preferred Holder must transfer to the transferee of such Class A Preferred Units all PIK Units issued as distributions thereon, and (B) in connection with any transfer of PIK Units, the transferring Class A Preferred Holder must transfer to the transferee of such PIK Units all Class A Preferred Units in connection with which such PIK Units were distributed; provided, however, that in the event that compliance with this Section 4.7(e)(iv) would result in the transfer of any fractional Class A Preferred Unit or PIK Unit, the number of Class A Preferred Units or PIK Units to be transferred shall be rounded down to the nearest whole Class A Preferred Unit or PIK Unit, as the case may be. |
3. Section 5.3(a) of the Partnership Agreement is hereby amended and restated as follows: |
(a) The Partnership shall maintain for each Partner (or a beneficial owner of Partnership Interests held by a nominee in any case in which the nominee has furnished the identity of such owner to the Partnership in accordance with Section 6031(c) of the Code or any other method acceptable to the General Partner) owning a Partnership Interest a separate Capital Account with respect to such Partnership Interest in accordance with the rules of Treasury Regulation Section 1.704-1(b)(2)(iv). Such Capital Account shall be increased by (i) the amount of all Capital Contributions made to the Partnership with respect to such Partnership Interest (including, with respect to the Class A Preferred Units, the net amount of cash contributed for the Class A Preferred Units by the holders thereof pursuant to a Class A Preferred Unit Purchase Agreement) and (ii) all items of Partnership income and gain (including Simulated Gain and income and gain exempt from tax) computed in accordance with Section 5.3(b) and allocated with respect to such Partnership Interest pursuant to Section 6.1, and decreased by (x) the amount of cash or Net Agreed Value of all actual and deemed distributions of cash or property (other than PIK Units) made with respect to such Partnership Interest and (y) all items of Partnership deduction and loss (including Simulated Depletion and Simulated Loss) computed in accordance with Section 5.3(b) and allocated with respect to such Partnership Interest pursuant to Section 6.1. In connection with the foregoing, the Partnership shall adopt the methodology set forth in the noncompensatory option regulations under Treasury Regulation Sections 1.704-1 and 1.721-2 with respect to the issuance and conversion of Class A Preferred Units, unless otherwise required by applicable law. |
4. Section 5.3(d)(i) of the Partnership Agreement is hereby amended and restated as follows: |
(d) (i) Consistent with Treasury Regulation Sections 1.704-1(b)(2)(iv)(f) and 1.704-1(b)(2)(iv)(h)(2), on an issuance of additional Partnership Interests for cash or Contributed Property, the issuance of a Noncompensatory Option, the issuance of Partnership Interests as consideration for the provision of services, the issuance of IDR Reset Common Units pursuant to Section 5.8, the conversion of the Combined Interest to Common Units pursuant to Section 11.3(b), or the conversion of a Class A Preferred Unit in accordance with Section 5.9(b), the Carrying Value of each Partnership property
immediately prior to such issuance (or, in the case of a Preferred Conversion Date, immediately after such Preferred Conversion Date) shall be adjusted upward or downward to reflect any Unrealized Gain or Unrealized Loss attributable to such Partnership property, as if such Unrealized Gain or Unrealized Loss had been recognized on an actual sale of each such property for an amount equal to its fair market value immediately prior to such issuance; provided, however, that in the event of the issuance of a Partnership Interest pursuant to the exercise of a Noncompensatory Option where the right to share in Partnership capital represented by such Partnership Interest differs from the consideration paid to acquire and exercise such option, the Carrying Value of each Partnership property immediately after the issuance of such Partnership Interest shall be adjusted upward or downward to reflect any Unrealized Gain or Unrealized Loss attributable to such Partnership property and the Capital Accounts of the Partners shall be adjusted in a manner consistent with Treasury Regulation Section 1.704-1(b)(2)(iv)(s); provided, further, that in the event of an issuance of Partnership Interests for a de minimis amount of cash or Contributed Property, in the event of an issuance of a Noncompensatory Option to acquire a de minimis Partnership Interest, or in the event of an issuance of a de minimis amount of Partnership Interests as consideration for the provision of services, the General Partner may determine that such adjustments are unnecessary for the proper administration of the Partnership. Any such Unrealized Gain or Unrealized Loss (or items thereof) shall be allocated (A) if the operation of this sentence is triggered by the conversion of a Class A Preferred Unit, first among the Partners holding Common Units as may be necessary to cause the Capital Account attributable to each such Common Unit to be the same, and (B) any remaining Unrealized Gain or Unrealized Loss shall be allocated among the Partners pursuant to Section 6.1 in the same manner as any item of gain or loss actually recognized would have been allocated. If the Unrealized Gain or Unrealized Loss allocated as a result of the occurrence of a Preferred Conversion Date is not sufficient to cause the Capital Account attributable to each Common Unit to be the same, then Capital Account balances shall be reallocated between the Partners holding such Common Units so as to cause the Capital Account attributable to each such Common Unit to be the same, in accordance with Treasury Regulation Section 1.704-1(b)(2)(iv)(s)(3). In determining Unrealized Gain or Unrealized Loss in connection with the issuance of additional Partnership Interests or a Preferred Conversion Date, the aggregate cash amount and fair market value of all Partnership assets (including cash or cash equivalents) immediately prior to the issuance of additional Partnership Interests (or, in the case of a Revaluation Event resulting from the exercise of a Noncompensatory Option (including conversion of a Class A Preferred Unit), immediately after the issuance of the Partnership Interest acquired pursuant to the exercise of the Noncompensatory Option) shall be determined by the General Partner using such method of valuation as it may adopt. For this purpose, the General Partner may first determine an aggregate value for the assets of the Partnership that takes into account the current trading price of the Common Units, the fair market value of all other Partnership Interests at such time (on a fully converted basis), and the amount of Partnership liabilities, and, if before the Preferred Conversion Date of any Class A Preferred Units, may adjust the fair market value of all Partnership assets to reflect the difference, if any, between the fair market value of any Class A Preferred Units for which the Preferred Conversion Date has not occurred and the aggregate Capital Accounts
attributable to such Class A Preferred Units to the extent of any Unrealized Gain or Unrealized Loss that has not been reflected in the Partners’ Capital Accounts previously, consistent with the methodology of Treasury Regulation Section 1.704-1(b)(2)(iv)(h)(2). The General Partner shall allocate such aggregate value among the individual properties of the Partnership (in such manner as it determines appropriate). Absent a contrary determination by the General Partner, the aggregate fair market value of all Partnership assets (including, without limitation, cash or cash equivalents) immediately prior to a Revaluation Event (including conversion of a Class A Preferred Unit) shall be the value that would result in the Capital Account for each Common Unit that is Outstanding prior to such Revaluation Event being equal to the Event Issue Value
5. Article V of the Partnership Agreement is hereby amended to add a new Section 5.9 at the end thereof creating a new series of Units as follows: |
Section 5.9 Establishment of Class A Preferred Units
(a) General. The General Partner hereby designates and creates a series of Units, including any PIK Units issued pursuant to Section 5.9(c), to be designated as “Class A Preferred Units,” having the same rights and preferences, and subject to the same duties and obligations as the Common Units, except as set forth in this Section 5.9. |
(b) Conversion of Class A Preferred Units |
(i) Each Class A Preferred Unit, unless previously converted, shall automatically convert on the Mandatory Conversion Date into a number of Common Units equal to the Liquidation Preference divided by the Conversion Price (the “Conversion Rate”), subject to adjustment pursuant to Section 5.9(b)(xii); provided, however, that if a Class A Preferred Holder together with its Affiliates and Associates would beneficially own Common Units after such Mandatory Conversion Date that exceeds 19.99% of the Outstanding Common Units after the conversion of all Class A Preferred Units in accordance with this Section 5.9(b)(i), then the provisions of this Section 5.9(b)(i) shall apply, with respect to such Class A Preferred Holder, only to such Class A Preferred Units that would result, upon such conversion, in such Class A Preferred Holder together with its Affiliates and Associates beneficially owning 19.99% of the Outstanding Common Units after the conversion of all Class A Preferred Units in accordance with this Section 5.9(b)(i), and the remaining Class A Preferred Units held by such Class A Preferred Holder shall remain Outstanding. Notwithstanding anything to the contrary herein, a Class A Preferred Holder shall not be entitled, with or without the consent of the Partnership, to waive the limitation on conversion of the Class A Preferred Units set forth in this Section 5.9(b)(i) on less than sixty-one (61) days prior written notice to the Partnership. |
(ii) Each of the holders of Class A Preferred Units (including a PIK Unit) shall have the right, from and after March 31, 2016 at the option of such holder, to request conversion in whole or in part of its Class A Preferred Units into a number of Common Units equal to the Conversion Rate, subject to adjustment
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pursuant to Section 5.9(b)(xii); provided, however, that if a Class A Preferred Holder together with its Affiliates and Associates would beneficially own Common Units after such Class A Holder Optional Conversion Date that exceeds 19.99% of the Outstanding Common Units after the conversion of all Class A Preferred Units in accordance with this Section 5.9(b)(ii), then the provisions of this Section 5.9(b)(ii) shall apply, with respect to such Class A Preferred Holder, only to such Class A Preferred Units that would result, upon such conversion, in such Class A Preferred Holder together with its Affiliates and Associates beneficially owning 19.99% of the Outstanding Common Units after the conversion of all Class A Preferred Units in accordance with this Section 5.9(b)(ii), and the remaining Class A Preferred Units held by such Class A Preferred Holder shall remain Outstanding. Notwithstanding anything to the contrary herein, a Class A Preferred Holder shall not be entitled, with or without the consent of the Partnership, to waive the limitation on conversion of the Class A Preferred Units set forth in this Section 5.9(b)(ii) on less than sixty-one (61) days prior written notice to the Partnership. To convert Class A Preferred Units into Common Units pursuant to this Section 5.9(b)(ii), the Class A Preferred Holder shall give written notice (a “Class A Conversion Notice”) to the Partnership stating that such holder elects to so convert Class A Preferred Units into Common Units and shall state therein with respect to Class A Preferred Units to be converted pursuant to Section 5.9(b)(ii): (a) the number of Class A Preferred Units (including PIK Units) to be converted, (b) the name or names in which such holder wishes the certificate or certificates for Common Units to be issued, (c) the holder’s computation of the number of Common Units to be received by the holder (or designated recipients) upon the Conversion Date and (d) the Conversion Rate on the Class A Holder Optional Conversion Date. The date of any Class A Conversion Notice shall be hereinafter be referred to as a “Class A Holder Optional Conversion Date.” |
(iii) The Partnership shall have the right to cause all, but not less than all, of the Class A Preferred Units to convert into Common Units at the Conversion Rate at any time beginning March 31, 2016, subject to adjustment pursuant to Section 5.9(b)(xii); provided, however, that if a Class A Preferred Holder together with its Affiliates and Associates would beneficially own Common Units after such Partnership Optional Conversion Date that exceeds 19.99% of the Outstanding Common Units after the conversion of all Class A Preferred Units in accordance with this Section 5.9(b)(iii), then the provisions of this Section 5.9(b)(iii) shall apply, with respect to such Class A Preferred Holder, only to such Class A Preferred Units that would result, upon such conversion, in such Class A Preferred Holder together with its Affiliates and Associates beneficially owning 19.99% of the Outstanding Common Units after the conversion of all Class A Preferred Units in accordance with this Section 5.9(b)(iii), and the remaining Class A Preferred Units held by such Class A Preferred Holder shall remain Outstanding. Notwithstanding anything to the contrary herein, a Class A Preferred Holder shall not be entitled, with or without the consent of the Partnership, to waive the limitation on conversion of the Class
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A Preferred Units set forth in this Section 5.9(b)(iii) on less than sixty-one (61) days prior written notice to the Partnership. |
(iv) If a Class A Preferred Unit conversion shall occur before a Record Date for payment of a distribution on the Common Units in respect of any completed Quarter and the Class A Preferred Units convert into additional Common Units, the additional Common Units issued in such conversion shall not receive the Common Unit distribution with respect to such completed Quarter. |
(v) In order to exercise the right to convert Class A Preferred Units prior to the Mandatory Conversion Date, the Partnership must: |
(A)deliver to the Class A Preferred Holders a “Notice of Partnership Optional Conversion” (attached as Exhibit B to this Agreement) not later than 30 days prior to the Partnership Optional Conversion Date; and
(B)pay all transfer or similar taxes, if any, required under Section 5.9(b)(vi).
The date specified in the Notice of Partnership Optional Conversion is the “Partnership Optional Conversion Date.”
(vi) The Partnership shall pay any documentary, stamp or similar issue or transfer taxes that may be payable in respect of any issuance or delivery of Common Units upon conversion of Class A Preferred Units, other than the transfer taxes payable upon the issuance of Common Units upon conversion of Class A Preferred Units in a name or names other than that of the Class A Preferred Holder, which shall be paid by the converting Class A Preferred Holder. |
(vii) Effective immediately prior to 5:00 p.m., New York City time, on the applicable Preferred Conversion Date, distributions on the converted Class A Preferred Units shall cease to accrue and the converted Class A Preferred Units shall cease to be outstanding, in each case subject to the right of Class A Preferred Holders of such converted Class A Preferred Units to receive the consideration issuable upon conversion which they are entitled to pursuant to this Section 5.9(b). |
(viii) As of 5:00 p.m., New York City time, on the applicable Preferred Conversion Date, the issuance by the Partnership of Common Units upon conversion of Class A Preferred Units shall become effective and the Person entitled to receive such Common Units shall be treated for all purposes as the record holder or holders of such Common Units. Prior to 5:00 p.m., New York City time, on the applicable Preferred Conversion Date, the Common Units issuable upon conversion shall be deemed not outstanding for any purpose, and Holders of Class A Preferred Units shall have no rights with respect to the Common Units issuable upon conversion by virtue of holding Class A Preferred Units. |
(ix) In connection with the conversion of any Class A Preferred Units, no fractional Common Units shall be issued to the converting Class A Preferred Holders. In lieu of any fractional Common Units issuable to a Class A Preferred Holder upon conversion, the Partnership shall pay or deliver, as applicable, to the converting Class A Preferred Holder, at its option, either (i) a number of Common Units rounded up to the next whole number of units, or (ii) an amount in cash (computed to the nearest cent) equal to the product of the fractional Common Unit and the Closing Price of Common Units on the Trading Day immediately preceding the applicable Preferred Conversion Date. |
(x) If more than one Class A Preferred Unit shall be surrendered for conversion at one time by or for the same Class A Preferred Holder, the number of Common Units issuable upon conversion of those Class A Preferred Units shall be computed on the basis of the aggregate number of Class A Preferred Units so surrendered. |
(xi) With respect to any conversion of Preferred Units, |
(1) promptly following the applicable Preferred Conversion Date, the Partnership shall instruct the Transfer Agent to deliver or cause to be delivered to the converting Class A Preferred Holder confirmation by book-entry of the whole number of Common Units issued upon conversion of such Class A Preferred Units; and
(2)on the Business Day immediately following the applicable Preferred Conversion Date, the Partnership shall deliver or cause to be delivered to the converting Class A Preferred Holder any cash payment for any fractional units that the Partnership is obligated to pay under Section 5.9(b)(ix).
(xii) If the Partnership (1) makes a distribution on its Common Units in Common Units, (2) subdivides or splits its outstanding Common Units into a greater number of Common Units, (3) combines or reclassifies its Common Units into a smaller number of Common Units or (4) issues by reclassification of its Common Units any Partnership Interest (including any reclassification in connection with a merger, consolidation or business combination in which the Partnership is the surviving Person), then the Class A Preferred Unit Price in effect at the time of the Record Date for such distribution or the effective date of such subdivision, split, combination or reclassification shall be proportionately adjusted so that the conversion of the Class A Preferred Units after such time shall entitle the holder to receive the aggregate number of Common Units (or shares of any Partnership Interest into which such shares of Common Units would have been combined, consolidated, merged or reclassified pursuant to clauses (3) and (4) above) that such holder would have been entitled to receive if the Class A Preferred Units had been converted into Common Units immediately prior to such Record Date or effective date, as the case may be, and in the case of a merger, consolidation or business combination in which the Partnership is the surviving
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Person, the Partnership shall provide effective provisions to ensure that the provisions in this Section 5.9 relating to the Class A Preferred Units shall not be abridged or amended and that the Class A Preferred Units shall thereafter retain the same powers, preferences and relative participating, optional and other special rights, and the qualifications, limitations and restrictions thereon, that the Class A Preferred Units had immediately prior to such transaction or event. An adjustment made pursuant to this Section 5.9(b)(xii) shall become effective immediately after the Record Date in the case of a distribution and shall become effective immediately after the effective date in the case of a subdivision, combination, reclassification (including any reclassification in connection with a merger, consolidation or business combination in which the Partnership is the surviving Person) or split. Such adjustment shall be made successively whenever any event described above shall occur. |
(c) Distributions. |
(i) Commencing with the Quarter ending on June 30, 2015 through the Preferred Conversion Date, the holders of the Class A Preferred Units as of an applicable Record Date shall be entitled to receive distributions (each, a “Class A Preferred Quarterly Distribution”), prior to any other distributions made in respect of any other Partnership Interests pursuant to Section 6.3, Section 6.4 or Section 6.5, in an amount equal to the Class A Preferred Distribution Rate on all Outstanding Class A Preferred Units. Distributions shall be paid on or about the last day of each of February, May, August and November following the end of each Quarter commencing with the Quarter ending June 30, 2015. Each Record Date established pursuant to this Section 5.9(c)(i) for a Class A Preferred Quarterly Distribution in respect of any Quarter shall be the same Record Date established for any distribution to be made by the Company in respect of other Company Securities pursuant to Section 6.3, Section 6.4 or Section 6.5 for such Quarter. For the Quarter ending June 30, 2015, through and including the Quarter ending June 30, 2016, Class A Preferred Quarterly Distributions shall be paid in PIK Units. For the Quarters ending from and after September 30, 2016, the Class A Preferred Quarterly Distributions may be paid in cash, in PIK Units or in a combination thereof, as determined by the Board of Directors in its sole discretion, but shall be paid in PIK Units absent an affirmative determination otherwise by the Board of Directors. The number of PIK Units to be issued to a Class A Preferred Holder on account of its Class A Preferred Units in connection with any Class A Preferred Quarterly Distribution paid in PIK Units shall be determined by dividing (i) the product of the Class A Preferred Distribution Rate multiplied by the number of Class A Preferred Units held by such Class A Preferred Holder, by (ii) the Class A Preferred Unit Price applicable to such Class A Preferred Units. Cash will be paid in lieu of any fractional PIK Units, with the value of the fractional PIK Unit determined by reference to the Class A Preferred Unit Price applicable to the Class A Preferred Units on which such PIK Units were issued. Unless otherwise expressly provided, references in this Agreement to Class A Preferred Units shall include all PIK Units Outstanding as of the date of such determination. If, in violation of this Agreement, the Partnership fails to
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pay in full any in-kind Class A Preferred Quarterly Distribution when due, then the holders entitled to the unpaid PIK Units shall be entitled to Class A Preferred Quarterly Distributions in subsequent Quarters, and to all other rights under this Agreement, as if such unpaid PIK Units had in fact been distributed on the date due. Nothing in this clause (i) shall alter the obligation of the Partnership to pay any unpaid PIK Units or the right of Class A Preferred Holders to enforce this Agreement to compel the Partnership to distribute any unpaid PIK Units. |
(ii) Notwithstanding anything in this Section 5.9(c) to the contrary, with respect to Class A Preferred Units that are converted into Common Units, the holder thereof shall not be entitled to a Class A Preferred Unit Distribution and a Common Unit distribution with respect to the same period, but shall be entitled only to the distribution to be paid based upon the class of Units held as of the close of business on the applicable Record Date, together with all accrued but unpaid distributions on the converted Class A Preferred Units. |
(iii) When any PIK Units are payable to a Class A Preferred Holder pursuant to this Section 5.9, the Partnership shall make a notation in book-entry form in the books of the Transfer Agent, or, at the request of a Class A Preferred Holder, issue to such Class A Preferred Holder a Certificate or Certificates for the number of PIK Units to which such Class A Preferred Holder shall be entitled, and all such PIK Units shall, when so issued, be duly authorized, validly issued fully paid and non-assessable Limited Partner Interests in the Partnership, except as such non-assessability may be affected by Section 17-607 or 17-804 of the Delaware Act, and shall be free from preemptive rights and free of any lien, claim, rights or encumbrances, other than those arising under the Delaware Act or this Agreement. |
(iv) For purposes of maintaining Capital Accounts, if the Partnership issues one or more PIK Units with respect to a Class A Preferred Unit, (i) the Partnership shall be treated as distributing cash with respect to such Class A Preferred Unit in an amount equal to the Class A Preferred Unit Distribution Rate attributable to such PIK Units, and (ii) the holder of such Class A Preferred Unit shall be treated as having contributed to the Partnership in exchange for such newly issued PIK Units an amount of cash equal to the Class A Preferred Unit Distribution Rate attributable to such PIK Units less the amount of any cash distributed by the Partnership in lieu of fractional PIK Units. |
(v) Accrued and unpaid distributions in respect of the Class A Preferred Units will not constitute an obligation of the Partnership. |
(d) Voting Rights. Except as provided in Section 5.9(f) or as a result of requirements imposed by the Delaware Act, the Class A Preferred Units shall have no voting rights. |
(e) Certificates. |
(i) If requested by a Class A Preferred Holder, the Class A Preferred Units shall be evidenced by Certificates in such form as the Board of Directors may approve and, subject to the satisfaction of any applicable legal, regulatory and contractual requirements, may be assigned or transferred in a manner identical to the assignment and transfer of other Units. The Certificates evidencing Class A Preferred Units shall be separately identified and shall not bear the same CUSIP number as the Certificates evidencing Common Units. |
(ii) The Certificate(s) representing the Class A Preferred Units may be imprinted with a legend in substantially the following form: |
“THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION THEREUNDER AND, IN THE CASE OF A TRANSACTION EXEMPT FROM REGISTRATION, UNLESS SOLD PURSUANT TO RULE 144 UNDER SUCH ACT OR THE ISSUER HAS RECEIVED DOCUMENTATION REASONABLY SATISFACTORY TO IT THAT SUCH TRANSACTION DOES NOT REQUIRE REGISTRATION UNDER SUCH ACT. THIS SECURITY IS SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER SET FORTH IN (i) THE AGREEMENT OF LIMITED PARTNERSHIP OF THE PARTNERSHIP, DATED AS MARCH 6, 2015, AS AMENDED, AND (ii) A CLASS A PREFERRED UNIT PURCHASE AGREEMENT, BY AND BETWEEN THE PARTNERSHIP AND THE UNIT PURCHASERS PARTY THERETO, IN EACH CASE, A COPY OF WHICH MAY BE OBTAINED FROM THE PARTNERSHIP AT ITS PRINCIPAL EXECUTIVE OFFICES.”
(iii) In connection with a sale of Class A Preferred Units pursuant to an effective registration statement or in reliance on Rule 144 of the rules and regulations promulgated under the Securities Act, upon receipt by the Partnership of such information as the Partnership reasonably deems necessary to determine that the sale of the Class A Preferred Units is made in compliance with Rule 144, the Partnership shall remove or cause to be removed the restrictive legend from the Certificate(s) representing such Class A Preferred Units (or the book-entry account maintained by the Transfer Agent), and the Partnership shall bear all costs associated therewith. |
(f) Amendments. This Section 5.9 shall not be amended in any manner that would adversely affect a Class A Preferred Holder without the prior written consent of such Class A Preferred Holder. |
6. Section 6.1(a) of the Partnership Agreement is hereby amended and restated as follows: |
(a) Net Income. After giving effect to the special allocated set forth in Section 6.1(d) and Section 6.1(e), Net Income for each taxable period and all items of income, gain, loss, deduction and Simulated Gain taken into account in computing Net Income for such taxable period shall be allocated as follows: |
(i) First, to the General Partner until the Net Income allocated to the General Partner pursuant to this Section 6.1(a)(i) for the current and all previous taxable periods is equal to the aggregate of the Net Loss allocated to the General Partner pursuant to Section 6.1(b)(iii) for all previous taxable periods; |
(ii) Second, to the Class A Preferred Holders in proportion to the amounts to be allocated to each of them under this Section 6.1(a)(ii) until the Net Income allocated to such holders of Class A Preferred Units pursuant to this Section 6.1(a)(ii) for the current and all previous taxable periods is equal to the aggregate of the Net Loss allocated to the Class A Preferred Holders pursuant to Section 6.1(b)(ii) for all previous taxable periods; and |
(iii) The balance, if any, 100% to the Unitholders, Pro Rata (determined without regard to any Class A Preferred Units then held by them). |
7. Section 6.1(b) of the Partnership Agreement is hereby amended and restated as follows: |
(b)Net Loss. After giving effect to the special allocations set forth in Section 6.1(d) and Section 6.1(e), Net Loss for each taxable period and all items of income, gain, loss, deduction and Simulated Gain taken into account in computing Net Loss for such taxable period shall be allocated as follows:
(i) First, to the Unitholders (other than Class A Preferred Holders), Pro Rata (determined without regard to any Class A Preferred Units then held by them); provided, that Net Loss shall not be allocated pursuant to this Section 6.1(b)(i) to the extent that such allocation would cause any such Unitholder to have a deficit balance in its Adjusted Capital Account at the end of such taxable period (or increase any existing deficit balance in its Adjusted Capital Account) as such Adjusted Capital Account would be determined without regard to any Class A Preferred Units then held by such Unitholder; |
(ii) Second, to the Class A Preferred Holders pro rata in accordance with the number of Class A Preferred Units held by them; provided, that the Net Loss shall not be allocated pursuant to this Section 6.1(b)(ii) to the extent that such allocation would cause any such Class A Preferred Holder to have a deficit balance in its Adjusted Capital Account at the end of such taxable period (or increase any existing deficit balance in its Adjusted Capital Account); and |
(iii) The balance, if any, 100% to the General Partner. |
8. Section 6.1(c) of the Partnership Agreement is hereby amended and restated as follows: |
(c)Net Termination Gains and Losses. After giving effect to the special allocations set forth in Section 6.1(d) and Section 6.1(e), Net Termination Gain or Net Termination Loss (including a pro rata part of each item of income, gain, loss, deduction and Simulated Gain taken into account in computing Net Termination Gain or Net Termination Loss) for each taxable period shall be allocated in the manner set forth in this Section 6.1(c). All allocations under this Section 6.1(c) shall be made after Capital Account balances have been adjusted by all other allocations provided under this Section 6.1 and after all distributions of cash and cash equivalents provided under Section 5.9, Section 6.3, Section 6.4 and Section 6.5 have been made; provided, however, that solely for purposes of this Section 6.1(c), Capital Accounts shall not be adjusted for distributions made pursuant to Section 12.4.
(i) Subject to the provisions set forth in the last sentence of this Section 6.1(c)(i), Net Termination Gain (including a pro rata part of each item of income, gain, loss, and deduction taken into account in computing Net Termination Gain) shall be allocated: |
(A)First, to the General Partner until the Net Termination Gain allocated to the General Partner pursuant to this Section 6.1(c)(i)(A) for the current and all previous taxable periods is equal to the aggregate of the Net Termination Loss allocated to the General Partner pursuant to Section 6.1(c)(ii)(C) for all previous taxable periods;
(B)Second, to the Class A Preferred Holders in proportion to the amounts to be allocated to each of them under this Section 6.1(c)(i)(B) until the Net Termination Gain allocated to such Class A Preferred Holders pursuant to this Section 6.1(c)(i)(B) for the current and all previous taxable periods is equal to the aggregate of the Net Loss allocated to the Class A Preferred Holders pursuant to Section 6.1(c)(ii)(B) for all previous taxable periods;
(C)Third, to all Unitholders, Pro Rata (determined without regard to any Class A Preferred Units then held by them), until the Capital Account in respect of each Common Unit then Outstanding is equal to the sum of (1) its Unrecovered Initial Unit Price, (2) the Minimum Quarterly Distribution for the Quarter during which the Liquidation Date occurs, reduced by any distribution pursuant to Section 6.4(a) with respect to such Common Unit for such Quarter, and (3) the excess of (aa) the First Target Distribution less the Minimum Quarterly Distribution for each Quarter after the Closing Date or the date of the most recent IDR Reset Election, if any, over (bb) the cumulative per Unit amount of any distributions of cash or cash equivalents that are deemed to be Operating Surplus made pursuant to Section 6.4(b) for such period (the sum of (1), (2), and (3) is hereinafter referred to as the “First Liquidation Target Amount”);
(D)Fourth, 13% to the holders of the Incentive Distribution Rights, Pro Rata, and 87% to all Unitholders, Pro Rata (determined without regard to any Class A Preferred Units then held by them), until the Capital Account in respect of each Common Unit then Outstanding is equal to the sum of (1) the First Liquidation Target Amount, and (2) the excess of (aa) the Second Target Distribution less the First Target Distribution for each Quarter after the Closing Date or the date of the most recent IDR Reset Election, if any, over (bb) the cumulative per Unit amount of any distributions of cash or cash equivalents that are deemed to be Operating Surplus made pursuant to Section 6.4(c) for such period (the sum of (1) and (2) is hereinafter referred to as the “Second Liquidation Target Amount”);
(E)Fifth, 23% to the holders of the Incentive Distribution Rights, Pro Rata, and 77% to all Unitholders, Pro Rata (determined without regard to any Class A Preferred Units then held by them), until the Capital Account in respect of each Common Unit then Outstanding is equal to the sum of (1) the Second Liquidation Target Amount, and (2) the excess of (aa) the Third Target Distribution less the Second Target Distribution for each Quarter after the Closing Date or the date of the most recent IDR Reset Election, if any, over (bb) the cumulative per Unit amount of any distributions of cash or cash equivalents that are deemed to be Operating Surplus made pursuant to Section 6.4(d) for such period (the sum of (1) and (2) is hereinafter defined as the “Third Liquidation Target Amount”); and
(F)Finally, 35.5% to the holders of the Incentive Distribution Rights, Pro Rata, and 64.5% to all Unitholders, Pro Rata (determined without regard to any Class A Preferred Units then held by them).
Notwithstanding the foregoing provisions in this Section 6.1(c)(i), the General Partner may adjust the amount of any Net Termination Gain arising in connection with a Revaluation Event that is allocated to the holders of Incentive Distribution Rights in a manner that will result (i) in the Capital Account for each Common Unit that is Outstanding prior to such Revaluation Event being equal to the Event Issue Value and (ii) to the greatest extent possible, the Capital Account with respect to the Incentive Distribution Rights that are Outstanding prior to such Revaluation Event being equal to the amount of Net Termination Gain that would be allocated to the holders of the Incentive Distribution Rights pursuant to this Section 6.1(c)(i)) if the Capital Accounts with respect to all Partnership Interests that were Outstanding immediately prior to such Revaluation Event and the Carrying Value of each Partnership property were equal to zero.
(ii) Net Termination Loss shall be allocated: |
A) First, to all Unitholders, Pro Rata (determined without regard to any Class A Preferred Units then held by them) until the
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Adjusted Capital Account in respect of each Common Unit then Outstanding has been reduced to zero; |
B) Second, to the Class A Preferred Holders, pro rata in accordance with the number of Class A Preferred Units held by them until the Adjusted Capital Account in respect of each Class A Preferred Unit then Outstanding has been reduced to zero; |
C) The balance, if any, 100% to the General Partner. |
9. Section 6.1(d)(iii)(A) of the Partnership Agreement is hereby amended to add the following language at the end thereof immediately before the period: |
; provided, however, that this Section 6.1(d)(iii)(A) shall not apply to any Excess Distribution in respect to or measured by a distribution to a Class A Preferred Unit.
10. Section 6.1(d) of the Partnership Agreement is hereby amended to add a new Section 6.1(d)(xiv) at the end thereof: |
(xiv)Allocations with respect to Class A Preferred Units.
(A)Items of Partnership gross income shall be allocated to the Class A Preferred Holders in amounts equal to the amount of cash actually distributed in respect of each such holder’s Class A Preferred Units, until the aggregate amount of such items allocated pursuant hereto for the current taxable period and all previous taxable periods is equal to the cumulative amount of all cash distributions made to the Class A Preferred Holders pursuant to Section 5.9(c)(i) (and, for the avoidance of doubt, without taking into account the cash distribution treated as made to the Class A Preferred Holders pursuant to Section 5.9(c)(iv)). Unless otherwise required by applicable law, the Partnership agrees that it will not treat a distribution with respect to the Class A Preferred Units as a guaranteed payment.
(B)Notwithstanding any other provision of this Section 6.1 (other than the Required Allocations), if (A) the Liquidation Date occurs prior to the conversion of the last Outstanding Class A Preferred Unit and (B) after having made all other allocations provided for in this Section 6.1 for the taxable period in which the Liquidation Date occurs, the Per Unit Capital Amount of each Class A Preferred Unit does not equal or exceed the Liquidation Preference, then items of income, gain, loss and deduction for such taxable period shall be allocated among the Partners in a manner determined appropriate by the General Partner so as to cause, to the maximum extent possible, the Per Unit Capital Amount in respect of each Class A Preferred Unit to equal the Liquidation Preference. For the avoidance of doubt, the reallocation of items set forth in the immediately preceding sentence provides that, to the extent necessary to achieve the Per Unit Capital Amount balances described above, items of income and
gain that would otherwise be included in Net Income or Net Loss, as the case may be, for the taxable period in which the Liquidation Date occurs, shall be reallocated from the Unitholders holding Units other than Class A Preferred Units to Unitholders holding Class A Preferred Units. In the event that (i) the Liquidation Date occurs on or before the date (not including any extension of time) prescribed by law for the filing of the Partnership’s federal income tax return for the taxable period immediately prior to the taxable period in which the Liquidation Date occurs and (ii) the reallocation of items for the taxable period in which the Liquidation Date occurs as set forth above in this Section 6.1(d)(xiv)(B) fails to achieve the Per Unit Capital Amounts described above, items of income, gain, loss and deduction that would otherwise be included in the Net Income or Net Loss, as the case may be, for such prior taxable period shall be reallocated among all Partners in a manner that will, to the maximum extent possible and after taking into account all other allocations made pursuant to this Section 6.1(d)(xiv)(B), cause the Per Unit Capital Amount in respect of each Class A Preferred Unit to equal the Liquidation Preference.
11. Article VI of the Partnership Agreement is hereby amended to add a new Section 6.9 at the end thereof as follows: |
Section 6.9 Special Provisions Relating to the Class A Preferred Holders.
(a) Except as otherwise provided herein, a Class A Preferred Holder shall have all of the rights and obligations of a Unitholder holding Common Units hereunder; provided, however, that immediately upon the conversion of any Class A Preferred Unit into Common Units pursuant to Section 5.9(b), the Unitholder holding a Class A Preferred Unit that is converted shall possess all of the rights and obligations of a Unitholder holding Common Units hereunder, including the right to vote as a Common Unitholder and the right to participate in allocations of income, gain, loss and deduction and distributions made with respect to Common Units. |
(b) A Unitholder holding a Class A Preferred Unit that has converted into a Common Unit pursuant to Section 5.9(b) shall not be issued a Common Unit Certificate pursuant to Section 4.1 and shall not be permitted to transfer its converted Class A Preferred Units to a Person that is not an Affiliate of the holder until such time as the General Partner determines, based on advice of counsel, that upon transfer, each such converted Class A Preferred Unit should have intrinsic economic and U.S. federal income tax characteristics to the transferee, in all material respects, that are the same as the intrinsic economic and U.S. federal income tax characteristics that a Common Unit (other than a converted Class A Preferred Unit) would have to such transferee upon transfer, provided that in all events such determination shall be made within 5 Business Days of the date of conversion or receipt by the Partnership of the notice of transfer, as applicable. The General Partner shall act in good faith and shall make the determinations set forth in this Section 6.7(b) as soon as practicable following a Preferred Conversion Date or as earlier provided herein. |
12. The Partnership Agreement is hereby amended by inserting as Exhibit B at the end thereof Exhibit B attached hereto. |
B. Agreement in Effect. Except as hereby amended, the Partnership Agreement shall remain in full force and effect. |
C. Applicable Law. This Amendment shall be construed in accordance with and governed by the laws of the State of Delaware, without regard to principles of conflicts of laws. |
D. Severability. Each provision of this Amendment shall be considered severable and if for any reason any provision or provisions herein are determined to be invalid, unenforceable or illegal under any existing or future law, such invalidity, unenforceability or illegality shall not impair the operation of or affect those portions of this Amendment that are valid, enforceable and legal. |
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, this Amendment has been executed as of the effective date written above.
GENERAL PARTNER:
SANCHEZ PRODUCTION PARTNERS GP LLC
By: /s/ Charles C. Ward
Name: Charles C. Ward
Title: Chief Financial Officer
EXHIBIT B
FORM OF NOTICE OF PARTNERSHIP OPTIONAL CONVERSION
To the Holders of Class A Preferred Units:
Please take notice that Sanchez Production Partners LP (the “Partnership”) has irrevocably elected to convert all of the outstanding Class A Preferred Units (the “Class A Preferred Units”) into Common Units of the Partnership. The conversion will be effective at 5:00 p.m., New York time on [_________]. The conversion rate will be calculated as set forth in Section 5.9(b)(i) of the Agreement of Limited Partnership of the Partnership.
Exhibit 4.1
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made and entered into as of March 31, 2015, by and between Sanchez Production Partners LP, a Delaware limited partnership (the “Partnership”), and SEP Holdings III, LLC, a Delaware limited liability company (the “Company”).
This Agreement is made pursuant to the transactions contemplated by that certain Purchase and Sale Agreement (the “PSA”), dated March 31, 2015, by and between the Company, on the one hand, and SEP Holdings IV, LLC, a Delaware limited liability company, and the Partnership, on the other hand.
The Partnership and the Company hereby agree as follows:
1. |
Definitions |
Capitalized terms used and not otherwise defined herein that are defined in the PSA shall have the meanings given such terms in the PSA. As used in this Agreement, the following terms shall have the following meanings:
“Advice” shall have the meaning set forth in Section 6(c).
“Beneficial Owner” has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under 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 The terms “Beneficially Owns” and “Beneficially Owned” have a corresponding meaning.
“Common Units” shall have the meaning set forth in the Partnership Agreement and includes any equity securities issued or issuable with respect thereto (including by recapitalization, merger or other event or occurrence).
“Demand Registration” shall have the meaning set forth in Section 2(a).
“EDGAR” means the Electronic Data Gathering, Analysis, and Retrieval system maintained by the Commission.
“Effectiveness Period” means, with respect to a particular Registration Statement, the period beginning when such Registration Statement is declared effective under the Securities Act and ending on the earliest of (a) three years after such Registration Statement is first declared effective (excluding a Registration Statement on Form S-3 with respect to which the three-year limitation in Rule 415(a)(5) is not applicable unless post-effectively amended on Form S-1, in which case such three-year period would run from the effective date of such post-effective amendment), (b) the time the Registrable Securities covered by such Registration Statement have been sold or otherwise disposed of by the Holder, and (c) such time as both (A) the Registrable Securities then covered by
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such Registration Statement may be sold pursuant to Rule 144 where no conditions of Rule 144 are then applicable (other than the holding period requirement in paragraph (d)(1)(ii) of Rule 144 so long as such holding period requirement is then satisfied at such time), as determined by the Partnership in good faith based in part on a written opinion letter of counsel to such effect, which opinion letter shall be addressed and acceptable to the Partnership, the Transfer Agent and the affected Holders, and (B) no Holder Beneficially Owns Common Units (on an as-converted basis) in excess of 5% of the then outstanding securities of such class.
“Existing Registration Rights Agreement” shall have the meaning set forth in Section 6(o).
“FINRA” shall have the meaning set forth in Section 3(g).
“Holder” or “Holders” means the Company and, upon compliance with Section 6(h), any other Person that is the Beneficial Owner of Registrable Securities as a result of the sale, assignment or other transfer of the Registrable Securities Beneficially Owned by the Company or other Partnership Interests issuable or issued upon the conversion or exercise of any securities Beneficially Owned by the Company which are convertible or exercisable into Registrable Securities.
“Indemnified Party” shall have the meaning set forth in Section 5(c).
“Indemnifying Party” shall have the meaning set forth in Section 5(c).
“Inspectors” shall have the meaning set forth in Section 3(p).
“Losses” shall have the meaning set forth in Section 5(a).
“Partnership Agreement” means the Agreement of Limited Partnership of Sanchez Production Partners LP, dated as of March 6, 2015, as the same may be amended, restated or otherwise modified from time to time.
“Partnership Interest” shall have the meaning set forth in the Partnership Agreement and includes any equity securities issued or issuable with respect thereto (including by recapitalization, merger or other event or occurrence).
“Other Units” means any Partnership Interests which do not constitute Registrable Securities.
“Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial proceeding, such as a deposition), whether commenced or threatened.
“Prospectus” means the prospectus included in a Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective Registration Statement in reliance upon Rule 430A), as amended or supplemented by any prospectus supplement, with respect to the
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terms of the offering of any portion of the Registrable Securities covered by a Registration Statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus.
“PSA” shall have the meaning set forth in the Recitals.
“Records” shall have the meaning set forth in Section 3(p).
“Registrable Securities” means at any time, with respect to any Holder, Common Units issued or issuable pursuant to the PSA, in each case whether Beneficially Owned by, or issuable to, such Holder, including upon the transfer thereof by the original holder or any subsequent holder, subject to Section 6(h), and any units or other securities issued in respect of such Registrable Securities because of or in connection with any unit split, dividend or other distribution, purchase in any rights offering or in connection with any exchange for or replacement of such Registrable Securities, or any combination of units, recapitalization, merger, consolidation or similar event, or any other equity securities issued pursuant to any other pro rata distribution with respect to such Registrable Securities; provided, however, that Partnership Interests held by a Holder shall cease to constitute Registrable Securities at such time as (A) all of such Partnership Interests may be sold by such Holder pursuant to Rule 144 where no conditions of Rule 144 are then applicable (other than the holding period requirement in paragraph (d)(1)(ii) of Rule 144 so long as such holding period requirement is then satisfied at such time), as determined by the Partnership in good faith based in part on a written opinion letter of counsel to such effect, which opinion letter shall be (I) addressed and acceptable to the Partnership and the Transfer Agent and (II) addressed to such Holder, and (B) the Common Units then Beneficially Owned by such Holder (on an as-converted basis) do not exceed 5% of the then outstanding securities of such class.
“Registration Statement” means any registration statement filed hereunder, including Section 6(d) (which registration statement may constitute a “shelf” registration statement covering the Registrable Securities specified by the Holder on an appropriate form under Rule 415), and (in each case) the Prospectus, amendments and supplements to such registration statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference or deemed to be incorporated by reference in such registration statement.
“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.
“Rule 415” means Rule 415 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.
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“Rule 424” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.
“Rule 430A” means Rule 430A promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.
“Securities Act” means the Securities Act of 1933, as amended.
“SEC Guidance” means (i) any publicly-available written or oral guidance, comments, requirements or requests of the Commission staff and (ii) the Securities Act.
“Selling Holders” means any Holder that sells or proposes to sell Registrable Securities pursuant to a Registration Statement in accordance with this Agreement.
“Trading Day” means a day on which the national securities exchange on which the Common Units are then listed for trading or quotation is open for trading.
“Transfer Agent” means Computershare, the current transfer agent of the Partnership, with a mailing address of 250 Royall Street, Canton, Massachusetts 02021 and a facsimile number of (791) 575-2549, and any successor transfer agent of the Partnership.
2. |
Demand Registration. |
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1. |
the Partnership shall not be obligated to file more than three Registration Statements in total pursuant to this Section 2; and |
I. |
First, the Registrable Securities held by all Selling Holders, pro rata based upon the number of Registrable Securities Beneficially Owned by each such Selling Holder at the time of such Demand Registration; and |
II. |
Second, the Other Units. |
hereof, unless such Selling Holders shall have reimbursed the Partnership in whole for all out-of-pocket expenses incurred by the Partnership in connection with such rescinded Demand Registration). |
3. Registration Procedures.
In connection with the Partnership’s Demand Registration obligations hereunder, the Partnership shall:
(a) Not less than 10 Trading Days prior to the initial filing (if applicable) of each Registration Statement and not less than two Trading Days prior to the filing of any related Prospectus or any pre- or post-amendment or supplement thereto or to such Registration Statement (but not including documents incorporated by reference therein), the Partnership shall furnish to each Holder copies of all such documents proposed to be filed, which documents will be subject to the review of such Holders. The Partnership shall not file a Registration Statement or any such Prospectus or any amendments or supplements thereto to which Holders of least two-thirds of the Registrable Securities shall reasonably object in good faith, provided that the Partnership is notified of such objection in writing no later than five Trading Days after the Holders have been so furnished copies of an initial Registration Statement or one Trading Day after the Holders have been so furnished copies of any related Prospectus or pre- or post-effective amendments or supplements thereto or to such Registration Statement. By the end of the fifth Trading Day following the written request furnished by or on behalf of the Partnership, the Holders shall furnish to the Partnership such written information regarding such Holder and the distribution proposed by such Holder as the Partnership may reasonably request in writing (and that has not otherwise been previously provided) and as shall be reasonably required in connection with any registration, qualification or compliance referred to in this Agreement.
(a) (i) Use its commercially reasonable efforts to cause a Registration Statement to become and remain effective for the Effectiveness Period and prepare and file with the Commission such amendments, including post-effective amendments, to a Registration Statement and the Prospectus used in connection therewith as may be necessary to keep a Registration Statement continuously effective as to the applicable Registrable Securities for the Effectiveness Period, including so as to permit sales of the greatest number of Registrable Securities for the longest possible Effectiveness Period (for example, to the extent permissible under applicable rules and regulations of the Commission, post-effectively amending a Registration Statement on Form S-1 to convert it to a Form S-3 not subject to the three year limit
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under clause (a) of the definition thereof); (ii) cause the related Prospectus to be amended or supplemented by any required Prospectus supplement (subject to the terms of this Agreement), and, as so supplemented or amended, to be filed pursuant to Rule 424; (iii) respond as promptly as reasonably possible to any comments received from the Commission with respect to a Registration Statement or any amendment thereto and provide as promptly as reasonably possible to any Holder upon request true and complete copies of all correspondence from and to the Commission relating to a Registration Statement (provided that the Partnership may excise any information contained therein which would constitute material non-public information as to any Holder which has not executed a confidentiality agreement with the Partnership); and (iv) comply in all material respects with the provisions of the Securities Act and the Exchange Act with respect to the disposition of all Registrable Securities covered by a Registration Statement during the applicable period in accordance (subject to the terms of this Agreement) with the intended methods of disposition by the Holders thereof set forth in such Registration Statement as so amended or in such Prospectus as so supplemented. |
by a Holder is required by law; provided, further, that notwithstanding each Holder’s agreement to keep such information confidential, each such Holder makes no acknowledgement that any such information is material, non-public information; provided, moreover, that the Partnership’s ability to suspend the availability of the Registration Statement under Sections 3(c)(iii) through (vi) is subject to the limitations set forth in Section 3(j). |
(f) Use its reasonable best efforts to avoid the issuance of, or, if issued, obtain the withdrawal of, (i) any order stopping or suspending the effectiveness of a Registration Statement, or (ii) any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, at the earliest practicable moment. |
(g) Furnish to each Holder, without charge, at least one conformed copy of each such Registration Statement (including the Prospectus included therein) and each amendment thereto, including financial statements and schedules, all documents incorporated or deemed to be incorporated therein by reference to the extent requested by such Person, and all exhibits to the extent requested by such Person (including those previously furnished or incorporated by reference) promptly after the filing of such documents with the Commission; provided, that any such item which is available on EDGAR need not be furnished in physical form. |
(h) Subject to the terms of this Agreement, the Partnership hereby consents to the use of such Prospectus and each amendment or supplement thereto by each of the Selling Holders in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto, except after the giving of any notice pursuant to Section 3(c). |
(j) Prior to any resale of Registrable Securities by a Holder, use its commercially reasonable efforts to register or qualify or cooperate with the Selling Holders in connection with the registration or qualification (or exemption from the registration or qualification) of such Registrable Securities for resale by the Holder under the securities or ”blue sky” laws of such jurisdictions within the United States as any Holder reasonably requests in writing, to keep each registration or qualification (or exemption therefrom) effective during the Effectiveness Period and to do any and all other acts or things reasonably necessary to enable the disposition in such jurisdictions of the Registrable Securities covered by each Registration Statement, including, but not limited to, causing such Registrable Securities to be registered with or approved by such other governmental agencies or authorities as may be necessary by virtue of the business and operations of the Partnership to enable the seller or sellers thereof to consummate the disposition of such Registrable Securities; provided, that the Partnership shall not be required to qualify generally to do business in any jurisdiction where it is not then so qualified, subject the Partnership to any material tax in any such jurisdiction where it is not then so subject or file a general consent to service of process in any such jurisdiction. |
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(k) If requested by a Holder, cooperate with such Holders to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be delivered to a transferee pursuant to a Registration Statement, which certificates shall be free of all restrictive legends, and to enable such Registrable Securities to be in such denominations and registered in such names as any such Holder may request. |
(m) Comply with all applicable rules and regulations of the Commission. |
(n) Use its commercially reasonable efforts to obtain from its independent certified public accountants and reserve engineers “comfort” letters in customary form and at customary times and covering matters of the type customarily covered by comfort letters, when so requested by any underwriters (including any Selling Holders that the Commission may, in the good faith judgment of the Selling Holders after consultation with outside counsel, require to be identified as an underwriter) in connection with a public offering of Registrable Securities. |
(o) In connection with the closing of any offering of Registrable Securities, use its commercially reasonable efforts to obtain from its counsel an opinion or opinions in customary form and at customary times and covering matters of the type customarily covered by legal opinions in underwritten offerings, if so requested by any underwriters (including any Selling Holders that the Commission may, in the good faith judgment of the Selling Holders after consultation with outside counsel, require to be identified as an underwriter). |
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(p) List the Registrable Securities on any national securities exchange on which the Common Units are then listed for trading or quotation, or if the Common Units are not then listed or quoted on a national securities exchange, use its commercially reasonable efforts to qualify such Registrable Securities for inclusion on such national securities exchange as the holders of a majority of such Registrable Securities shall request. |
(q) The Partnership may require each Selling Holder to furnish to the Partnership a certified statement as to the number of Registrable Securities Beneficially Owned by such Holder and, if required by the Commission pursuant to SEC Guidance, the natural persons thereof that have voting and dispositive control over the Registrable Securities. |
(s) If underwriters are engaged in connection with any Registration Statement or offering thereunder, without limitation to any of the foregoing, (i) provide indemnification, representations, covenants and other assurance to the underwriters in form and substance customary in such transactions and (ii) at the reasonable request of any underwriter, make available its senior executive and financial officers to participate in a marketing presentation to potential investors. |
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4. Registration Expenses.
All fees and expenses incident to the performance of or compliance with this Agreement by the Partnership shall be borne by the Partnership (without reimbursement by the Company or any Holder) whether or not any Registrable Securities are sold pursuant to a Registration Statement. The fees and expenses referred to in the foregoing sentence shall include, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses of the Partnership’s counsel and auditors) (A) with respect to filings made with the Commission, (B) with respect to filings required to be made with any national securities exchange on which Partnership Interests are then listed for trading, (C) in compliance with applicable state securities or “blue sky” laws reasonably requested by the Selling Holders or underwriters (including, without limitation, fees and disbursements of counsel for the Partnership in connection with “blue sky” qualifications or exemptions of the Registrable Securities) and determination of the eligibility of the Registrable Securities for investment under the laws of such jurisdictions as requested by the Holders, and (D) if not previously paid by the Partnership in connection with a filing by the Partnership with FINRA, with respect to any filing that may be required to be made by any broker through which a Holder intends to make sales of Registrable Securities with FINRA pursuant to FINRA Rule 5110 (or any similar or successor rule), so long as the broker is receiving no more than a customary brokerage commission in connection with such sale, (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities), (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Partnership, (v) Securities Act liability insurance, if the Partnership so desires such insurance, and (vi) fees and expenses of all other Persons retained by the Partnership in connection with the consummation of the transactions contemplated by this Agreement. In addition, the Partnership shall be responsible for all of its internal expenses incurred in connection with the consummation of the transactions contemplated by this Agreement (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit and the fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange as required hereunder. In no event shall the Partnership be responsible for any broker or similar commissions attributable to any Holder or, except to the extent specifically provided for herein, any legal fees or other costs of the Holders.
5. Indemnification
(a) Indemnification by the Partnership. The Partnership shall, notwithstanding any termination of this Agreement, indemnify and hold harmless each Holder, the officers, directors, members, partners, agents, brokers (including brokers who offer and sell Registrable Securities as principal as a result of a pledge or any failure to perform under a margin call of Partnership Interests), investment advisors and employees (and any other Persons with a functionally equivalent role of a Person holding such titles, notwithstanding a lack of such title or any other title) of each of them, each Person who controls any such Holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, members, equityholders, partners, agents and employees (and any other Persons with a functionally equivalent role of a Person holding such titles, notwithstanding a lack of such title or any other title) of each such controlling Person, to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, without
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limitation, reasonable attorneys’ fees) and expenses (collectively, “Losses”), as incurred, arising out of or relating to (1) any untrue or alleged untrue statement of a material fact contained in a Registration Statement, any Prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading or (2) any violation or alleged violation by the Partnership of the Securities Act, the Exchange Act or any state securities law, or any rule or regulation thereunder, in connection with the performance of its obligations under this Agreement, except to the extent, but only to the extent, that in the case of (1) above, (i) such untrue statements or omissions are based solely upon information regarding such Holder furnished in writing to the Partnership by such Holder expressly for use therein, or (ii) in the case of an occurrence of an event of the type specified in Section 3(c)(iii) through (vi), the use by such Holder of an outdated or defective Prospectus after the Partnership has notified such Holder in writing that the Prospectus is outdated or defective and prior to the receipt by such Holder of the Advice contemplated in Section 6(c). The Partnership shall notify the Holders promptly of the institution, threat or assertion of any Proceeding arising from or in connection with the transactions contemplated by this Agreement of which the Partnership has knowledge.
(b) Indemnification by Holders. Each Holder shall, severally and not jointly, indemnify and hold harmless the Partnership, its directors, officers, agents and employees, each Person who controls the Partnership (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, agents or employees of such controlling Persons, to the fullest extent permitted by applicable law, from and against all Losses, as incurred, to the extent arising out of or based solely upon (x) such Holder’s failure to comply with the prospectus delivery requirements of the Securities Act or (y) any untrue or alleged untrue statement of a material fact contained in any Registration Statement, any Prospectus, or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading to the extent, but only to the extent, that (i) such untrue statement or omission is contained in any information so furnished in writing by such Holder to the Partnership specifically for inclusion in such Registration Statement or such Prospectus, or in any amendment or supplement thereto or (ii) in the case of an occurrence of an event of the type specified in Section 3(c)(iii) through (vi), the use by such Holder of an outdated or defective Prospectus after the Partnership has notified such Holder in writing that the Prospectus is outdated or defective and prior to the receipt by such Holder of the Advice contemplated in Section 6(c). In no event shall the liability of any Selling Holder hereunder be greater in amount than the dollar amount of the net proceeds received by such Holder upon the sale of the Registrable Securities giving rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding shall be brought or asserted against any Person entitled to indemnity hereunder (an “Indemnified Party”), such Indemnified Party shall promptly notify the Person from whom indemnity is sought (the “Indemnifying Party”) in writing, and the Indemnifying Party shall have the right to assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in connection with defense thereof;
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provided, that the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) that such failure shall have materially prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in writing to pay such fees and expenses; (2) the Indemnifying Party shall have failed promptly to assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3) the named parties to any such Proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party, and counsel to the Indemnified Party shall reasonably believe that a material conflict of interest is likely to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party (in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense thereof and the reasonable fees and expenses of no more than one separate counsel shall be at the expense of the Indemnifying Party). The Indemnifying Party shall not be liable for any settlement of any such Proceeding effected without its written consent, which consent shall not be unreasonably withheld or delayed. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending Proceeding in respect of which any Indemnified Party is a party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such Proceeding.
Subject to the terms of this Agreement, all reasonable fees and expenses of the Indemnified Party (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such Proceeding in a manner not inconsistent with this Section 5) shall be paid to the Indemnified Party, as incurred, within 10 Trading Days after written notice thereof to the Indemnifying Party; provided, that the Indemnified Party shall promptly reimburse the Indemnifying Party for that portion of such fees and expenses applicable to such actions for which such Indemnified Party is judicially determined to be not entitled to indemnification hereunder.
(d) Contribution. If the indemnification under Sections 5(a) or 5(b) is unavailable to an Indemnified Party or insufficient to hold an Indemnified Party harmless for any Losses, then each Indemnifying Party shall contribute to the amount paid or payable by such Indemnified Party, in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of such 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 of a material fact, has been taken or made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission. The amount paid or payable by a party as a result of any
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Losses shall be deemed to include, subject to the limitations set forth in this Agreement, any reasonable attorneys’ or other reasonable fees or expenses incurred by such party in connection with any Proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in this Section 5 was available to such party in accordance with its terms.
The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 5(d) were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section 5(d), no Holder shall be required to contribute, in the aggregate, any amount in excess of the amount by which the net proceeds actually received by such Holder from the sale of the Registrable Securities subject to the Proceeding exceeds the amount of any damages that such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission.
The indemnity and contribution agreements contained in this Section 5 are in addition to any liability that the Indemnifying Parties may have to the Indemnified Parties.
6. Miscellaneous.
(a) Remedies. In the event of a breach by the Partnership or by a Holder of any of their respective obligations under this Agreement, each Holder or the Partnership, as the case may be, in addition to being entitled to exercise all rights granted by law and under this Agreement, including recovery of damages, shall be entitled to specific performance of its rights under this Agreement. The Partnership and each Holder agree that monetary damages would not provide adequate compensation for any losses incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agrees that, in the event of any action for specific performance in respect of such breach, it shall not assert or shall waive the defense that a remedy at law would be adequate.
(b) Compliance. Each Holder covenants and agrees that it will comply with the prospectus delivery requirements of the Securities Act as applicable to it in connection with sales of Registrable Securities pursuant to a Registration Statement. The Partnership covenants and agrees that it shall (i) so long as any Holder owns Registrable Securities, file the reports required to be filed by it under the Securities Act and the Exchange Act in a timely manner, (ii) if the Partnership ceases to be required to file reports under the Securities Act and Exchange Act, upon the written request of any Holder of Registrable Securities, make publicly available other information necessary to permit sales pursuant to Rule 144 under the Securities Act and (iii) take such further action as any Holder(s) may reasonably request in writing, all to the extent required from time to time to enable such Holders to sell Registrable Securities without registration under the Securities Act pursuant to the exemptions provided by Rule 144 thereunder (but the obligations of the Partnership pursuant to clause (ii) hereof shall not apply if none of the Holders are Affiliates of the Partnership). Upon the request of any Holder, the Partnership shall deliver to such Holder a written statement as to whether it has complied with such information and requirements.
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(c) Discontinued Disposition. By its acquisition of Registrable Securities, each Holder agrees that, upon receipt of a notice from the Partnership of the occurrence of any event of the kind described in Section 3(c)(iii) through (vi), such Holder will forthwith discontinue disposition of such Registrable Securities under a Registration Statement until it is advised in writing (the “Advice”) by the Partnership that the use of the applicable Prospectus (as it may have been supplemented or amended) may be resumed. The Partnership will use its commercially reasonable efforts to ensure that the use of the Prospectus may be resumed as promptly as is practicable within the time period specified in Section 3(j).
(d) Piggy-Back Registrations. So long as the Holders, as defined under the Existing Registration Rights Agreement, if they so request pursuant to the provisions thereof, would then be able to register all of their Registrable Securities thereunder pursuant to Sections 6(d) or 6(e) of the Existing Registration Rights Agreement, if the Partnership shall determine to prepare and file with the Commission a Registration Statement relating to an offering for its own account or the account of others, other than a Holder, under the Securities Act of any Common Units, other than on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or their then-equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with the Partnership’s incentive plan or other employee benefit plans, then the Partnership shall deliver to each Holder a written notice of such determination and, if within 15 days after the date of the delivery of such notice, any such Holder shall so request in writing, then the Partnership shall (if permitted under applicable SEC Guidance) include in such Registration Statement all or any part of such Registrable Securities such Holder requests to be registered; provided, however, that if at any time after giving such written notice of its intention to register any Common Units, the Partnership or the other Person(s) for whose account such registration is proposed shall determine for any reason not to proceed with the proposed registration of the Common Units to be sold by it, the Partnership may, at its election, give written notice of such determination to each Holder of Registrable Securities and, thereupon, shall be relieved of its obligation to register or offer any Registrable Securities in connection with such registration or offering; provided, further, that if the managing underwriter advises the Partnership that the inclusion of all Registrable Securities and/or Common Units proposed to be included in such registration or offering would interfere with the successful marketing (including pricing) of the Common Units proposed to be registered or offered by the Partnership, then the number of Registrable Securities and Common Units proposed to be included in such registration or offering shall be included in the following order:
1. First, the Common Units to be registered or offered, as applicable; |
2. Second, the Registrable Securities, as defined under the Existing Registration Rights Agreement, to be registered or offered, as applicable; and |
3. Third, the Registrable Securities held by all Selling Holders, pro rata based upon the number of Registrable Securities Beneficially Owned by each such Selling Holder at the time of such registration. |
In connection with any underwritten offering under this Section 6(d), the Partnership shall not be required to include Registrable Securities in such underwritten offering unless the
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Holders of such Registrable Securities accept the terms of the underwriting of such offering that have been agreed upon between the Partnership and the underwriters selected by the Partnership, including without limitation, the underwriting agreement and the fees and expenses in connection therewith. Notwithstanding anything in this Section 6(d) to the contrary, if a Holder has the right to have Partnership Interests (including Common Units) registered pursuant to Section 6(e), then such Holder’s rights with respect to such Partnership Interests shall be governed by Section 6(e) and not this Section 6(d).
(e) Tag-Along Registrations. So long as the Holders, as defined under the Existing Registration Rights Agreement, if they so request pursuant to the provisions thereof, would then be able to register all of their Registrable Securities thereunder pursuant to Sections 6(d) or 6(e) of the Existing Registration Rights Agreement, if the Partnership shall be requested to file a registration statement pursuant to Section 7.12 of the Partnership Agreement for any Partnership Interests held by any “Holder” (as defined in the Partnership Agreement) and a Holder owns the same class of Partnership Interests as such Partnership Interests required to be registered, the Partnership shall promptly deliver to such Holder a written notice of such request and such Holder shall have the right to have such Partnership Interests owned by it registered in accordance with the terms and conditions set forth in Section 7.12 of the Partnership Agreement as though such Holder was a “Holder” under Section 7.12 of the Partnership Agreement subject to the rights of the Holders, as defined under the Existing Registration Rights Agreement, to register all of their Registrable Securities thereunder pursuant to Section 6(e) thereof; provided, however, that if such registration statement requested to be filed by a “Holder” (as defined in the Partnership Agreement) is not filed with the Commission or is otherwise withdrawn, then any Partnership Interests of a Holder included on such registration statement, or any other Registration Statement including such Partnership Interests registered in accordance with this Section 6(e), shall correspondingly be terminated or withdrawn, as applicable.
(f) Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the same shall be in writing and signed by the Partnership and the Holders of least two-thirds of then outstanding Registrable Securities. If a Registration Statement does not register all of the Registrable Securities pursuant to a waiver or amendment done in compliance with the previous sentence, then the number of Registrable Securities to be registered for each Holder shall be reduced pro rata among all Holders, and each Holder shall have the right to designate which of its Registrable Securities shall be omitted from such Registration Statement. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of a Holder or some Holders and that does not directly or indirectly affect the rights of other Holders may be given by such Holder or Holders of all of the Registrable Securities to which such waiver or consent relates; provided, however, that the provisions of this sentence may not be amended, modified, or supplemented except in accordance with the provisions of the first sentence of this Section 6(f).
(g) Notices. Any notice, communication, request, instruction or other document by any party to another required or permitted hereunder shall be given in writing and addressed as set forth below. Any such notice, communication, request, instruction or other document shall be deemed to have been duly made or given and the receiving party charged with notice as follows:
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(a) if personally delivered, when received; (b) if sent by facsimile, with electronic confirmation of delivery, if sent during normal business hours on a Business Day, and if not sent during normal business hours on a Business Day, on the next subsequent Business Day; (c) if mailed certified mail, return receipt requested, on the day such notice is received, and if such day is not a Business Day, on the next subsequent Business Day; or (d) if sent by overnight courier, the next Business Day after placement into the custody of the overnight courier. All notices shall be addressed as follows:
Company:
SEP Holdings III, LLC
c/o Sanchez Energy Corporation
1000 Main Street, Suite 3000
Houston, Texas 77002
Attn: President
Fax: (713) 756-2784
Partnership:
Sanchez Production Partners LP
1000 Main Street, Suite 3000
Houston, Texas 77002
Attn: Chief Financial Officer
Fax: (832) 308-3720
Holder other than the Company: such address and number set forth in such Holder’s joinder agreement.
Any party may, by written notice so delivered to the other parties, change its address for notice purposes hereunder.
(h) Successors and Assigns. All the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective parties hereto, the successors and permitted assigns of the Company and the Partnership and any Holder that is not the Company; provided, however, that, notwithstanding anything in this Agreement to the contrary, in the event of any transfer or assignment of any Registrable Securities by a Holder, an assignee or transferee thereof shall not become a “Holder” hereunder until (i) the Holder has elected to assign such Holder’s rights under this Agreement with respect to such Partnership Interests so transferred or assigned to such transferee or assignee and (ii) the Partnership is given: (a) written notice by such transferring or assigning Holder at or promptly after said transfer or assignment, stating the name and address of such transferee or assignee and identifying the Partnership Interests with respect to which the rights under this Agreement are being transferred or assigned; and (b) a joinder agreement executed by such transferee or assignee pursuant to which such Person agrees to be bound by the terms of this Agreement. This Agreement shall not run to the benefit of or be enforceable by any other Person.
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(i) Execution and Counterparts. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” or “.tif” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” or “.tif” signature page were an original thereof.
(j) Governing Law. This Agreement, other documents delivered pursuant hereto and the legal relations between the parties shall be governed by and construed and enforced in accordance with the Laws of the State of Texas, without giving effect to principles of conflicts of law that would result in the application of the Laws of another jurisdiction. The parties hereto irrevocably submit to the jurisdiction of the courts of the State of Texas and the federal courts of the United States of America located in Harris County, Texas over any dispute between the parties arising out of this Agreement or the transactions contemplated hereby, and each party irrevocably agrees that all such claims in respect of such dispute shall be heard and determined in such courts. The parties hereto irrevocably waive, to the fullest extent permitted by Law, any objection which they may now or hereafter have to the venue of any dispute arising out of this Agreement or the transactions contemplated hereby being brought in such court or any defense of inconvenient forum for the maintenance of such dispute. Each party agrees that a judgment in any such dispute may be enforced in other jurisdictions by a suit on the judgment or any other manner provided by Law. The parties hereby waive trial by jury in any action, proceeding or counterclaim brought by any party against another in any matter whatsoever arising out of or in relation to or in connection with this Agreement.
(k) Cumulative Remedies. The remedies provided herein are cumulative and not exclusive of any other remedies provided by law.
(l) Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.
(m) Headings. The headings in this Agreement are for convenience only, do not constitute a part of the Agreement and shall not be deemed to limit or affect any of the provisions hereof.
(n) Independent Nature of Holders’ Obligations and Rights. The obligations of each Holder hereunder are several and not joint with the obligations of any other Holder hereunder, and no Holder shall be responsible in any way for the performance of the obligations of any other Holder hereunder. Nothing contained herein or in any other agreement or document
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delivered at any closing, and no action taken by any Holder pursuant hereto or thereto, shall be deemed to constitute the Holders as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Holders are in any way acting in concert with respect to such obligations or the transactions contemplated by this Agreement. Each Holder shall be entitled to protect and enforce its rights, including without limitation the rights arising out of this Agreement, and it shall not be necessary for any other Holder to be joined as an additional party in any proceeding for such purpose.
(o) No Conflicting Registration Rights. The Partnership represents and warrants to each Holder that there are no registration rights with respect to any equity interest in the Partnership other than the registration rights granted hereby, those granted pursuant to that certain Registration Rights Agreement, dated August 9, 2013 between the Partnership and Sanchez Energy Partners I, LP (the “Existing Registration Rights Agreement”) and those explicitly set forth in the Partnership Agreement as of the date hereof. Without the prior written consent of the Company, the Partnership shall not grant any registration rights to third parties that (i) conflict with or impair the registration rights contained in this Agreement, (ii) have an Effectiveness Period (taking into account the date that such registration rights are exercised) that is longer than the one set forth in this Agreement, (iii) provide a greater number of demand registrations than the number set forth in Section 2(a), (iv) allows such third parties to exercise piggy-back registration rights unless the Holders, if they so request pursuant to the provisions hereof, are then able to register all of their Registrable Securities pursuant to Section 6(d) or 6(e) and (v) provide that the Partnership will pay any of the expenses of such third parties to the extent such expenses would not be paid by the Partnership pursuant to Section 4 with respect to the Registrable Securities.
(p) Termination. This Agreement shall remain in effect until the later of (i) the date upon which no Registrable Securities shall remain outstanding or (ii) the date upon which all Registrable Securities eligible to be sold pursuant to a Registration Statement shall have been sold; provided, however, that Sections 4 and 5 shall survive the termination of this Agreement.
(q) Survival of Agreement. This Agreement shall survive any merger, business combination or other similar transaction and be binding on the Partnership or its successor, as applicable.
(r) Unit Splits, Etc. All unit numbers and amounts derived from unit numbers in this Agreement are to be appropriately adjusted for any unit distribution, unit split, unit combination or other similar transaction, including as a result of any transaction referred to in Section 6(q). In the event the Partnership merges, combines with or otherwise converts to another entity by operation of law, merger, or otherwise, as a result of which units are exchanged for or converted into securities of such entity, the provisions hereof shall survive and apply to such securities, and references herein to any type or class of units shall be deemed to include such securities.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first written above.
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Exhibit 4.2
BY AND AMONG
SANCHEZ PRODUCTION PARTNERS LP
AND
THE PURCHASERS NAMED ON SCHEDULE A HERETO
This REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made and entered into as of March 31, 2015, by and among Sanchez Production Partners LP, a Delaware limited partnership (the “Partnership”), and each of the Persons set forth on Schedule A to this Agreement (each, a “Purchaser” and collectively, the “Purchasers”).
WHEREAS, this Agreement is made in connection with the closing of the issuance and sale of the Purchased Units pursuant to the Class A Preferred Unit Purchase Agreement, dated as of March 31, 2015 (the date of such closing, the “Closing Date”), by and among the Partnership and the Purchasers (the “Preferred Unit Purchase Agreement”); and
WHEREAS, the Partnership has agreed to provide the registration and other rights set forth in this Agreement for the benefit of the Purchasers pursuant to the Preferred Unit Purchase Agreement.
NOW THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each party hereto, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Definitions. Capitalized terms used herein without definition shall have the meanings given to them in the Preferred Unit Purchase Agreement. The terms set forth below are used herein as so 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, the Person in question. As used herein, the term “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. For avoidance of doubt, for purposes of this Agreement, the Partnership, on the one hand, and the Purchasers, on the other hand, shall not be considered Affiliates.
“Agreement” has the meaning specified therefor in the introductory paragraph of this Agreement.
“Amended Partnership Agreement” means the Agreement of Limited Partnership of the Partnership, as amended by Amendment No. 1 thereto on the Closing Date.
“Business Day” means any day other than a Saturday, Sunday, any federal legal holiday or day on which banking institutions in the State of New York or State of Texas are authorized or required by law or other governmental action to close.
“Closing Date” has the meaning specified therefor in the recitals of this Agreement.
“Commission” means the U.S. Securities and Exchange Commission.
“Common Unit Price” means the volume-weighted average closing price of the Common Units on the principal market on which the Common Units are then traded during the ten (10) Trading Days (as defined in the Amended Partnership Agreement) prior to the date of measurement.
“Common Units” has the meaning specified therefor in Article I of the Amended Partnership Agreement.
“Effectiveness Period” means the earlier of (i) the date as of which all Registrable Securities are sold by the Purchasers and (ii) one year following the Preferred Conversion Date.
“Exchange Act” means the Securities and Exchange Act of 1934, as amended.
“Existing Registration Rights Agreements” means (i) that certain Registration Rights Agreement dated as of August 9, 2013 between the Partnership and Sanchez Energy Partners I, LP and (ii) that certain Registration Rights Agreement dated as of March 31, 2015 between the Partnership and SEP Holdings III, LLC, in each case as amended, supplemented or modified from time to time.
“General Partner” means Sanchez Production Partners GP LLC, a Delaware limited liability company.
“Governmental Authority” means any federal, state, local or foreign government, or other governmental, regulatory or administrative authority, agency or commission or any court, tribunal, or judicial or arbitral body.
“Holder” means the record holder of any Registrable Securities. For the avoidance of doubt, in accordance with Section 3.05 of this Agreement, for purposes of determining the availability of any rights and applicability of any obligations under this Agreement, including, calculating the amount of Registrable Securities held by a Holder, a Holder’s Registrable Securities shall be aggregated together with all Registrable Securities held by other Holders who are Affiliates of such Holder.
“In-Kind LD Amount” has the meaning specified therefor in Section 2.01(b) of this Agreement.
“Included Registrable Securities” has the meaning specified therefor in Section 2.02(a) of this Agreement.
“Launch” has the meaning specified therefor in Section 2.04 of this Agreement.
“Law” means any statute, law, ordinance, regulation, rule, order, code, governmental restriction, decree, injunction or other requirement of law, or any judicial or administrative interpretation thereof, of any Governmental Authority.
“LD Period” has the meaning specified therefor in Section 2.01(b) of this Agreement.
“LD Termination Date” has the meaning specified therefor in Section 2.01(b) of this Agreement.
“Liquidated Damages” has the meaning specified therefor in Section 2.01(b) of this Agreement.
“Liquidated Damages Multiplier” means the product of the Common Unit Price times the number of Common Units (which in the case of Common Units subject to issuance upon conversion of the Preferred Units shall be the number of Common Units issuable upon conversion of the Preferred Units at the date of determination) held by such Holder that may not be sold without restriction and without the need for current public information pursuant to any section of Rule 144 (or any successor or similar provision adopted by the Commission then in effect) under the Securities Act.
“Losses” has the meaning specified therefor in Section 2.09(a) of this Agreement.
“Managing Underwriter” means, with respect to any Underwritten Offering, the book-running lead manager of such Underwritten Offering.
“NYSE MKT” means the NYSE MKT LLC.
“Opt-Out Notice” has the meaning specified therefor in Section 2.02(a) of this Agreement.
“Parity Securities” has the meaning specified therefor in Section 2.02(b) of this Agreement.
“Partnership” has the meaning specified therefor in the introductory paragraph of this Agreement.
“Person” means an individual or a corporation, limited liability company, partnership, joint venture, trust, unincorporated organization, association, government agency or political subdivision thereof or other entity.
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“Piggyback Threshold Amount” means $500,000.
“PIK Units” has the meaning specified therefor in Article I of the Amended Partnership Agreement.
“Post-Launch Withdrawing Selling Holders” has the meaning specified therefor in Section 2.04 of this Agreement.
“Preferred Conversion Date” has the meaning specified therefor in Article I of the Amended Partnership Agreement and means the earliest of such dates to occur.
“Preferred Units” means Class A Preferred Units (including PIK Units) representing limited partner interests of the Partnership, as described in the Amended Partnership Agreement and issued pursuant to the Preferred Unit Purchase Agreement or the Amended Partnership Agreement, as the case may be.
“Preferred Unit Purchase Agreement” has the meaning specified therefor in the recitals of this Agreement.
“Purchaser” and “Purchasers” have the meanings specified therefor in the introductory paragraph of this Agreement.
“Registrable Securities” means (i) the Common Units issued or issuable upon the conversion of the Preferred Units (including PIK Units) acquired by the Purchasers pursuant to the Preferred Unit Purchase Agreement or, in the case of PIK Units, pursuant to the Amended Partnership Agreement, and (ii) any Common Units issued as Liquidated Damages pursuant to Section 2.01(b) of this Agreement, and includes any type of interest issued to the Holder as a result of Section 3.04 of this Agreement.
“Registrable Securities Amount” means the calculation based on the product of the Common Unit Price times the number of Registrable Securities.
“Registration Expenses” has the meaning specified therefor in Section 2.08(b) of this Agreement.
“Securities Act” means the Securities Act of 1933, as amended.
“Selling Expenses” has the meaning specified therefor in Section 2.08(b) of this Agreement.
“Selling Holder” means a Holder who is selling Registrable Securities pursuant to a registration statement.
“Selling Holder Indemnified Persons” has the meaning specified therefor in Section 2.09(a) of this Agreement.
“Shelf Registration Statement” has the meaning specified therefor in Section 2.01(a) of this Agreement.
“Target Effective Date” has the meaning specified therefor in Section 2.01(a) of this Agreement.
“Underwritten Offering” means an offering (including an offering pursuant to a Shelf Registration Statement) in which Common Units are sold to one or more underwriters on a firm commitment basis for reoffering to the public or an offering that is a “bought deal” with one or more investment banks.
“Underwritten Offering Notice” has the meaning specified therefor in Section 2.04 of this Agreement.
Section 1.02 Registrable Securities. Any Registrable Security will cease to be a Registrable Security (a) when a registration statement covering such Registrable Security becomes or has been declared effective by the Commission and such Registrable Security has been sold or disposed of pursuant to such effective registration statement; (b) when such Registrable Security has been sold or disposed of (excluding transfers or assignments by a Holder to an Affiliate) pursuant to Rule 144 (or any successor or similar provision adopted by the Commission then in effect) under the Securities Act under circumstances in which all of the applicable conditions of such Rule (then in effect) are met; (c) when such Registrable Security is held by the Partnership or one of its subsidiaries or Affiliates; provided, however, that none of the Purchasers or their Affiliates shall be considered an Affiliate of the Partnership; or (d) when such Registrable Security has been sold or disposed of in a private transaction in which the transferor’s rights under this Agreement are not assigned to the transferee of such securities pursuant to Section 2.11 hereof.
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ARTICLE II
REGISTRATION RIGHTS
Section 2.01 Registration.
(a) Effectiveness Deadline. Promptly following the date of this Agreement, but in no event later than 120 calendar days following the date of this Agreement, the Partnership shall prepare and file a registration statement under the Securities Act to permit the public resale of all Registrable Securities to be issued upon conversion of the Preferred Units (including PIK Units reasonably expected to be issued by the Partnership to the Holders of Registrable Securities) pursuant to the provisions of the Amended Partnership Agreement from time to time as permitted by Rule 415 (or any successor or similar provision adopted by the Commission then in effect) under the Securities Act, on the terms and conditions specified in this Section 2.01 (a “Shelf Registration Statement”). A Shelf Registration Statement filed pursuant to this Section 2.01 shall be on such registration form of the Commission as is permissible under the Securities Act. The Partnership shall use commercially reasonable efforts to cause the Shelf Registration Statement filed pursuant to this Section 2.01(a) to become or be declared effective as soon as practicable thereafter, but in no event later than 180 calendar days after the initial filing date of such Shelf Registration Statement (the “Target Effective Date”). The Shelf Registration Statement shall provide for the resale pursuant to any method or combination of methods legally available to, and requested by, the Holders of Registrable Securities covered by such Shelf Registration Statement, including by way of an Underwritten Offering. During the Effectiveness Period, the Partnership shall use commercially reasonable efforts to cause such Shelf Registration Statement filed pursuant to this Section 2.01(a) to remain effective, and to be supplemented and amended to the extent necessary to ensure that such Shelf Registration Statement is available or, if not available, that another registration statement is available for the resale of the Registrable Securities until all Registrable Securities have ceased to be Registrable Securities.
When effective, a Shelf Registration Statement (including the 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 Shelf Registration Statement, in the light of the circumstances under which a statement is made).
(b) Failure to Go Effective. If a Shelf Registration Statement required by Section 2.01(a) is not declared effective by the Target Effective Date, then each Holder shall be entitled to a payment (with respect to the Registrable Securities of each such Holder), as liquidated damages and not as a penalty, of 0.25% of the Liquidated Damages Multiplier per 30-day period, that shall accrue daily, for the first 60 days following such Target Effective Date, increasing by an additional 0.25% of the Liquidated Damages Multiplier per 30-day period, that shall accrue daily, for each subsequent 60 days (i.e., 0.5% for 61-120 days, 0.75% for 121-180 days and 1.0% thereafter), up to a maximum of 1.00% of the Liquidated Damages Multiplier per 30-day period (the “Liquidated Damages”). The Liquidated Damages payable pursuant to the immediately preceding sentence shall be payable within ten (10) Business Days after the end of each such 30-day period. Any Liquidated Damages shall be paid to each Holder in immediately available funds; provided, however, that if the Partnership certifies that it is unable to pay Liquidated Damages in cash because such payment would result in a breach under a credit facility or other debt instrument filed as an exhibit to the Partnership’s periodic reports filed with the Commission, then the Partnership may pay such Liquidated Damages using as much cash as permitted without breaching any such credit facility or other debt instrument and shall pay the balance of such Liquidated Damages (the “In-Kind LD Amount”) in kind in the form of the issuance of additional Common Units. Upon any issuance of Common Units as Liquidated Damages, the Partnership shall promptly (i) prepare and file an amendment to such Shelf Registration Statement prior to its effectiveness adding such Common Units to such Shelf Registration Statement as additional Registrable Securities and (ii) prepare and file a supplemental listing application with the NYSE MKT (or such other market on which the Registrable Securities are then listed and traded) to list such additional Common Units. The determination of the number of Common Units to be issued as Liquidated Damages shall be equal to the In-Kind LD Amount divided by the volume weighted average closing price of the Common Units (as reported on the NYSE MKT or the principal securities market on which the Common Units are then traded) for the consecutive ten (10) trading day period ending on the close of trading on the trading day immediately preceding the date on which the Liquidated Damages payment is due, less a discount to such average closing price of 2.00%. The accrual of Liquidated Damages to a Holder shall cease (a “LD Termination Date,” and, each such period beginning on a Target Effective Date and ending on a LD Termination Date being, a “LD Period”) at the earlier of (i) such Shelf Registration Statement
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becoming effective, (ii) when such Holder no longer holds Registrable Securities and (iii) one year following the earlier to occur of the Partnership Optional Conversion Date (as defined in the Amended Partnership Agreement) or the Mandatory Conversion Date (as defined in the Amended Partnership Agreement). Any amount of Liquidated Damages shall be prorated for any period of less than 30 calendar days accruing during a LD Period. If the Partnership is unable to cause a Shelf Registration Statement to go effective by the Target Effective Date as a result of an acquisition, merger, reorganization, disposition or other similar transaction, then the Partnership may request a waiver of the Liquidated Damages, and each Holder may individually grant or withhold its consent to such request in its discretion. For the avoidance of doubt, nothing in this Section 2.01(b) shall relieve the Partnership from its obligations under Section 2.01(a).
Section 2.02 Piggyback Rights.
(a) Participation. If the Partnership proposes to file during the Effectiveness Period (i) a shelf registration statement other than a Shelf Registration Statement contemplated by Section 2.01(a), (ii) a prospectus supplement to an effective shelf registration statement, other than a Shelf Registration Statement contemplated by Section 2.01(a) and Holders may be included in such Underwritten Offering without the filing of a post-effective amendment thereto, or (iii) a registration statement, other than a shelf registration statement, in each case, for the sale of Common Units in an Underwritten Offering for its own account or that of another Person, or both, then as soon as practicable following the selection of the Managing Underwriter for such Underwritten Offering, the Partnership shall give notice (including, but not limited to, notification by electronic mail) of such Underwritten Offering to each Holder (together with its Affiliates) holding at least the Piggyback Threshold Amount of the then-outstanding Registrable Securities (calculated based on the Common Unit Price) and such notice shall offer such Holders the opportunity to include in such Underwritten Offering such number of Registrable Securities (the “Included Registrable Securities”) as each such Holder may request in writing; provided, however, that (A) the Partnership shall not be required to provide such opportunity to any such Holder that does not offer a minimum of the Piggyback Threshold Amount of Registrable Securities (based on the Common Unit Price), and (B) if the Partnership has been advised by the Managing Underwriter that the inclusion of Registrable Securities for sale for the benefit of the Holders will have an adverse effect on the amount, price, timing or distribution of the Common Units in the Underwritten Offering, then (i) if no Registrable Securities can be included in the Underwritten Offering in the opinion of the Managing Underwriter, the Partnership shall not be required to offer such opportunity to the Holders or (ii) if any Registrable Securities can be included in the Underwritten Offering in the opinion of the Managing Underwriter, then the amount of Registrable Securities to be offered for the accounts of Holders shall be determined based on the provisions of Section 2.02(b). Any notice required to be provided pursuant to this Section 2.02(a) to Holders shall be provided on a Business Day and receipt of such notice shall be confirmed by the Holder. Each such Holder shall then have two (2) Business Days (or one (1) Business Day in connection with any overnight or bought Underwritten Offering) after notice has been delivered to request in writing the inclusion of Registrable Securities in the Underwritten Offering. 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. If, at any time after giving written notice of its intention to undertake an Underwritten Offering and prior to the closing of such Underwritten Offering, the Partnership shall determine for any reason not to undertake or to delay such Underwritten Offering, the Partnership may, at its election, give written notice of such determination to the Selling Holders and, (x) in the case of a determination not to undertake such Underwritten Offering, shall be relieved of its obligation to sell any Included Registrable Securities in connection with such terminated Underwritten Offering, and (y) in the case of a determination to delay such Underwritten Offering, shall be permitted to delay offering any Included Registrable Securities as part of such Underwritten Offering for the same period as the delay in the Underwritten Offering. Any Selling Holder shall have the right to withdraw such Selling Holder’s request for inclusion of such Selling Holder’s Registrable Securities in such Underwritten Offering by giving written notice to the Partnership of such withdrawal at or prior to the time of pricing of such Underwritten Offering. Any Holder may deliver written notice (an “Opt-Out Notice”) to the Partnership requesting that such Holder not receive notice from the Partnership of any proposed Underwritten Offering; provided, however, that such Holder may later revoke any such Opt-Out Notice in writing. Following receipt of an Opt-Out Notice from a Holder (unless subsequently revoked), the Partnership shall not be required to deliver any notice to such Holder pursuant to this Section 2.02(a) and such Holder shall no longer be entitled to participate in Underwritten Offerings by the Partnership pursuant to this Section 2.02(a). Notwithstanding anything in this Agreement to the contrary, Holders under this Agreement shall not be entitled to participate in a demand registration or a “shelf takedown” with respect to the Existing Registration Rights Agreements in connection with registrations or offerings by “Holders” under either of the Existing Registration
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Rights Agreements or the registration statements, prospectuses and prospectus supplements filed in connection therewith.
(b) Priority. Other than situations outlined in Section 2.01 of this Agreement, if the Managing Underwriter of any proposed Underwritten Offering of Common Units included in an Underwritten Offering involving Included Registrable Securities advises the Partnership, or the Partnership reasonably determines, that the total amount of Common Units that the Selling Holders and any other Persons intend to include in such offering exceeds the number that can be sold in such offering without being likely to have an adverse effect on the amount, price, timing or distribution of the Common Units offered or the market for the Common Units, then the Common Units to be included in such Underwritten Offering shall include the number of Registrable Securities that such Managing Underwriter advises the Partnership, or the Partnership reasonably determines, can be sold without having such adverse effect, with such number to be allocated (i) first, to the Partnership or other party requesting such registration, including “Holders” under either of the Existing Registration Rights Agreements, (ii) second, to the “Holders” under the Existing Registration Rights Agreements, (iii) third, pro rata among the Selling Holders who have requested participation in such Underwritten Offering, based, for each Selling Holder, on the percentage derived by dividing (x) the number of Registrable Securities proposed to be sold by such Selling Holder by (y) the aggregate number of Registrable Securities proposed to be sold by all Selling Holders, and (iii) fourth, to any other holder of securities of the Partnership having rights of registration that are neither expressly senior nor subordinated to the Holders in respect of the Registrable Securities (the “Parity Securities”), allocated among such holders in such manner as they may agree.
(c) Termination of Piggyback Registration Rights. Each Holder’s rights under Section 2.02 shall terminate upon such Holder (together with its Affiliates) ceasing to hold at least the Piggyback Threshold Amount of Registrable Securities (calculated based on the Common Unit Price).
Section 2.03 Delay Rights.
Notwithstanding anything to the contrary contained herein, the Partnership may, upon written notice to any Selling Holder whose Registrable Securities are included in a Shelf Registration Statement or other registration statement contemplated by this Agreement, suspend such Selling Holder’s use of any prospectus which is a part of such Shelf Registration Statement or other registration statement (in which event the Selling Holder shall discontinue sales of the Registrable Securities pursuant to such Shelf Registration Statement or other registration statement contemplated by this Agreement but may settle any previously made sales of Registrable Securities) if (i) the Partnership is pursuing an acquisition, merger, reorganization, disposition or other similar transaction and the Partnership determines in good faith that the Partnership’s ability to pursue or consummate such a transaction would be materially adversely affected by any required disclosure of such transaction in such Shelf Registration Statement or other registration statement or (ii) the Partnership has experienced some other material non-public event the disclosure of which at such time, in the good faith judgment of the Partnership, would materially adversely affect the Partnership; provided, however, that in no event shall the Selling Holders be suspended from selling Registrable Securities pursuant to such Shelf Registration Statement or other registration statement for a period that exceeds an aggregate of 60 calendar days in any 180-calendar day period or 105 calendar days in any 365-calendar day period, in each case, exclusive of days covered by any lock-up agreement executed by a Selling Holder in connection with any Underwritten Offering. Upon disclosure of such information or the termination of the condition described above, the Partnership shall provide prompt notice to the Selling Holders whose Registrable Securities are included in such Shelf Registration Statement and shall promptly terminate any suspension of sales it has put into effect and shall take such other reasonable actions to permit registered sales of Registrable Securities as contemplated in this Agreement.
If (i) the Selling Holders shall be prohibited from selling their Registrable Securities under a Shelf Registration Statement or other registration statement contemplated by this Agreement as a result of a suspension pursuant to the immediately preceding paragraph in excess of the periods permitted therein or (ii) a Shelf Registration Statement or other registration statement contemplated by this Agreement is filed and declared effective but, during the Effectiveness Period, shall thereafter cease to be effective or fail to be usable for its intended purpose without being succeeded within 20 Business Days by a post-effective amendment thereto, a supplement to the prospectus or a report filed with the Commission pursuant to Section 13(a), 13(c), 14 or l5(d) of the Exchange Act, then, until the suspension is lifted or a post-effective amendment, supplement or report is filed with the Commission, but not including any day on which a suspension is lifted or such amendment, supplement or report is filed and
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declared effective, if applicable, the Partnership shall pay the Selling Holders an amount equal to the Liquidated Damages, following the earlier of (x) the date on which the suspension period exceeded the permitted period and (y) the twenty-first (21st) Business Day after such Shelf Registration Statement or other registration statement contemplated by this Agreement ceased to be effective or failed to be useable for its intended purposes, as liquidated damages and not as a penalty (for purposes of calculating Liquidated Damages, the date in (x) or (y) above shall be deemed the “90th day,” as used in the definition of Liquidated Damages). For purposes of this paragraph, a suspension shall be deemed lifted with respect to a Selling Holder on the date that notice that the suspension has been terminated is delivered to such Selling Holder. Liquidated Damages shall cease to accrue pursuant to this paragraph upon the earlier of (i) a suspension being deemed lifted and (ii) when such Selling Holder no longer holds Registrable Securities included in such Shelf Registration Statement.
Section 2.04 Underwritten Offerings.
(a) General Procedures. In the event that one or more Holders elects to include other than pursuant to Section 2.02 of this Agreement, at least an aggregate of $4,000,000 of Registrable Securities (calculated based on the Registrable Securities Amount) under a Shelf Registration Statement pursuant to an Underwritten Offering, the Partnership shall, upon request by such Holders (such request, an “Underwritten Offering Notice”), retain underwriters in order to permit such Holders to effect such sale through an Underwritten Offering; provided, however, that the Holders shall have the option and right, to require the Partnership to effect not more than two (2) Underwritten Offerings, pursuant to and subject to the conditions of this Section 2.04 of this Agreement. Upon delivery of such Underwritten Offering Notice to the Partnership, the Partnership shall as soon as practicable (but in no event later than one (1) calendar day following the date of delivery of the Underwritten Offering Notice to the Partnership) deliver notice of such Underwritten Offering Notice to all other Holders who shall then have two (2) calendar days from the date that such notice is given to them to notify the Partnership in writing of the number of Registrable Securities held by such Holder that they want to be included in such Underwritten Offering. For the avoidance of doubt, any Holders notified about an Underwritten Offering by the Partnership after the Partnership has received the corresponding Underwritten Offering Notice may participate in such Underwritten Offering, but shall not count toward the $4,000,000 of Registrable Securities necessary to request an Underwritten Offering pursuant to an Underwritten Offering Notice. In connection with any Underwritten Offering under this Agreement, the Holders of a majority of the Registrable Securities being disposed of pursuant to the Underwritten Offering shall be entitled to select the Managing Underwriter or Underwriters for such Underwritten Offering, subject to the reasonable consent of the Partnership. In connection with an Underwritten Offering contemplated by this Agreement in which a Selling Holder participates, each Selling Holder and the Partnership shall be obligated to enter into an underwriting agreement that contains such representations, covenants, indemnities and other rights and obligations as are customary in underwriting agreements for firm commitment offerings of securities. No Selling Holder may participate in such Underwritten Offering unless such Selling Holder agrees to sell its Registrable Securities on the basis provided in such underwriting agreement and completes and executes all questionnaires, powers of attorney, indemnities and other documents reasonably required under the terms of such underwriting agreement. Each Selling Holder may, at its option, require that any or all of the representations and warranties by, and the other agreements on the part of, the Partnership to and for the benefit of such underwriters also be made to and for such Selling Holder’s benefit and that any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement also be conditions precedent to its obligations. No Selling Holder shall be required to make any representations or warranties to or agreements with the Partnership or the underwriters other than representations, warranties or agreements regarding such Selling Holder, its authority to enter into such underwriting agreement and to sell, and its ownership of, the securities whose offer and resale will be registered, on its behalf, its intended method of distribution and any other representation required by Law. If any Selling Holder disapproves of the terms of an underwriting, such Selling Holder may elect to withdraw therefrom by notice to the Partnership and the Managing Underwriter; provided, however, that any such withdrawal must be made no later than the time of pricing of such Underwritten Offering. If all Selling Holders withdraw from an Underwritten Offering prior to the pricing of such Underwritten Offering, the events will not be considered an Underwritten Offering and will not decrease the number of available Underwritten Offerings the Selling Holders have the right and option to request under this Section 2.04. No such withdrawal or abandonment shall affect the Partnership’s obligation to pay Registration Expenses; provided, however, that if (i) certain Selling Holders withdraw from an Underwritten Offering after the public announcement at launch (the “Launch”) of such Underwritten Offering (such Selling Holders, the “Post-Launch Withdrawing Selling Holders”), and (ii) all Selling Holders withdraw from such Underwritten Offering prior to pricing, then the Post-Launch Withdrawing Selling Holders shall pay for all
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reasonable Registration Expenses incurred by the Partnership during the period from the Launch of such Underwritten Offering until the time all Selling Holders withdraw from such Underwritten Offering.
Section 2.05 Sale Procedures.
In connection with its obligations under this Article II, the Partnership will, as expeditiously as possible:
(a) use commercially reasonable efforts to prepare and file with the Commission such amendments and supplements to a Shelf Registration Statement and the prospectus used in connection therewith as may be necessary to keep such Shelf Registration Statement effective for the Effectiveness Period and as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities covered by such Shelf Registration Statement;
(b) if a prospectus supplement will be used in connection with the marketing of an Underwritten Offering from a Shelf Registration Statement and the Managing Underwriter at any time shall notify the Partnership in writing that, in the sole judgment of such Managing Underwriter, inclusion of detailed information to be used in such prospectus supplement is of material importance to the success of the Underwritten Offering of such Registrable Securities, the Partnership shall use commercially reasonable efforts to include such information in such prospectus supplement;
(c) furnish to each Selling Holder (i) as far in advance as reasonably practicable before filing a Shelf Registration Statement or any other registration statement contemplated by this Agreement or any supplement or amendment thereto, upon request, copies of reasonably complete drafts of all such documents proposed to be filed (including exhibits and each document incorporated by reference therein to the extent then required by the rules and regulations of the Commission), and provide each such Selling Holder the opportunity to object to any information pertaining to such Selling Holder and its plan of distribution that is contained therein and make the corrections reasonably requested by such Selling Holder with respect to such information prior to filing a Shelf Registration Statement or such other registration statement or supplement or amendment thereto, and (ii) such number of copies of such Shelf Registration Statement or such other registration statement and the prospectus included therein and any supplements and amendments thereto as such Selling Holder may reasonably request in order to facilitate the public sale or other disposition of the Registrable Securities covered by such Shelf Registration Statement or other registration statement;
(d) if applicable, use commercially reasonable efforts to register or qualify the Registrable Securities covered by a Shelf Registration Statement or any other registration statement contemplated by this Agreement under the securities or blue sky laws of such jurisdictions as the Selling Holders or, in the case of an Underwritten Offering, the Managing Underwriter, shall reasonably request; provided, however, that the Partnership will not be required to qualify generally to transact business in any jurisdiction where it is not then required to so qualify or to take any action that would subject it to general service of process in any such jurisdiction where it is not then so subject;
(e) promptly notify each Selling Holder, at any time when a prospectus relating thereto is required to be delivered by any of them under the Securities Act, of (i) the filing of a Shelf Registration Statement or any other registration statement contemplated by this Agreement or any prospectus or prospectus supplement to be used in connection therewith, or any amendment or supplement thereto, and, with respect to such Shelf Registration Statement or any other registration statement or any post-effective amendment thereto, when the same has become effective; and (ii) the receipt of any written comments from the Commission with respect to any filing referred to in clause (i) and any written request by the Commission for amendments or supplements to such Shelf Registration Statement or any other registration statement or any prospectus or prospectus supplement thereto;
(f) immediately notify each Selling Holder, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of (i) the happening of any event as a result of which the prospectus or prospectus supplement contained in a Shelf Registration Statement or any other registration statement contemplated by this Agreement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading (in the case of any prospectus contained therein, in the light of the circumstances under which a statement is made); (ii) the issuance or express threat of issuance by the Commission of any stop order suspending the effectiveness of such Shelf Registration Statement or any other registration statement contemplated by this Agreement, or the initiation of any proceedings for that purpose; or (iii) the receipt by the Partnership of any notification with respect to the suspension
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of the qualification of any Registrable Securities for sale under the applicable securities or blue sky laws of any jurisdiction. Following the provision of such notice, the Partnership agrees to as promptly as practicable amend or supplement the prospectus or prospectus supplement or take other appropriate action so that the prospectus or prospectus supplement does not include 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 light of the circumstances then existing and to take such other commercially reasonable action as is necessary to remove a stop order, suspension, threat thereof or proceedings related thereto;
(g) upon request and subject to appropriate confidentiality obligations, furnish to each Selling Holder copies of any and all transmittal letters or other correspondence with the Commission or any other governmental agency or self-regulatory body or other body having jurisdiction (including any domestic or foreign securities exchange) relating to such offering of Registrable Securities;
(h) in the case of an Underwritten Offering, use commercially reasonable efforts to furnish upon request, (i) an opinion of counsel for the Partnership dated the date of the closing under the underwriting agreement and (ii) a “cold comfort” letter, dated the pricing date of such Underwritten Offering and a letter of like kind dated the date of the closing under the underwriting agreement, in each case, signed by the independent public accountants who have certified the Partnership’s financial statements included or incorporated by reference into the applicable registration statement, and each of the opinion and the “cold comfort” letter shall be in customary form and covering substantially the same matters with respect to such registration statement (and the prospectus and any prospectus supplement included therein) as have been customarily covered in opinions of issuer’s counsel and in accountants’ letters delivered to the underwriters in Underwritten Offerings of securities by the Partnership and such other matters as such underwriters and Selling Holders may reasonably request;
(i) otherwise use commercially reasonable efforts to comply with all applicable rules and regulations of the Commission, and make available to its security holders, as soon as reasonably practicable, an earnings statement, covering a period of twelve months beginning within three months after the effective date of such Shelf Registration Statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 promulgated thereunder;
(j) make available to the appropriate representatives of the Managing Underwriter and Selling Holders access to such information and Partnership and General Partner personnel as is reasonable and customary to enable such parties to establish a due diligence defense under the Securities Act; provided, that the Partnership need not disclose any non-public information to any such representative unless and until such representative has entered into a confidentiality agreement with the Partnership;
(k) use commercially reasonable efforts to cause all such Registrable Securities registered pursuant to this Agreement to be listed on each securities exchange or nationally recognized quotation system on which the Common Units issued by the Partnership are then listed;
(l) use commercially reasonable efforts to cause the Registrable Securities to be registered with or approved by such other governmental agencies or authorities as may be necessary by virtue of the business and operations of the Partnership to enable the Selling Holders to consummate the disposition of such Registrable Securities;
(m) provide a transfer agent and registrar for all Registrable Securities covered by such registration statement not later than the effective date of such registration statement;
(n) enter into customary agreements and take such other actions as are reasonably requested by the Selling Holders or the underwriters, if any, in order to expedite or facilitate the disposition of such Registrable Securities (including, making appropriate officers of the General Partner available to participate in any “road show” presentations before analysts, and other customary marketing activities (including one-on-one meetings with prospective purchasers of the Registrable Securities)), provided, however, that in the event the Partnership, using commercially reasonable efforts, is unable to make such appropriate officers of the General Partner available to participate in connection with any “road show” presentations and other customary marketing activities (whether in person or otherwise), the Partnership shall make such appropriate officers available to participate via conference call or other means of communication in connection with no more than one (1) “road show” presentation per Underwritten Offering); and
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(o) if requested by a Selling Holder, (i) incorporate in a prospectus supplement or post-effective amendment such information as such Selling Holder reasonably requests to be included therein relating to the sale and distribution of Registrable Securities, including information with respect to the number of Registrable Securities being offered or sold, the purchase price being paid therefor and any other terms of the offering of the Registrable Securities to be sold in such offering and (ii) make all required filings of such prospectus supplement or post-effective amendment after being notified of the matters to be incorporated in such prospectus supplement or post-effective amendment.
The Partnership will not name a Holder as an underwriter as defined in Section 2(a)(11) of the Securities Act in any Shelf Registration Statement without such Holder’s consent. If the staff of the Commission requires the Partnership to name any Holder as an underwriter as defined in Section 2(a)(11) of the Securities Act, and such Holder does not consent thereto, then such Holder’s Registrable Securities shall not be included on such Shelf Registration Statement, such Holder shall no longer be entitled to receive Liquidated Damages under this Agreement with respect to such Holder’s Registrable Securities, and the Partnership shall have no further obligations hereunder with respect to Registrable Securities held by such Holder, unless such Holder has not had an opportunity to conduct customary underwriter’s due diligence (including receipt of comfort letters and opinions of counsel) with respect to the Partnership at the time such Holder’s consent is sought.
Each Selling Holder, upon receipt of notice from the Partnership of the happening of any event of the kind described in subsection (f) of this Section 2.05, shall forthwith discontinue offers and sales of the Registrable Securities by means of a prospectus or prospectus supplement until such Selling Holder’s receipt of the copies of the supplemented or amended prospectus contemplated by subsection (f) of this Section 2.05 or until it is advised in writing by the Partnership that the use of the prospectus may be resumed and has received copies of any additional or supplemental filings incorporated by reference in the prospectus, and, if so directed by the Partnership, such Selling Holder will, or will request the Managing Underwriter, if any, to deliver to the Partnership (at the Partnership’s expense) all copies in their possession or control, other than permanent file copies then in such Selling Holder’s possession, of the prospectus covering such Registrable Securities current at the time of receipt of such notice.
Section 2.06 Cooperation by Holders.
The Partnership shall have no obligation to include Registrable Securities of a Holder in a Shelf Registration Statement or in an Underwritten Offering pursuant to Section 2.02(a) who has failed to timely furnish such information that the Partnership determines, after consultation with its counsel, is reasonably required in order for the registration statement or prospectus supplement, as applicable, to comply with the Securities Act.
Section 2.07 Restrictions on Public Sale by Holders of Registrable Securities.
Each Holder of Registrable Securities agrees to enter into a customary letter agreement with underwriters providing such Holder will not effect any public sale or distribution of Registrable Securities during the 60 calendar day period beginning on the date of a prospectus or prospectus supplement filed with the Commission with respect to the pricing of any Underwritten Offering, provided that (i) the duration of the foregoing restrictions shall be no longer than the duration of the shortest restriction imposed by the underwriters on the Partnership or the officers, directors or any other Affiliate of the Partnership or the General Partner on whom a restriction is imposed and (ii) the restrictions set forth in this Section 2.07 shall not apply to any Registrable Securities that are included in such Underwritten Offering by such Holder. In addition, this Section 2.07 shall not apply to any Holder that is not entitled to participate in such Underwritten Offering, whether because such Holder delivered an Opt-Out Notice prior to receiving notice of the Underwritten Offering or because such Holder (together with its Affiliates) holds less than the Piggyback Threshold Amount of the then-outstanding Registrable Securities (calculated based on the product of the Common Unit Price times the number of Registrable Securities) or because the Registrable Securities held by such Holder may be disposed of without restriction pursuant to any section of Rule 144 (or any successor or similar provision adopted by the Commission then in effect) under the Securities Act.
Section 2.08 Expenses.
(a) Expenses. The Partnership will pay all reasonable Registration Expenses as determined in good faith, including, in the case of an Underwritten Offering, whether or not any sale is made pursuant to such Underwritten Offering. Each Selling Holder shall pay its pro rata share of all Selling Expenses in connection with any sale of its
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Registrable Securities hereunder. For the avoidance of doubt, each Selling Holder’s pro rata allocation of Selling Expenses shall be the percentage derived by dividing (i) the number of Registrable Securities sold by such Selling Holder in connection with such sale by (ii) the aggregate number of Registrable Securities sold by all Selling Holders in connection with such sale. In addition, except as otherwise provided in Sections 2.08 and 2.09 hereof, the Partnership shall not be responsible for legal fees incurred by Holders in connection with the exercise of such Holders’ rights hereunder.
(b) Certain Definitions. “Registration Expenses” means all expenses incident to the Partnership’s performance under or compliance with this Agreement to effect the registration of Registrable Securities on a Shelf Registration Statement pursuant to Section 2.01(a) or an Underwritten Offering covered under this Agreement, and the disposition of such Registrable Securities, including, without limitation, all registration, filing, securities exchange listing and NYSE MKT fees, all registration, filing, qualification and other fees and expenses of complying with securities or blue sky laws, fees of the Financial Industry Regulatory Authority, Inc., fees of transfer agents and registrars, all word processing, duplicating and printing expenses, any transfer taxes, the fees and disbursements of counsel and independent public accountants for the Partnership, including the expenses of any special audits or “cold comfort” letters required by or incident to such performance and compliance, and, only if the Existing Registration Rights Agreements have been amended to provide for the same, the reasonable fees and disbursements of one counsel for the Selling Holders participating in such Shelf Registration Statement or Underwritten Offering to effect the disposition of such Registrable Securities, selected by the Holders of a majority of the Registrable Securities initially being registered under such Shelf Registration Statement or other registration statement as contemplated by this Agreement, subject to the reasonable consent of the Partnership. “Selling Expenses” means all underwriting discounts and selling commissions or similar fees or arrangements allocable to the sale of the Registrable Securities, and fees and disbursements of counsel to the Selling Holders, except for the reasonable fees and disbursements of counsel for the Selling Holders required to be paid by the Partnership pursuant to Sections 2.08 and 2.09, solely to the extent such fees and disbursements of counsel are required to be paid by the Partnership under the Existing Registration Rights Agreements.
Section 2.09 Indemnification.
(a) By the Partnership. In the event of a registration of any Registrable Securities under the Securities Act pursuant to this Agreement, the Partnership will indemnify and hold harmless each Selling Holder thereunder, its directors, officers, managers, employees and agents and each Person, if any, who controls such Selling Holder within the meaning of the Securities Act and the Exchange Act, and its directors, officers, employees or agents (collectively, the “Selling Holder Indemnified Persons”), against any losses, claims, damages, expenses or liabilities (including reasonable attorneys’ fees and expenses) (collectively, “Losses”), joint or several, to which such Selling Holder Indemnified Person may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such Losses (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact (in the case of any prospectus, in light of the circumstances under which such statement is made) contained in (which, for the avoidance of doubt, includes documents incorporated by reference in) such Shelf Registration Statement or any other registration statement contemplated by this Agreement, any preliminary prospectus, prospectus supplement or final prospectus contained therein, or any amendment or supplement thereof, or any free writing prospectus relating thereto or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a prospectus, in light of the circumstances under which they were made) not misleading, and will reimburse each such Selling Holder Indemnified Person for any legal or other expenses reasonably incurred by them in connection with investigating, defending or resolving any such Loss or actions or proceedings; provided, however, that the Partnership will not be liable in any such case if and to the extent that any such Loss arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with information furnished by such Selling Holder Indemnified Person in writing specifically for use in such Shelf Registration Statement or such other registration statement, or prospectus supplement, as applicable. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Selling Holder Indemnified Person, and shall survive the transfer of such securities by such Selling Holder.
(b) By Each Selling Holder. Each Selling Holder agrees severally and not jointly to indemnify and hold harmless the Partnership, the General Partner, their respective directors, officers, employees and agents and each Person, if any, who controls the Partnership within the meaning of the Securities Act or of the Exchange Act, and its
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directors, officers, employees and agents, to the same extent as the foregoing indemnity from the Partnership to the Selling Holders, but only with respect to information regarding such Selling Holder furnished in writing by or on behalf of such Selling Holder expressly for inclusion in such Shelf Registration Statement or any other registration statement contemplated by this Agreement, any preliminary prospectus, prospectus supplement or final prospectus contained therein, or any amendment or supplement thereof, or any free writing prospectus relating thereto; provided, however, that the liability of each Selling Holder shall not be greater in amount than the dollar amount of the proceeds (net of any Selling Expenses) received by such Selling Holder from the sale of the Registrable Securities giving rise to such indemnification.
(c) Notice. Promptly after receipt by an indemnified party hereunder of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party hereunder, notify the indemnifying party in writing thereof, but the omission so to notify the indemnifying party shall not relieve it from any liability that it may have to any indemnified party other than under this Section 2.09. In any action brought against any indemnified party, it shall notify the indemnifying party of the commencement thereof. The indemnifying party shall be entitled to participate in and, to the extent it shall wish, to assume and undertake the defense thereof with counsel reasonably satisfactory to such indemnified party and, after notice from the indemnifying party to such indemnified party of its election so to assume and undertake the defense thereof, the indemnifying party shall not be liable to such indemnified party under this Section 2.09 for any legal expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation and of liaison with counsel so selected; provided, however, that (i) if the indemnifying party has failed to assume the defense or employ counsel reasonably acceptable to the indemnified party or (ii) if the defendants in any such action include both the indemnified party and the indemnifying party and counsel to the indemnified party shall have concluded that there may be reasonable defenses available to the indemnified party that are different from or additional to those available to the indemnifying party, or if the interests of the indemnified party reasonably may be deemed to conflict with the interests of the indemnifying party, then the indemnified party shall have the right to select a separate counsel and to assume such legal defense and otherwise to participate in the defense of such action, with the reasonable expenses and fees of such separate counsel and other reasonable expenses related to such participation to be reimbursed by the indemnifying party as incurred. Notwithstanding any other provision of this Agreement, no indemnifying party shall settle any action brought against any indemnified party with respect to which such indemnified party is entitled to indemnification hereunder without the consent of the indemnified party, unless the settlement thereof imposes no liability or obligation on, and includes a complete and unconditional release from all liability of, the indemnified party.
(d) Contribution. If the indemnification provided for in this Section 2.09 is held by a court or government agency of competent jurisdiction to be unavailable to any indemnified party or is insufficient to hold them harmless in respect of any Losses, then each such indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such Loss in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of such indemnified party on the other in connection with the statements or omissions that resulted in such Losses, as well as any other relevant equitable considerations; provided, however, that in no event shall such Selling Holder be required to contribute an aggregate amount in excess of the dollar amount of proceeds (net of Selling Expenses) received by such Selling Holder from the sale of Registrable Securities giving rise to such indemnification. The relative fault of the indemnifying party on the one hand and the indemnified party on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact has been made by, or relates to, information supplied by such party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The parties hereto agree that it would not be just and equitable if contributions pursuant to this paragraph were to be determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to herein. The amount paid by an indemnified party as a result of the Losses referred to in the first sentence of this paragraph shall be deemed to include any legal and other expenses reasonably incurred by such indemnified party in connection with investigating, defending or resolving any Loss that is the subject of this paragraph. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who is not guilty of such fraudulent misrepresentation.
(e) Other Indemnification. The provisions of this Section 2.09 shall be in addition to any other rights to indemnification or contribution that an indemnified party may have pursuant to law, equity, contract or otherwise.
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Section 2.10 Rule 144 Reporting.
With a view to making available the benefits of certain rules and regulations of the Commission that may permit the sale of the Registrable Securities to the public without registration, the Partnership agrees to use its commercially reasonable efforts to:
(a) make and keep public information regarding the Partnership available, as those terms are understood and defined in Rule 144 (or any successor or similar provision adopted by the Commission then in effect) under the Securities Act, at all times from and after the date hereof;
(b) file with the Commission in a timely manner all reports and other documents required of the Partnership under the Securities Act and the Exchange Act at all times from and after the date hereof; and
(c) so long as a Holder owns any Registrable Securities, furnish, unless otherwise available electronically at no additional charge via the Commission’s EDGAR system, to such Holder forthwith upon request a copy of the most recent annual or quarterly report of the Partnership, and such other reports and documents as such Holder may reasonably request in availing itself of any rule or regulation of the Commission allowing such Holder to sell any such securities without registration.
Section 2.11 Transfer or Assignment of Registration Rights.
The rights to cause the Partnership to register Registrable Securities granted to the Purchasers by the Partnership under this Article II may be transferred or assigned by any Purchaser to one or more transferees or assignees of Registrable Securities, subject to the transfer restrictions provided in Section 4.7(e) of the Amended Partnership Agreement, provided, however, that (a) the Partnership is given written notice prior to any said transfer or assignment, stating the name and address of each of the transferee or assignee and identifying the Registrable Securities with respect to which such registration rights are being transferred or assigned and (b) each such transferee or assignee assumes in writing responsibility for its portion of the obligations of such Purchaser under this Agreement.
Section 2.12 Limitation on Subsequent Registration Rights.
From and after the date hereof, the Partnership shall not, without the prior written consent of the Holders of at least a majority of the then outstanding Registrable Securities, enter into any agreement with any current or future holder of any securities of the Partnership that would allow such current or future holder to require the Partnership to include securities in any registration statement filed by the Partnership on a basis that is superior to the rights of the Holders of Registrable Securities hereunder.
ARTICLE III
MISCELLANEOUS
Section 3.01 Communications.
All notices and other communications provided for or permitted hereunder shall be made in writing by facsimile, electronic mail, courier service or personal delivery:
(a) if to an Purchaser:
To the respective address listed in the Preferred Unit Purchase Agreement
(b) if to a transferee of a Purchaser, to such Holder at the address provided pursuant to Section 2.11 above; and
(c) if to the Partnership:
Sanchez Production Partners LP
1000 Main Street, Suite 3000
Houston, TX 7702
Attention: Charles C. Ward
Email: cward@sanchezpp.com
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With a copy to (which shall not constitute notice):
Andrews Kurth LLP
600 Travis, Suite 4200
Houston, TX 77002
Attention: Scott Olson
Facsimile: 713.238.7410
Email: solson@andrewskurth.com
All such notices and communications shall be deemed to have been received at the time delivered by hand, if personally delivered; when receipt acknowledged, if sent via facsimile or sent via Internet electronic mail; and when actually received, if sent by courier service.
Section 3.02 Successor and Assigns.
This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties, including subsequent Holders of Registrable Securities to the extent permitted herein.
Section 3.03 Assignment of Rights.
All or any portion of the rights and obligations of any Purchaser under this Agreement may be transferred or assigned by such Purchaser only in accordance with Section 2.11 hereof.
Section 3.04 Recapitalization, Exchanges, Etc. Affecting the Units.
The provisions of this Agreement shall apply to the full extent set forth herein with respect to any and all units of the Partnership or any successor or assign of the Partnership (whether by merger, consolidation, sale of assets or otherwise) that may be issued in respect of, in exchange for or in substitution of, the Registrable Securities, and shall be appropriately adjusted for combinations, unit splits, recapitalizations, pro rata distributions of units and the like occurring after the date of this Agreement.
Section 3.05 Aggregation of Registrable Securities.
All Registrable Securities held or acquired by Persons who are Affiliates of one another shall be aggregated together for the purpose of determining the availability of any rights and applicability of any obligations under this Agreement.
Section 3.06 Specific Performance.
Damages in the event of breach of this Agreement by a party hereto may be difficult, if not impossible, to ascertain, and it is therefore agreed that each such Person, in addition to and without limiting any other remedy or right it may have, will have the right to an injunction or other equitable relief in any court of competent jurisdiction, enjoining any such breach, and enforcing specifically the terms and provisions hereof, and each of the parties hereto hereby waives any and all defenses it may have on the ground of lack of jurisdiction or competence of the court to grant such an injunction or other equitable relief. The existence of this right will not preclude any such Person from pursuing any other rights and remedies at law or in equity that such Person may have.
Section 3.07 Counterparts.
This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, including facsimile or .pdf counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same Agreement.
Section 3.08 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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Section 3.09 Governing Law.
THIS AGREEMENT, INCLUDING ALL ISSUES AND QUESTIONS CONCERNING ITS APPLICATION, CONSTRUCTION, VALIDITY, INTERPRETATION AND ENFORCEMENT, SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK.
Section 3.10 Severability of Provisions.
Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting or impairing the validity or enforceability of such provision in any other jurisdiction.
Section 3.11 Entire Agreement.
This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the rights granted by the Partnership set forth herein. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter.
Section 3.12 Amendment.
This Agreement may be amended only by means of a written amendment signed by the Partnership and the Holders of a majority of the then outstanding Registrable Securities; provided, however, that no such amendment shall materially and adversely affect the rights of any Holder hereunder without the consent of such Holder.
Section 3.13 No Presumption.
If any claim is made by a party relating to any conflict, omission or ambiguity in this Agreement, no presumption or burden of proof or persuasion shall be implied by virtue of the fact that this Agreement was prepared by or at the request of a particular party or its counsel.
Section 3.14 Obligations Limited to Parties to Agreement.
Each of the parties hereto covenants, agrees and acknowledges that no Person other than the Purchasers (and their permitted transferees and assignees) and the Partnership shall have any obligation hereunder. Notwithstanding that one or more of the Purchasers may be a corporation, partnership or limited liability company, no recourse under this Agreement or under any documents or instruments delivered in connection herewith or therewith shall be had against any former, current or future director, officer, employee, agent, general or limited partner, manager, member, stockholder or Affiliate of any of the Purchasers or any former, current or future director, officer, employee, agent, general or limited partner, manager, member, stockholder or Affiliate thereof, whether by the enforcement of any assessment or by any legal or equitable proceeding, or by virtue of any applicable Law, it being expressly agreed and acknowledged that no personal liability whatsoever shall attach to, be imposed on or otherwise be incurred by any former, current or future director, officer, employee, agent, general or limited partner, manager, member, stockholder or Affiliate of any of the Purchasers or any former, current or future director, officer, employee, agent, general or limited partner, manager, member, stockholder or Affiliate thereof, as such, for any obligations of the Purchasers under this Agreement or any documents or instruments delivered in connection herewith or therewith or for any claim based on, in respect of or by reason of such obligation or its creation, except in each case for any transferee or assignee of a Purchaser hereunder.
Section 3.15 Independent Nature of Purchaser’s Obligations.
The obligations of each Purchaser under this Agreement are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance of the obligations of any other Purchaser under this Agreement. Nothing contained herein, and no action taken by any Purchaser pursuant thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of group or entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by this Agreement. Each Purchaser shall be entitled
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to independently protect and enforce its rights, including, the rights arising out of this Agreement, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose.
Section 3.16 Interpretation.
Article and Section references are 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. The words “include,” “includes” and “including” or words of similar import shall be deemed to be followed by the words “without limitation.” Whenever any determination, consent or approval is to be made or given by an Purchaser under this Agreement, such action shall be in such Purchaser’s sole discretion unless otherwise specified. Unless expressly set forth or qualified otherwise (e.g., by “Business” or “trading”), all references herein to a “day” are deemed to be a reference to a calendar day.
[SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, the parties hereto execute this Agreement, effective as of the date first above written.
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SANCHEZ PRODUCTION PARTNERS LP |
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By: |
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Sanchez Production Partners GP LLC, |
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its general partner |
By: |
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/s/ Charles C. Ward |
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Name: Charles C. Ward Title: Chief Financial Officer |
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[Signature page to Registration Rights Agreement]
HITE HEDGE LP
By: ___/s/ James Jampel__________________
Name: James Jampel
Title: President of HITE Hedge Capital LP, the General Partner of HITE Hedge LP, and President of HITE Hedge Asset Management LLC, its Investment Manager
HITE MLP LP
By: ___/s/ James Jampel__________________
Name: James Jampel
Title: President of HITE Hedge Capital LP, the General Partner of HITE MLP LP, and President of HITE Hedge Asset Management LLC, its Investment Manager
HITE hedge qp LP
By: ___/s/ James Jampel__________________
Name: James Jampel
Title: President of HITE Hedge Capital LP, the General Partner of HITE Hedge QP LP, and President of HITE Hedge Asset Management LLC, its Investment Manager
HITE MLP ADVANTAGE LP
By: ___/s/ James Jampel__________________
Name: James Jampel
Title: President of HITE Hedge Capital LP, the General Partner of HITE MLP Advantage LP, and President of HITE Hedge Asset Management LLC, its Investment Manager
[Signature page to Registration Rights Agreement]
raging capital MASTER FUND, LTD.
By:__/s/ Frederick C. Wasch____
Name: Frederick C. Wasch
Title: Chief Financial Officer
Raging Capital Management, LLC
Investment Manager of Raging
Capital Master Fund, Ltd.
[Signature page to Registration Rights Agreement]
mICHAEL BREWSTER
By:___/s/ Michael Brewster
Exhibit 10.1
$500,000,000
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of March 31, 2015
among
SANCHEZ PRODUCTION PARTNERS LP
as Borrower,
ROYAL BANK OF CANADA
as Administrative Agent and Collateral Agent,
SOCIÉTÉ GÉNÉRALE
As Syndication Agent
COMPASS BANK and SUNTRUST BANK
As Co-Documentation Agents
RBC CaPITAL MARKETS and SG AMERICAS SECURITIES, LLC
as Joint Lead Arrangers and Joint Bookrunners,
and
THE LENDERS PARTY HERETO
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Annex I |
List of Maximum Credit Amounts |
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Exhibit A |
Form of Note |
Exhibit B |
Form of Compliance Certificate |
Exhibit C |
Security Instruments |
Exhibit D |
Form of Assignment and Assumption |
Exhibit E |
Form of Borrowing Request |
Exhibit F |
Form of Interest Election Request |
Exhibit G |
Form of Notice of Letter of Credit Request |
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Schedule 6.01(q) |
Minimum Hedges |
Schedule 7.05 |
Litigation |
Schedule 7.06 |
Environmental Matters |
Schedule 7.11 |
Material Debt and Other Obligations |
Schedule 7.14 |
Subsidiaries |
Schedule 7.20 |
Gas Imbalances |
Schedule 7.21 |
Marketing Contracts |
Schedule 7.22 |
Swap Agreements; Swap Transactions |
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715347206 14464587
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
THIS THIRD AMENDED AND RESTATED CREDIT AGREEMENT (this “Agreement”) dated as of March 31, 2015, is by and among Sanchez Production Partners LP, a limited partnership duly formed and existing under the laws of the State of Delaware (the “Borrower”), each of the Lenders from time to time party hereto, Royal Bank of Canada (in its individual capacity, “Royal Bank of Canada”), as administrative agent for the Lenders (in such capacity, together with its successors in such capacity, the “Administrative Agent”) and as collateral agent for the Lenders (in such capacity, together with its successors in such capacity, the “Collateral Agent”), RBC Capital Markets and SG Americas Securities, LLC, as joint lead arrangers and joint bookrunners.
RECITALS
WHEREAS, the Borrower, Société Générale, as administrative agent, and certain lenders, are parties to that certain Second Amended and Restated Credit Agreement dated as of May 30, 2013 (as amended, amended and restated, supplemented or otherwise modified prior to the date hereof, the “Existing Credit Agreement”) whereby the lenders therein extended credit to the Borrower in the form of loans and letters of credit; and
WHEREAS, the Borrower has entered into a certain Purchase and Sale Agreement dated as of March 31, 2015 (the “Palmetto PSA”), by and among SEP III Holdings, LLC, a Delaware limited liability company, as seller (“Palmetto Seller”), SEP Holdings IV, LLC, a Delaware limited liability company and a Guarantor under this Agreement, as buyer (“Palmetto Buyer”), and Borrower, pursuant to which Palmetto Buyer will acquire certain wellbores producing from the Eagle Ford Shale formation in Gonzales County, Texas, and more particularly described in the Palmetto PSA (such acquisition, the “Palmetto Acquisition”); and
WHEREAS, pursuant to the terms of that certain Assignment of Secured Indebtedness and Authorization to Assign Liens dated as of March 31, 2015, by and among the Borrower, the Existing Lenders, the Existing Agent, the Lenders, the Agent and the other parties thereto (the “Assignment Agreement”), the Existing Lenders have sold and assigned, and the Lenders have purchased and assumed, all of the outstanding loans and credit extensions outstanding under the Existing Agreement, together with the benefit of all of the related security documents and liens, as more particularly set forth therein; and
WHEREAS, the parties hereto desire to enter into this Agreement, which shall amend and restate and otherwise supersede the Existing Credit Agreement and provide that the Lenders may continue to extend credit to the Borrower as provided in this Agreement; and
WHEREAS, the Borrower has requested that the Lenders provide Loan Commitments (to include availability for Loans and Letters of Credit), pursuant to which Loans will be made from time to time prior to the Termination Date (including credit the proceeds of which, together with other consideration, will be used to consummate the Palmetto Acquisition), and Letter of Credit Commitments, pursuant to which Letters of Credit will be issued from time to time prior to the Termination Date; and
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WHEREAS, the Lenders and the Issuer are willing, on the terms and subject to the conditions hereinafter set forth, to extend the Loan Commitments and make Loans to the Borrower and issue (or participate in) Letters of Credit;
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and of the loans, extensions of credit and commitments hereinafter referred to, the Borrower, the Administrative Agent, the Collateral Agent, the Issuer and the Lenders agree to amend and restate in their entirety the Existing Credit Agreement and hereto agree as follows:
Section 1.01 Terms Defined Above. As used in this Agreement, each term defined above has the meaning indicated above.
Section 1.02 Certain Defined Terms. As used in this Agreement, the following terms have the meanings specified below:
“ABR”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a fluctuating rate determined by reference to the Alternate Base Rate.
“Acceptable Security Interest” in any Property means a Lien which (a) exists in favor of the Collateral Agent for the benefit of the Administrative Agent, the Issuer, the Lenders, and any Swap Counterparty, (b) is superior to all Liens or rights of any other Person in the Property encumbered thereby, other than Excepted Liens, (c) secures the Obligations, and (d) is perfected and enforceable, subject to general principles of equity and the rights of debtors under applicable Debtor Relief Laws.
“Act” has the meaning assigned to such term in Section 12.16.
“Adjusted EBITDA” means, for any period, the sum of Consolidated Net Income for such period plus (minus) the following expenses or charges to the extent deducted from Consolidated Net Income in such period: Interest Expense, depreciation, depletion, amortization, write off of deferred financing fees, impairment of long-lived assets, (gain) loss on sale of assets, (gain) loss from equity investment, accretion of asset retirement obligation, unrealized (gain) loss on oil, natural gas and natural gas liquids derivatives and realized (gain) loss on cancelled oil, natural gas and natural gas liquids derivatives, and other similar charges.
“Adjusted LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/100 of 1%) equal to (a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate
“Administrative Questionnaire” means an Administrative Questionnaire in a form supplied by the Administrative Agent.
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“Advance” means any advance hereunder of monies by a Lender to the Borrower as part of a Borrowing and refers to an ABR Loan or a Eurodollar Loan.
“Affected Lender” has the meaning assigned to such term in Section 5.06.
“Affected Loans” has the meaning assigned to such term in Section 5.05.
“Affiliate” means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.
“Agents” means each of the Administrative Agent, the Collateral Agent, any person identified as a “Syndication Agent,” any Person identified as a “Co-Documentation Agent” or any combination of them as the context requires and also includes any Person identified as “Lead Arranger” or “Bookrunner.”
“Aggregate Maximum Credit Amount” at any time shall equal the sum of the Maximum Credit Amounts, as the same may be reduced or terminated pursuant to Section 2.06, or otherwise modified in accordance with this Agreement.
“Agreement” means this Third Amended and Restated Credit Agreement, as the same may from time to time be amended, modified, supplemented or amended and restated.
“Alternate Base Rate” means, for any day, a rate per annum equal to the greatest of (a) the Base Rate in effect on such day, (b) the Federal Funds Effective Rate in effect on such day plus ½ of 1% and (c) the Adjusted LIBO Rate for a one month interest period in effect on such day (or if such day is not a Business Day, the immediately preceding Business Day) plus 1%. Any change in the Alternate Base Rate due to a change in the Base Rate, the Federal Funds Effective Rate or the Adjusted LIBO Rate shall be effective from and including the effective day of such change in the Base Rate, the Federal Funds Effective Rate and the Adjusted LIBO Rate, respectively.
“Applicable Margin” means, for any day and with respect to (a) all Loans maintained as Eurodollar Loans or ABR Loans or (b) Commitment Fee Rate, the applicable percentage set forth below corresponding to the Borrowing Base Utilization Percentage:
Borrowing Base Utilization Percentage |
Eurodollar Loan |
ABR Loan |
Commitment Fee Rate |
> 90% |
2.75% |
1.75% |
0.500% |
> 75% < 90% |
2.50% |
1.50% |
0.500% |
> 50% < 75% |
2.25% |
1.25% |
0.500% |
> 25% < 50% |
2.00% |
1.00% |
0.375% |
< 25% |
1.75% |
0.75% |
0.375% |
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Each change in the Applicable Margin shall apply during the period commencing on the effective date of such change and ending on the date immediately preceding the effective date of the next such change, provided, however, that if at any time the Borrower fails to deliver a Reserve Report pursuant to Section 2.07, then the “Applicable Margin” shall mean the rate per annum set forth on the grid when the Borrowing Base Utilization Percentage is at its highest level. If for any reason, based upon incorrect or inaccurate information provided to the Administrative Agent or the Lenders by the Borrower, it is determined that a higher Applicable Margin should have applied to a period than was actually applied, then the proper margin shall be applied retroactively, and the Borrower shall pay to the Administrative Agent, for the benefit of the Lenders, promptly on demand therefor, an amount equal to the difference between the amount of interest and fees that would have accrued using the proper margin and the amount actually paid.
“Applicable Percentage” means, with respect to any Lender at any time, the percentage of the Aggregate Maximum Credit Amount represented by such Lender’s Maximum Credit Amount at such time. The initial Applicable Percentages of the Lenders are set forth on Annex I.
“Approved Counterparty” means (a) any Lender or any Affiliate of a Lender, (b) any other Person whose long term senior unsecured debt rating is A by S&P or A2 by Moody’s (or their equivalent) or higher, and (c) any other Person approved by the Administrative Agent in its sole and absolute discretion.
“Approved Engineer” means Netherland, Sewell and Associates, Inc., Ryder Scott Company, L.P. or any other independent petroleum engineer satisfactory to the Administrative Agent in its sole and absolute discretion.
“Approved Fund” means any Person (other than a natural Person) that (a) is engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business, and (b) is administered or managed by a Lender, an Affiliate of a Lender or a Person or an Affiliate of a Person that administers or manages a Lender.
“Arranger” means, RBC Capital Markets in its capacity as joint lead arranger and joint bookrunner hereunder.
“Assignment Agreement” has the meaning ascribed thereto in the third recital.
“Assignment and Assumption” means an assignment and assumption entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 12.04(b)), and accepted by the Administrative Agent, in the form of Exhibit D or any other form approved by the Administrative Agent.
“Availability Period” means the period from and including the Closing Date to but excluding the Termination Date.
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“Available Cash” means, with respect to any fiscal quarter ending prior to the Termination Date:
(a)the sum of (i) all cash and Cash Equivalents of the Borrower on hand at the end of such fiscal quarter; and (ii) all additional cash and Cash Equivalents of the Borrower on hand on the date of determination of Available Cash with respect to such fiscal quarter resulting from working capital borrowings made prior to the end of such fiscal quarter, less
(b)the amount of any cash reserves established by the board of directors or equivalent governing body of the General Partner for the Borrower to (i) provide for the proper conduct of the business of the Borrower (including reserves for future maintenance capital expenditures including drilling and for anticipated future credit needs of the Borrower), (ii) comply with Governmental Requirements or any loan agreement, security agreement, mortgage, debt instrument or other agreement or obligation to which the Borrower or a Consolidated Subsidiary is a party or by which it is bound or its assets are subject or (iii) provide funds for distributions with respect to any one or more of the next four fiscal quarters.
“Base Rate” means, at any time, the rate of interest then most recently established by the Administrative Agent in New York or such other office as the Administrative Agent shall designate in writing, as its base rate for dollars loaned in the United States. The Base Rate is not necessarily intended to be the lowest rate of interest determined by the Administrative Agent in connection with extensions of credit.
“Board” means the Board of Governors of the Federal Reserve System of the United States of America or any successor Governmental Authority.
“Borrowing” means Loans made or continued on the same date and, with respect to Eurodollar Loans, as to which a single Interest Period is in effect.
“Borrowing Base” means an amount equal to the amount determined in accordance with Section 2.07, as the same may be redetermined or adjusted from time to time pursuant to Section 2.07, Section 8.12(c) or Section 9.12(d), or otherwise redetermined or adjusted in accordance with this Agreement.
“Borrowing Base Deficiency” means the aggregate outstanding amount, if any, by which the Revolving Credit Exposure exceeds the lesser of the (a) Borrowing Base and (b) the Aggregate Maximum Credit Amount.
“Borrowing Base Utilization Percentage” means, as of any day, the fraction expressed as a percentage, the numerator of which is the Revolving Credit Exposure on such day, and the denominator of which is the Borrowing Base in effect on such day.
“Borrowing Request” means a request by the Borrower for a Borrowing in accordance with Section 2.03.
“Business Day” means any day that is not a Saturday, Sunday or other day on which commercial banks in New York City or Houston, Texas are authorized or required by law to remain closed; and if such day relates to a Borrowing or continuation of, a payment or
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prepayment of principal of or interest on, or the Interest Period for a Eurodollar Loan or a notice by the Borrower with respect to any such Borrowing or continuation, payment, prepayment, or Interest Period, any day which is also a day on which dealings in dollar deposits are carried out in the London interbank market.
“Capital Leases” means, in respect of any Person, all leases which shall have been, or should have been, in accordance with GAAP, recorded as capital leases on the balance sheet of the Person liable (whether contingent or otherwise) for the payment of rent thereunder.
“Cash Collateral Account” has the meaning assigned to such term in Section 2.08(j).
“Cash Collateralize” means, with respect to a Letter of Credit, the deposit of immediately available funds into a cash collateral account maintained with (or on behalf of) the Administrative Agent on terms reasonably satisfactory to the Administrative Agent.
“Cash Equivalent” means, at any time:
(a)any direct obligation of (or unconditionally guaranteed by) the United States or a State thereof (or any agency or political subdivision thereof, to the extent such obligations are supported by the full faith and credit of the United States or a State thereof) maturing not more than one year after such time;
(b)commercial paper maturing not more than 270 days from the date of issue, that is issued by (i) a corporation (other than an Affiliate of any Obligor) organized under the laws of any State of the United States or of the District of Columbia, and rated A1 or higher by S&P or P1 or higher by Moody’s or (ii) any Lender (or its holding company);
(c)any certificate of deposit, time deposit or bankers acceptance, maturing not more than one year after its date of issuance, that is issued by (i) any bank or trust company organized under the laws of the United States (or any State thereof), and that has (A) a short term deposit rating of A2 or higher from Moody’s or A or higher from S&P and (B) a combined capital and surplus greater than $500,000,000, or (ii) any Lender;
(d)shares of money market mutual or similar funds which invest primarily in assets satisfying the requirements of clauses (a) through (c) of this definition; or
(e)money market funds that (i) purport to comply generally with the criteria set forth in SEC Rule 2a-7 under the Investment Company Act of 1940, as amended, (ii) are rated AAA by S&P or Aaa by Moody’s or carrying an equivalent rating by a national recognized rating agency, and (iii) have portfolio assets of at least $5,000,000,000.
“Casualty Event” means any loss, casualty or other insured damage to, or any nationalization, taking under power of eminent domain or by condemnation or similar proceeding of, any Property of the Borrower or any of its Subsidiaries having a fair market value in excess of $100,000 in the aggregate for any calendar year.
“Change in Control” means any one or more of the following events shall occur: (a) the General Partner shall cease to be the sole general partner of the Borrower, or (b) the Permitted
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Holders shall, collectively, shall cease to own, directly or indirectly, more than 50% of the Equity Interests of the General Partner or shall cease to Control, directly or indirectly, the General Partner.
“Change in Law” means (a) the adoption of any law, rule, treaty or regulation after the date of this Agreement, (b) any change in any law, rule, treaty or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by any Lender or the Issuer (or, for purposes of Section 5.01(b), by any lending office of such Lender or by such Lender’s or the Issuer’s holding company, if any) with any request, rule, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement; provided 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 concerning capital adequacy promulgated by the Bank for International Settlements, the Basel Committee on Banking Regulations and Supervisory Practices (or any successor similar authority) or the United States financial 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, promulgated or issued.
“Closing Date” means the date of this Agreement.
“Code” means the Internal Revenue Code of 1986, as amended from time to time, and any successor statute.
“Collateral” shall mean the Collateral as defined in the Pledge and Security Agreement, and the Mortgaged Property.
“Collateral Agent” means Royal Bank of Canada, as collateral agent, under the Security Instruments (together with any successor(s) and assign(s) thereto).
“Commitment Fee” has the meaning assigned to such term in Section 3.04(a).
“Commitment Fee Rate” means the rate per annum determined from time to time based on the percentage reflected in the definition of Applicable Margin.
“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.
“Consolidated Net Income” means with respect to the Borrower and the Consolidated Subsidiaries, for any period, the aggregate of the net income (or loss) of the Borrower and the Consolidated Subsidiaries after allowances for taxes for such period determined on a consolidated basis in accordance with GAAP; provided that there shall be excluded from such net income (to the extent otherwise included therein) the following (all determined in accordance with GAAP): (a) the net income of any Person in which the Borrower or a Consolidated Subsidiary has an interest (which interest does not cause the net income of such other Person to be consolidated with the net income of the Borrower and the Consolidated Subsidiaries), except to the extent of the amount of dividends or distributions actually paid in cash during such period by such other Person to the Borrower or to a Consolidated Subsidiary, as the case may be; (b) the
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net income (but not loss) during such period of any Consolidated Subsidiary to the extent that the declaration or payment of dividends or similar distributions or transfers or loans by that Consolidated Subsidiary is not at the time permitted by operation of the terms of its charter or any agreement, instrument or Governmental Requirement applicable to such Consolidated Subsidiary or is otherwise restricted or prohibited; (c) the net income (or loss) of any Person acquired in a pooling-of-interests transaction for any period prior to the date of such transaction; (d) any extraordinary gains or losses during such period; (e) non-cash gains, losses or adjustments under Accounting Standards Codification 815 as a result of changes in the fair market value of derivatives; (f) any gains or losses attributable to writeups or writedowns of assets, including ceiling test writedowns; (g) non-cash share-based payments under Accounting Standards Codification 718; and provided further that if the Borrower or any Consolidated Subsidiary shall acquire or dispose of any Property during such period having an aggregate fair market value in excess of $5,000,000 (whether in one or a series of related transactions), then Consolidated Net Income shall be calculated after giving pro forma effect to such acquisition or disposition, as if such acquisition or disposition had occurred on the first day of such period.
“Consolidated Subsidiaries” means each Subsidiary of the Borrower (whether now existing or hereafter created or acquired) the financial statements of which shall be (or should have been) consolidated with the financial statements of the Borrower in accordance with GAAP.
“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.
“Current Ratio” means the ratio of
(a)consolidated current assets of the Borrower and its Consolidated Subsidiaries but including any unused availability under this Agreement and excluding therefrom any current non-cash asset (including in respect of Swap Transactions) described in or calculated pursuant to the requirements of Accounting Standards Codification 815 or 410, each as amended (provided that, for the avoidance of doubt, the calculation of consolidated current assets shall include any current assets in respect of the termination of any Swap Transaction)
to
(b)consolidated current liabilities of the Borrower and its Consolidated Subsidiaries but excluding therefrom any current maturities of Debt (to the extent such payments are not past due) and current non-cash liabilities (including in respect of Swap Transactions) described in or calculated pursuant to the requirements of Accounting Standards Codification 815 or 410, each as amended (provided that, for the avoidance of doubt, the calculation of consolidated current liabilities shall include any current liabilities in respect of the termination of any Swap Transaction).
“Debt” means, for any Person, the sum of the following (without duplication): (a) all obligations of such Person for borrowed money or evidenced by bonds, bankers’ acceptances,
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debentures, notes or other similar instruments; (b) all obligations of such Person (whether contingent or otherwise) in respect of letters of credit, surety or other bonds and similar instruments; (c) all accounts payable, accrued expenses, liabilities or other obligations of such Person, in each such case to pay the deferred purchase price of Property or services; (d) all obligations under Capital Leases; (e) all obligations under Synthetic Leases; (f) all Debt (as defined in the other clauses of this definition) of others secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) a Lien on any Property of such Person, whether or not such Debt is assumed by such Person (but, to the extent such obligations or liabilities are limited in recourse to the Obligors, the amount of such liabilities or obligations constituting Debt shall be limited to the lesser of the fair market value of such property and the amount of the obligations or liabilities assumed); (g) all Debt (as defined in the other clauses of this definition) of others guaranteed by such Person or in which such Person otherwise assures a creditor against loss of the Debt (howsoever such assurance shall be made) to the extent of the lesser of the amount of such Debt and the maximum stated amount of such guarantee or assurance against loss; (h) all obligations or undertakings of such Person to maintain or cause to be maintained the financial position or covenants of others or to purchase the Debt or Property of others, in each case, intended as a means of credit enhancement for creditors of such others and not as a purchase and sale agreement; (i) obligations to deliver commodities, goods or services, including, without limitation, Hydrocarbons, in consideration of one or more advance payments, other than gas balancing arrangements in the ordinary course of business; (j) obligations to pay for goods or services whether or not such goods or services are actually received or utilized by such Person; (k) any Debt of a partnership for which such Person is liable either by agreement, by operation of law or by a Governmental Requirement but only to the extent of such liability; (l) Disqualified Capital Stock; and (m) the undischarged balance of any production payment created by such Person or for the creation of which such Person directly or indirectly received payment; provided however, that Debt shall exclude (i) all Swap Obligations and guarantees in respect thereof and (ii) for purposes of calculating Total Net Debt, accounts payable and other accrued liabilities (for the deferred purchase price of Property or services) from time to time incurred in the ordinary course of business with respect to which no more than 90 days have elapsed since the date of invoice or that are being contested in good faith by appropriate action and for which adequate reserves are maintained in accordance with GAAP and other obligations to pay for goods or services whether or not such goods or services are actually received or utilized by such Person. The Debt of any Person shall include all obligations of such Person of the character described above to the extent such Person remains legally liable in respect thereof notwithstanding that any such obligation is not included as a liability of such Person under GAAP.
“Debtor Relief Laws” means the Bankruptcy Code of the United States, 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 (including, to the extent applicable, the rights and remedies of creditors of a “financial company” as such term is defined in Section 201 of the Dodd-Frank Wall Street Reform and Consumer Protection Act) or providing for the relief of debtors.
“Default” means any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default.
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“Defaulting Lender” means, subject to Section 2.10(g), any Lender that (a) has failed to (i) fund all or any portion of its Loans within three Business Days of the date such Loans were required to be funded hereunder unless such Lender notifies the Administrative Agent and the 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 the Administrative Agent, the 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 three Business Days of the date when due, (b) has notified the Borrower, the Administrative Agent or the 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 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), 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, or (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; 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 ownership 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 the Administrative Agent that a Lender is a Defaulting Lender under 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 2.10(g)) upon delivery of written notice of such determination to the Borrower, the Issuer, and each Lender.
“Disqualified Capital Stock” means any Equity Interest that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable) or upon the happening of any event, matures or is mandatorily redeemable for any consideration other than other Equity Interests (that would not constitute Disqualified Capital Stock), pursuant to a sinking fund obligation or otherwise, or is convertible or exchangeable for Debt or redeemable for any consideration other than other Equity Interests (that would not constitute Disqualified Capital Stock) at the option of the holder thereof, in whole or in part, on or prior to the date that is one year after the earlier of (a) the Maturity Date and (b) the date on which there are no Loans, Letter of Credit Exposure or other obligations hereunder outstanding and all of the Loan Commitments are terminated.
“dollars” or “$” refers to lawful money of the United States of America.
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“Domestic Subsidiary” means any Subsidiary that is organized under the laws of the United States of America or any state thereof or the District of Columbia.
“Eligible Assignee” means (a) a Lender; (b) an Affiliate of a Lender; (c) an Approved Fund; or (d) any other Person (other than a natural Person, the Borrower, a Defaulting Lender, any Affiliate of the Borrower or any other Person taking direction from, or working in concert with, the Borrower or any of the Borrower’s Affiliates) approved by the Administrative Agent and the Issuer (such approvals not to be unreasonably withheld).
“Environmental Laws” means any and all applicable Governmental Requirements pertaining in any way to health, safety, the environment or the preservation or reclamation of natural resources, in effect in any and all jurisdictions in which the Borrower or any of its Subsidiaries is conducting or at any time has conducted business, or where any Property of the Borrower or any of its Subsidiaries is located, including without limitation, the Oil Pollution Act of 1990 (“OPA”), as amended, the Clean Air Act, as amended, the Comprehensive Environmental, Response, Compensation, and Liability Act of 1980 (“CERCLA”), as amended, the Federal Water Pollution Control Act, as amended, the Occupational Safety and Health Act of 1970, as amended, the Resource Conservation and Recovery Act of 1976 (“RCRA”), as amended, the Safe Drinking Water Act, as amended, the Toxic Substances Control Act, as amended, the Superfund Amendments and Reauthorization Act of 1986, as amended, the Hazardous Materials Transportation Act, as amended, and other environmental conservation or protection Governmental Requirements. The term “oil” shall have the meaning specified in OPA, the terms “hazardous substance” and “release” (or “threatened release”) have the meanings specified in CERCLA and the terms “solid waste” and “disposal” (or “disposed”) have the meanings specified in RCRA and the term “oil and gas waste” shall have the meaning specified in Section 91.1011 of the Texas Natural Resources Code (“Section 91.1011”); provided, however, that (a) in the event either OPA, CERCLA, RCRA or Section 91.1011 is amended so as to broaden the meaning of any term defined thereby, such broader meaning shall apply subsequent to the effective date of such amendment and (b) to the extent the laws of the state or other jurisdiction in which any Property of the Borrower or any of its Subsidiaries is located establish a meaning for “oil,” “hazardous substance,” “release,” “solid waste,” “disposal” or “oil and gas waste” which is broader than that specified in either OPA, CERCLA, RCRA or Section 91.1011, such broader meaning shall apply with respect to Property located in such state or other jurisdiction.
“Equity Interests” means shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any such Equity Interest.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute.
“ERISA Affiliate” means any trade or business (whether or not incorporated) under common control with the Borrower within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code).
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“ERISA Event” means (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by the Borrower or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by the Borrower or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate a Pension Plan under Section 4041(c) of ERISA, the treatment of a Plan amendment as a termination under Section 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; (f) the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon the Borrower or any ERISA Affiliate; or (g) the determination that any Pension Plan or Multiemployer Plan is considered an at-risk plan or a plan in endangered or critical status within the meaning of Sections 430, 431 and 432 of the Code or Sections 303, 304 and 305 of ERISA.
“Eurodollar”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the LIBO Rate.
“Event of Default” has the meaning assigned to such term in Section 10.01.
“Excepted Liens” shall mean: (a) Liens for taxes, assessments or other governmental charges or levies (x) not yet due or (y) that are being contested in good faith by appropriate action and for which adequate reserves have been maintained; (b) Liens in connection with workmen’s compensation, unemployment insurance or other social security, old age pension or public liability obligations not yet due or that are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP; (c) operators’, vendors’, carriers’, warehousemen’s, repairmen’s, mechanics’, workmen’s, materialmen’s, construction or other like Liens arising by operation of law in the ordinary course of business or incident to the exploration, development, operation and maintenance of Oil and Gas Properties or statutory landlord’s liens, each of which is in respect of 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; (d) contractual Liens that arise in the ordinary course of business under operating agreements, joint venture agreements, oil and gas partnership agreements, oil and gas leases, farm-out agreements, division orders, contracts for the sale, transportation or exchange of oil and natural gas, unitization and pooling declarations and agreements, area of mutual interest agreements, overriding royalty agreements, marketing agreements, processing agreements, net profits agreements, development agreements, gas balancing or deferred production agreements, injection, repressuring and recycling agreements, salt water or other disposal agreements, seismic or other geophysical permits or agreements, and other agreements which are usual and customary in the oil and gas business and are for claims that are not delinquent or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP, provided that any such Lien referred to in this clause does not materially impair the use of the
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Property covered by such Lien for the purposes for which such Property is held by the Borrower or any of its Subsidiaries or materially impair the value of such Property subject thereto; (e) encumbrances (other than to secure the payment of borrowed money or the deferred purchase price of Property or services), easements, restrictions, servitudes, permits, conditions, covenants, exceptions or reservations in any rights of way or other Property of the Borrower or any of its Subsidiaries for the purpose of roads, pipelines, transmission lines, transportation lines, distribution lines for the removal of gas, oil, coal or other minerals or timber, and other like purposes, or for the joint or common use of real estate, rights of way, facilities and equipment, and defects, irregularities, zoning restrictions and deficiencies in title of any rights of way or other Property that in the aggregate do not materially impair the use of such rights of way or other Property for the purposes of which such rights of way and other Property are held by the Borrower or any Subsidiary or materially impair the value of such Property subject thereto; (f) deposits of cash or Cash Equivalents to secure the performance of bids, tenders, trade contracts, leases, statutory obligations and other obligations of a like nature incurred in the ordinary course of business (all of the foregoing other than for Debt) or to secure obligations on surety or appeal bonds; (g) Liens permitted by the Security Instruments; (h) Liens arising solely by virtue of any statutory or common law provision relating to banker’s liens, rights of set-off or similar rights and remedies and burdening only deposit accounts or other funds maintained with a creditor depository institution, provided that no such deposit account is a dedicated cash collateral account or is subject to restrictions against access by the depositor in excess of those set forth by regulations promulgated by the Board and no such deposit account is intended by the Borrower or any of its Subsidiaries to provide collateral to the depository institution; (i) judgment and attachment Liens not giving rise to an Event of Default; and (j) Liens comprised of UCC financing statement filings regarding operating leases covering only the Property leased thereunder.
“Excluded Hedge Obligation” means, with respect to any Obligor, any Swap Obligation if and to the extent that all or a portion of such Swap Obligation or the guarantee of such Obligor of, or the grant by such Obligor of a security interest or other Lien to secure, such Swap Obligation (or any guarantee thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of such Obligor’s failure for any reason to constitute a Qualified ECP Obligor at the time such Obligor’s guarantee or such Obligor’s grant of such security interest or other Lien becomes effective with respect to such Swap Obligation. 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 guarantee obligation or other liability or security interest or other 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 Lender, U.S. federal withholding Taxes imposed on amounts payable to or for the account of such Lender
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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 the Borrower under Section 5.06) or (ii) such Lender changes its lending office, except in each case to the extent that, pursuant to Section 5.03, 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 5.03(f) or (g), and (d) any U.S. federal withholding Taxes imposed under FATCA.
“Existing Agent” shall mean Société Générale, as administrative agent for the Existing Lenders under the Existing Credit Agreement.
“Existing Credit Agreement” shall have the meaning assigned to such term in the Recitals.
“Existing Lenders” shall mean the “Lenders” under and as defined in the Existing Credit Agreement.
“Existing Loans” shall mean the “Loans” under and as defined in the Existing Credit Agreement.
“Existing Obligations” shall mean the “Obligations” under and as defined in the Existing Credit Agreement outstanding on the Closing Date.
“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof, any agreements entered into pursuant to Section 1471(b)(1) of the Code, and any intergovernmental agreements related to or implementing the foregoing, or laws or regulations implementing such agreements, including any successor provisions, subsequent amendments, and administrative guidance promulgated thereunder (or which may be promulgated thereunder in the future).
“Federal Funds Effective Rate” means, for any day, a fluctuating interest rate per annum equal to:
(a)the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York; or
(b)if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from three federal funds brokers of recognized standing selected by it.
“Fee Letter” means that certain engagement letter dated March 11, 2015, among the Borrower, the Administrative Agent and the Arranger.
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“Financial Officer” means, for any Person, the chief financial officer, principal accounting officer, treasurer or controller of such Person. Unless otherwise specified, all references to a Financial Officer shall mean a Financial Officer of the General Partner, on behalf of the Borrower.
“Financial Statements” means the audited consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of December 31, 2014 and the related consolidated statement of income, members’ equity and cash flow of the Borrower and its Consolidated Subsidiaries for the fiscal year ended on such date.
“Flood Insurance Laws” means, to the extent applicable to any Obligor, Secured Party or Collateral, the National Flood Insurance Act of 1968 and the Flood Disaster Protection Act of 1973, the National Flood Insurance Reform Act of 1994, the Biggert-Waters Flood Insurance Reform Act of 2012 and the regulations issued in connection therewith by the Office of the Controller of the Currency, the Federal Reserve Board and other Governmental Authorities, each as it may be amended, reformed or otherwise modified from time to time.
“Foreign Lender” means any Lender that is not a U.S. Person.
“Foreign Subsidiary” means any Subsidiary that is not a Domestic Subsidiary.
“GAAP” means generally accepted accounting principles in the United States of America as in effect from time to time subject to the terms and conditions set forth in Section 1.04.
“General Partner” means Sanchez Production Partners GP LLC, a Delaware limited liability company.
“Governmental Authority” means the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government over the Borrower or any of its Subsidiaries, any of their Properties, any Agent, the Issuer or any Lender.
“Governmental Requirement” means any applicable law, statute, code, ordinance, order, determination, rule, regulation, judgment, decree, injunction, franchise, permit, certificate, license, authorization or other directive or requirement, whether now or hereinafter in effect, including, without limitation, Environmental Laws, energy regulations and occupational, safety and health standards or controls, of any Governmental Authority.
“Guarantee Agreement” means each agreement executed by the Guarantors in a form acceptable to the Administrative Agent and Lenders, as the same may be amended, modified or supplemented from time to time.
“Guarantors” means CEP Mid-Continent LLC, a Delaware limited liability company, Northeast Shelf Energy, L.L.C., an Oklahoma limited liability company, Mid-Continent Oilfield Supply, L.L.C., an Oklahoma limited liability company, SEP Holdings IV, LLC, a Delaware limited liability company, and any additional Guarantors pursuant to Section 8.13.
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“Highest Lawful Rate” means, with respect to each Lender, the maximum nonusurious interest rate, if any (or, if the context so requires, an amount calculated at such rate), that at any time or from time to time may be contracted for, taken, reserved, charged or received on the Notes or on other Obligations under laws applicable to such Lender which are presently in effect or, to the extent allowed by law, under such applicable federal laws which may hereafter be in effect and which allow a higher maximum nonusurious interest rate than Governmental Requirements allow as of the date hereof.
“Hydrocarbon Interests” means all rights, titles, interests and estates now or hereafter acquired in and to oil and gas leases, oil, gas and mineral leases, or other liquid or gaseous hydrocarbon leases, mineral fee interests, overriding royalty and royalty interests, net profit interests and production payment interests, including any reserved or residual interests of whatever nature.
“Hydrocarbons” means oil, gas, casinghead gas, drip gasoline, natural gasoline, condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons, coal bed gas and occluded natural gas and all products refined or separated therefrom.
“Impacted Lender” means, at any time, a Lender (a) as to which the Administrative Agent or the Issuer has in good faith determined and notified the Borrower and, in the case of the Issuer, the Administrative Agent that such Lender or its Parent Company or a Subsidiary thereof has notified the Administrative Agent, or has stated publicly, that it will not comply with its funding obligations under any other loan agreement or credit agreement or other similar agreement or (b) that has, or whose Parent Company has, a non-investment grade rating from Moody’s (below Baa3) or S&P (below BBB-) or another nationally recognized rating agency. Any determination that a Lender is an Impacted Lender under clause (a) above will be made by the Administrative Agent or the Issuer, as the case may be, in its sole discretion acting in good faith. The Administrative Agent will promptly send to all parties hereto a copy of any notice to the Borrower provided for in this definition.
“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 any Obligor under any Loan Document and (b) to the extent not otherwise described in (a), Other Taxes.
“Initial Reserve Report” means (i) the reserve report concerning Oil and Gas Properties of the Borrower and its Subsidiaries, prepared by Netherland, Sewell and Associates, Inc., effective as of December 31, 2014, and (ii) the Palmetto Reserve Report.
“Initial Subordinated Note” means that certain 10.00%/10.75% Senior Unsecured Subordinated PIK Note due 2020 issued on the Closing Date from Borrower, as issuer, to Palmetto Seller, as holder, in an initial aggregate principal amount of up to $21,250,000, which note has an initial maturity date not earlier than six months after the Maturity Date (as in effect on the Closing Date), no mandatory amortization or scheduled payment of principal thereunder and (subject to the provisions of Section 9.21) provides for interest payments to be made only in-kind by capitalizing the accrued but unpaid interest thereunder.
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“Interest Election Request” means a request by the Borrower to continue a Borrowing in accordance with Section 2.04.
“Interest Expense” means, for any period, the sum (determined without duplication) of the aggregate gross interest expense of the Borrower and the Consolidated Subsidiaries for such period, including (a) to the extent included in interest expense under GAAP: (i) amortization of debt discount, (ii) capitalized interest and (iii) the portion of any payments or accruals under Capital Leases allocable to interest expense, plus the portion of any payments or accruals under Synthetic Leases allocable to interest expense whether or not the same constitutes interest expense under GAAP and (b) cash dividend payments by the Borrower in respect of any Disqualified Capital Stock; but excluding non-cash gains, losses or adjustments under Accounting Standards Codification 815 as a result of changes in the fair market value of derivatives.
“Interest Period” means with respect to any Eurodollar Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day in the calendar month that is one, three or six months thereafter, as the Borrower may elect; provided, that (a) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day, and (b) any Interest Period pertaining to a Borrowing that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period. For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is made and thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing.
“Investment” means, for any Person: (a) the acquisition (whether for cash, Property, services or securities or otherwise) of Equity Interests of any other Person or any agreement to make any such acquisition (including, without limitation, any “short sale” or any sale of any securities at a time when such securities are not owned by the Person entering into such short sale); (b) the making of any deposit for the purpose of acquisition of Equity Interests in or Debt of, or advance, loan or capital contribution to, assumption of Debt of, purchase or other acquisition of any other Debt or equity participation or interest in, or other extension of credit to, any other Person (including the purchase of Property from another Person subject to an understanding or agreement, contingent or otherwise, to resell such Property to such Person, but excluding any such advance, loan or extension of credit having a term not exceeding ninety (90) days representing the purchase price of inventory, equipment, or supplies sold by such Person in the ordinary course of business); (c) the purchase or acquisition (in one or a series of transactions) of Property of another Person that constitutes a business unit or (d) the entering into of any guarantee of, or other contingent obligation (including the deposit of any Equity Interests to be sold) with respect to, Debt or other liability of any other Person and (without duplication) any amount committed to be advanced, lent or extended to such Person.
“Issuer” means Royal Bank of Canada, in its capacity as an issuer of Letters of Credit hereunder, and its successors in such capacity as provided in Section 2.08(i).
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“Lenders” means the Persons listed on Annex I, and any Person that shall have become a party hereto pursuant to an Assignment and Assumption, other than any such Person that ceases to be a party hereto pursuant to an Assignment and Assumption.
“Letter of Credit” means any letter of credit issued pursuant to this Agreement.
“Letter of Credit Agreements” means all letter of credit applications and other agreements (including any amendments, modifications or supplements thereto) submitted by the Borrower, or entered into by the Borrower, with the Issuer relating to any Letter of Credit issued by such Issuer.
“Letter of Credit Commitment” at any time means Fifteen Million Dollars ($15,000,000).
“Letter of Credit Disbursement” means a payment made by the Issuer pursuant to a Letter of Credit issued by the Issuer.
“Letter of Credit Exposure” means, at any time, the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit at such time plus (b) the aggregate amount of all unpaid and outstanding Reimbursement Obligations. The Letter of Credit Exposure of any Lender at any time shall be its Applicable Percentage of the total Letter of Credit Exposure at such time.
“Leverage Ratio Adjustment Date” means the first date on which either (a) the Borrower shall have repaid in full all Debt outstanding under the Subordinated Notes in compliance with the conditions and limitations set forth in this Agreement, including Section 9.21(b), or (b) the MidCon Assets shall have been sold in compliance with the conditions and limitations set forth in this Agreement, including Section 9.12(d); provided that if the “as of” date of the sale of the MidCon Assets occurs on or before the last day of the preceding fiscal quarter and the Borrower has not, before the date on which the sale of the MidCon Assets is consummated, delivered the Financial Officer’s certificate required by Section 8.01(c), then the Leverage Ratio Adjustment Date shall be deemed to be the last day of the preceding fiscal quarter. For the sake of clarity, if no Subordinated Notes are issued on the Closing Date, then the Leverage Ratio Adjustment Date shall be deemed to have occurred on the Closing Date and the covenant set forth in Section 9.01(c) shall be of no force or effect.
“LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest Period the greater of (a) zero percent (0%) per annum and (b) the ICE Benchmark Administration LIBO rate appearing on Reuters Libor Rates LIBOR01 (or on any successor or substitute page of such service, or any successor to or substitute for such service, providing rate quotations comparable to those currently provided on such page of such service, as determined by the Administrative Agent from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) 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. In the event that such rate is not available at such time for any reason, then the LIBO Rate with respect to such Eurodollar Borrowing for such Interest Period shall be the rate at which dollar deposits of $5,000,000 and for a maturity
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comparable to such Interest Period are offered by the principal London office of the Administrative Agent in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period.
“Lien” means any interest in Property securing an obligation owed to, or a claim by, a Person other than the owner of the Property, whether such interest is based on the common law, statute or contract, and whether such obligation or claim is fixed or contingent, and including but not limited to (a) the lien or security interest arising from a mortgage, encumbrance, pledge, security agreement, conditional sale or trust receipt or a financing lease, consignment or bailment for security purposes or (b) production payments and the like payable out of Oil and Gas Properties. The term “Lien” shall include easements, restrictions, servitudes, permits, conditions, covenants, exceptions or reservations.
“Loan Commitment” means, with respect to each Lender, the commitment of such Lender to make Loans and to acquire participations in Letters of Credit hereunder, as such commitment may be (a) modified from time to time pursuant to Sections 2.06, (b) modified from time to time pursuant to assignments by or to such Lender pursuant to Section 12.04(b) or (c) otherwise modified in accordance with this Agreement.
“Loan Documents” means the Fee Letter, this Agreement, the Notes, the Assignment Agreement, the Letter of Credit Arrangements, the Letters of Credit and the Security Instruments.
“Loans” means the loans made by the Lenders to the Borrower pursuant to this Agreement.
“Majority Lenders” means, at any time while no Loans or Letter of Credit Exposure is outstanding, Lenders having at greater than fifty percent (50%) of the Aggregate Maximum Credit Amount; and at any time while any Loans or Letter of Credit Exposure is outstanding, Lenders holding greater than fifty percent (50%) of the outstanding aggregate principal amount of the Loans or participation interests in Letters of Credit (without regard to any sale by a Lender of a participation in any Loan under Section 12.04(c)).
“Material Adverse Effect” means a material adverse change in, or material adverse effect on (a) the business, operations, Property, liabilities (actual or contingent) or condition (financial or otherwise) of the Borrower and the Guarantors taken as a whole, (b) the ability of the Borrower, any of its Subsidiaries or any Guarantor to perform any of its obligations under any Loan Document to which it is a party, (c) the validity or enforceability of any Loan Document or (d) the rights and remedies of or benefits available to the Administrative Agent, any other Agent, the Issuer or any Lender under any Loan Document.
“Material Domestic Subsidiary” means, as of any date, any Domestic Subsidiary that (a) is a Wholly-Owned Subsidiary and (b) together with its Subsidiaries, owns Property having a fair market value of $1,000,000 or more.
“Material Indebtedness” means Debt (other than the Loans and Letters of Credit), or obligations in respect of one or more Swap Transactions, of any one or more of the Borrower and
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its Subsidiaries in an aggregate principal amount exceeding $2,500,000. For purposes of determining Material Indebtedness, the “principal amount” of the obligations of the Borrower or any of its Subsidiaries in respect of Swap Transactions with a particular counterparty at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that the Borrower or such Subsidiary would be required to pay if such Swap Transactions were terminated at such time.
“Material Swap Transactions” has the meaning assigned to such term in Section 8.01(j).
“Maturity Date” means March 31, 2020.
“Maximum Credit Amount” means, as to each Lender, the amount set forth opposite such Lender’s name on Annex I under the caption “Maximum Credit Amount”, as the same may be (a) reduced or terminated from time to time in connection with a reduction or termination of the Aggregate Maximum Credit Amount pursuant to Section 2.06 or (b) modified from time to time pursuant to any assignment permitted by Section 12.04(b).
“MidCon Assets” means all or substantially all of the Oil and Gas Properties of the Borrower and its Subsidiaries located in the States of Oklahoma and Kansas.
“Minimum Hedge” has the meaning assigned to such term in Section 6.01(q).
“Moody’s” means Moody’s Investors Service, Inc. and any successor thereto that is a nationally recognized rating agency.
“Mortgaged Property” means any Property owned by the Borrower or any Guarantor which is subject to the Liens existing and to exist under the terms of the Mortgages.
“Mortgages” means the mortgages and/or deeds of trust subjecting the Property of the Borrower or any Guarantor to Liens in favor of Collateral Agent for the benefit of the Lenders and the Swap Counterparties.
“Multiemployer Plan” means a Plan which is a multiemployer plan as defined in Section 3(37) or 4001 (a)(3) of ERISA.
“Multiple Employer Plan” means a Plan which has two or more contributing sponsors (including the Borrower or any ERISA Affiliate) at least two of whom are not under common control, as such a plan is described in Section 4064 of ERISA.
“Net Revenue Interest” means, with respect to any Oil and Gas Property, the decimal or percentage share of production from or allocable to such Oil and Gas Property, after deduction of all overriding royalties and other burdens (including lessor royalties), that an owner of a Working Interest is entitled to receive.
“Non-Consenting Lender” means any Lender that does not approve any consent, waiver or amendment that (i) requires the approval of all Lenders or all affected Lenders in accordance with the terms of Section 12.02 and (ii) has been approved by the Required Lenders.
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“Non-Defaulting Lender” means a Lender that is not a Defaulting Lender or an Impacted Lender.
“Notes” means the promissory notes of the Borrower described in Section 2.02(d) and being substantially in the form of Exhibit A, together with all amendments, modifications, replacements, extensions and rearrangements thereof.
“Obligations” means (a) all principal, interest, fees, reimbursements, indemnifications, and other amounts payable by the Borrower or any of its Subsidiaries to the Administrative Agent, the Issuer or the Lenders under the Loan Documents, including without limitation, the Letter of Credit Exposure and (b) all obligations of the Borrower or any of its Subsidiaries owing to any Swap Counterparty under any Swap Transaction. Notwithstanding the foregoing, Excluded Hedge Obligations shall not be an Obligation of any Guarantor that is not a Qualified ECP Obligor.
“Obligor” means, as the context may require, (a) the Borrower or (b) a Guarantor.
“OFAC” means the U.S. Department of the Treasury’s Office of Foreign Assets Control.
“Oil and Gas Properties” means (a) Hydrocarbon Interests; (b) the Properties now or hereafter pooled or unitized with Hydrocarbon Interests; (c) all presently existing or future unitization, pooling agreements and declarations of pooled units and the units created thereby (including without limitation all units created under orders, regulations and rules of any Governmental Authority) which may affect all or any portion of the Hydrocarbon Interests; (d) all operating agreements, contracts and other agreements, including production sharing contracts and agreements, which relate to any of the Hydrocarbon Interests or the production, sale, purchase, exchange or processing of Hydrocarbons from or attributable to such Hydrocarbon Interests; (e) all Hydrocarbons in and under and which may be produced and saved or attributable to the Hydrocarbon Interests, including all oil in tanks, and all rents, issues, profits, proceeds, products, revenues and other incomes from or attributable to the Hydrocarbon Interests; (f) all tenements, hereditaments, appurtenances and Properties in any manner appertaining, belonging, affixed or incidental to the Hydrocarbon Interests and (g) all Properties, rights, titles, interests and estates described or referred to above, including any and all Property, real or personal, now owned or hereinafter acquired and situated upon, used, held for use or useful in connection with the operating, working or development of any of such Hydrocarbon Interests or Property (excluding drilling rigs, automotive equipment, rental equipment or other personal Property which may be on such premises for the purpose of drilling a well or for other similar temporary uses) and including any and all oil wells, gas wells, injection wells or other wells, buildings, structures, fuel separators, liquid extraction plants, plant compressors, pumps, pumping units, field gathering systems, tanks and tank batteries, fixtures, valves, fittings, machinery and parts, engines, boilers, meters, apparatus, equipment, appliances, tools, implements, cables, wires, towers, casing, tubing and rods, surface leases, rights-of-way, easements and servitudes together with all additions, substitutions, replacements, accessions and attachments to any and all of the foregoing.
“OPA” has the meaning assigned to such term in the definition of “Environmental Laws”.
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“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 5.06).
“Palmetto Acquisition” has the meaning assigned to such term in the second recital.
“Palmetto Acquisition Documents” means, collectively, the Palmetto PSA and all schedules, exhibits, annexes and amendments thereto and all side letters and agreements affecting the terms thereof or entered into in connection therewith (including any Swap Agreement or novation thereof), together with all bills of sale, assignments, agreements, instruments and other documents executed, made or delivered by any Person in connection with the Palmetto Acquisition, in each case in form and substance reasonably acceptable to the Administrative Agent, in each case, as amended, supplemented, or otherwise modified from time to time in accordance with this Agreement.
“Palmetto Buyer” has the meaning assigned to such term in the second recital.
“Palmetto PSA” has the meaning assigned to such term in the second recital.
“Palmetto Seller” has the meaning assigned to such term in the second recital.
“Palmetto Reserve Report” means the reserve report concerning Oil and Gas Properties to be acquired by the Borrower and its Subsidiaries in accordance with the Palmetto PSA and derived from the reserve report prepared by Ryder Scott Company L.P. for Sanchez Energy Corp., effective as of December 31, 2014.
“Parent Company” means, with respect to a Lender, the bank holding company (as defined in Federal Reserve Board Regulation Y), if any, of such Lender, and/or any Person owning, beneficially or of record, directly or indirectly, a majority of the shares of such Lender.
“Participant” has the meaning assigned to such term in Section 12.04(c)(i).
“Participant Register” has the meaning assigned to such term in Section 12.04(c)(iii).
“PBGC” means the Pension Benefit Guaranty Corporation, or any successor thereto.
“Pension Plan” means any employee pension benefit plan (including a Multiple Employer Plan, but excluding a Multiemployer Plan) that is maintained or is contributed to by
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the Borrower, any of its Subsidiaries, and any ERISA Affiliate and is either covered by Title IV of ERISA or is subject to the minimum funding standards under Section 412 of the Code.
“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.
“Permitted Holders” means (a) Antonio R. Sanchez, III, Eduardo A. Sanchez, Patricio D. Sanchez, Ana Lee Sanchez Jacobs, and A.R. Sanchez, Jr., (b) any spouse or descendant of any individual named in (a), (c) any other natural person who is related to, or who has been adopted by, any such individual or such individual’s spouse referenced in (a)-(b) above within the second degree of kinship, (d) any member of SP Holdings and (e) any Person Controlled by any one or more of the foregoing.
“Permitted Refinancing Debt” means Debt (for purposes of this definition, “new Debt”) incurred in exchange for, or the net proceeds of which are used to refinance, all or any portion of the Unsecured Notes (the “Refinanced Debt”); provided that (a) the portion of such new Debt incurred to refinance the Refinanced Debt is in an aggregate principal amount not in excess of the sum of (i) the aggregate principal amount then outstanding of the Refinanced Debt (or, if the Refinanced Debt is exchanged or acquired for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration thereof, such lesser amount), (ii) any accrued and unpaid interest on the Refinanced Debt refinanced, and (iii) an amount necessary to pay any fees and expenses, including premiums, related to such exchange or refinancing; (b) such new Debt has a stated maturity no earlier than the date that is 180 days after the Maturity Date and an average life no shorter than the period beginning on the date of incurrence of such new Debt and ending on the date that is 180 days after the Maturity Date; (c) such new Debt does not contain covenants and Events of Default that are, taken as a whole, more onerous to the Borrower and its Subsidiaries than those imposed by the Refinanced Debt (as determined in good faith by the senior management of the General Partner); (d) the stated interest or coupon rate of such new Debt is reasonably acceptable to the Administrative Agent; and (e) such new Debt (and any Guarantees in respect thereof) is unsecured.
“Plan” means any employee pension benefit plan within the meaning of Section 3(2) of ERISA (including a Pension Plan, but excluding a Multiemployer Plan), maintained for employees of the Borrower, any of its Subsidiaries, or, with respect to any such plan that is subject to Section 412 of the Code or Title IV of ERISA, any ERISA Affiliate.
“Pledge and Security Agreement” means the Third Amended and Restated Pledge and Security Agreement dated as of the Closing Date executed by the Borrower and each of the Guarantors existing on the Closing Date, in favor of the Collateral Agent, which amends and restates that certain Second Amended and Restated Pledge and Security Agreement dated as of May 30, 2013, by and among the Borrower and each of the Guarantors in favor of Société Générale, for the benefit of Lenders and Swap Counterparties, and any supplements thereto executed by any Guarantor pursuant to Section 8.13(b), each as amended, restated, modified and supplemented from time to time.
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“Property” means any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible, including, without limitation, cash, securities, accounts and contract rights (including but not limited to Swap Agreements).
“Proposed Borrowing Base” has the meaning assigned to such term in Section 2.07(b).
“Proved Developed Nonproducing Reserves” means Oil and Gas Properties that are categorized as “Proved Reserves” that are both “Developed” and “Nonproducing”, as such terms are defined in the Definitions for Oil and Gas Reserves as promulgated by the Society of Petroleum Engineers (or any generally recognized successor) as in effect at the time in question.
“Proved Developed Producing Reserves” means Oil and Gas Properties that are categorized as “Proved Reserves” that are both “Developed” and “Producing”, as such terms are defined in the Definitions for Oil and Gas Reserves as promulgated by the Society of Petroleum Engineers (or any generally recognized successor) as in effect at the time in question.
“Proved Reserves” means Oil and Gas Properties that are categorized as “Proved Reserves” in the Definitions for Oil and Gas Reserves as promulgated by the Society of Petroleum Engineers (or any generally recognized successor) as in effect at the time in question.
“Proved Undeveloped Reserves” means Oil and Gas Properties that are categorized as “Proved Reserves” that are “Undeveloped Reserves”, as such terms are defined in the Definitions for Oil and Gas Reserves as promulgated by the Society of Petroleum Engineers (or any generally recognized successor) as in effect at the time in question.
“Qualified ECP Obligor” means, in respect of any Swap Obligation, each Obligor that has total assets exceeding $10,000,000 at the time such Swap Obligation is incurred or such other person as at such time constitutes an “eligible contract participant” under the Commodity Exchange Act or any regulation promulgated thereunder.
“Recipient” means the Administrative Agent, the Issuer, or any Lender or any other recipient of any payment to be made by or on account of any obligation of any Obligor hereunder.
“Redemption” means with respect to any Debt, the repurchase, redemption, prepayment, repayment or defeasance or any other acquisition or retirement for value (or the segregation of funds with respect to any of the foregoing) of any such Debt. “Redeem” has the correlative meaning thereto.
“Register” has the meaning assigned to such term in Section 12.04(b)(iv).
“Reimbursement Obligations” has the meaning assigned to such term in Section 2.08(f).
“Related Parties” means, with respect to any specified Person, such Person’s Affiliates and the respective directors, officers, employees, agents and advisors (including attorneys, accountants and experts) of such Person and such Person’s Affiliates.
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“Remedial Work” has the meaning assigned to such term in Section 8.10(a).
“Replacement Lender” has the meaning assigned to such term in Section 5.06.
“Reportable Event” means any of the events set forth in Section 4043(c) of ERISA, other than events for which the 30 day notice period has been waived.
“Required Lenders” means, at any time while no Loans or Letter of Credit Exposure is outstanding, Lenders having at least sixty-six and two-thirds percent (66-2/3%) of the Aggregate Maximum Credit Amount; and at any time while any Loans or Letter of Credit Exposure is outstanding, Lenders holding at least sixty-six and two-thirds percent (66-2/3%) of the outstanding aggregate principal amount of the Loans or participation interests in Letters of Credit (without regard to any sale by a Lender of a participation in any Loan under Section 12.04(c)).
“Reserve Report” means the Initial Reserve Report and each other report setting forth, as of each December 31st or June 30th (or such other date as required pursuant to Section 2.07 and the other provisions of this Agreement), the oil and gas reserves attributable to the Oil and Gas Properties of the Borrower and its Subsidiaries, together with a projection of the rate of production and future net income, severance and ad valorem taxes, operating expenses and capital expenditures with respect thereto as of such date, consistent with SEC reporting requirements at the time, provided that each such report hereafter delivered must (a) separately report on the Proved Developed Producing Reserves, Proved Developed Nonproducing Reserves and Proved Undeveloped Reserves of the Borrower and its Consolidated Subsidiaries, (b) take into account the Borrower’s or its Consolidated Subsidiaries’ (or the prior owner’s, if the Borrower or Consolidated Subsidiaries have owned such Oil and Gas Properties for less than one year prior to the date of the report) actual experiences with leasehold operating expenses and other costs in determining projected leasehold operating expenses and other costs, (c) identify and take into account any “overproduced” or “under-produced” status under gas balancing arrangements and (d) reflect recent information and analysis comparable in scope to that contained in the Initial Reserve Report.
“Responsible Officer” means, as to any Person, the Chief Executive Officer, the President or any Financial Officer of such Person. Unless otherwise specified, all references to a Responsible Officer herein shall mean a Responsible Officer of the General Partner, on behalf of the Borrower.
“Restricted Payment” means any dividend or other distribution (whether in cash, securities or other Property) with respect to any Equity Interests in the Borrower, or any payment (whether in cash, securities or other Property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such Equity Interests in the Borrower or any option, warrant or other right to acquire any such Equity Interests in the Borrower.
“Revolving Credit Exposure” means, with respect to any Lender at any time, the sum of the outstanding principal amount of such Lender’s Loans and its Letter of Credit Exposure at such time.
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“Rolling Period” means for any date of determination, the most recent four quarters ended on such date.
“Sanctions” has the meaning assigned to such term in Section 7.26(a).
“Secured Parties” means the Collateral Agent, the Administrative Agent, the Lenders, the Issuer and any Swap Counterparty, and each of their respective successors, transferees and assigns, in the case of the Lenders and the Issuer, as permitted by this Agreement.
“Security Instruments” means the Guarantee Agreement, Pledge and Security Agreement, Mortgages, and other agreements, instruments or certificates described or referred to in Exhibit C, and any and all other agreements, instruments, consents or certificates now or hereafter executed and delivered by the Borrower or any other Person in connection with, or as security for the payment or performance of the Obligations.
“Senior Secured Net Debt” means, as of any date of determination, the sum of the aggregate outstanding principal amount of the Loans and the Letter of Credit Exposure less Available Cash.
“SOG” means Sanchez Oil & Gas Corporation, a Delaware corporation.
“SP Holdings” means SP Holdings, LLC a Delaware limited liability company.
“S&P” means Standard & Poor’s Ratings Group, a division of The McGraw-Hill Companies, Inc., and any successor thereto that is a nationally recognized rating agency.
“Statutory Reserve Rate” means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board to which the Administrative Agent is subject for eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of the Board). Such reserve percentages shall include those imposed pursuant to such Regulation D. Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.
“Subordinated Note” means the Initial Subordinated Note and any additional notes issued as payment in kind of interest on such Initial Subordinated Note or any other Subordinated Note in each case in accordance with the terms thereof.
“Subsidiary” means: (a) any Person of which at least a majority of the outstanding Equity Interests having by the terms thereof ordinary voting power to elect a majority of the board of directors, manager or other governing body of such Person (irrespective of whether or not at the time Equity Interests of any other class or classes of such Person shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned or Controlled by the Borrower or one or more of its Subsidiaries or by the
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Borrower and one or more of its Subsidiaries and (b) any partnership of which the Borrower or any of its Subsidiaries is a general partner. Unless otherwise indicated herein, each reference to the term “Subsidiary” shall mean a Subsidiary of the Borrower.
“Swap Agreement” means any agreement with respect to any swap, forward, future or derivative transaction or option or similar agreement, whether exchange traded, “over-the-counter” or otherwise, involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions, and in any event, any other agreement, contract or transaction that constitutes a “swap” within the meaning of Section 1a(47) of the Commodity Exchange Act; provided that no phantom stock or similar plan providing for payments only on account of services provided by current or former directors, officers, employees or consultants of the Borrower or any of its Subsidiaries shall be a Swap Agreement; provided, that options, warrants, rights and other similar interests in respect of Equity Interests in the Borrower shall not constitute Swap Agreements for purposes of Section 9.17.
“Swap Counterparty” means, as applicable, any Person that (a) was a party to a particular Swap Transaction with the Borrower or any of its Subsidiaries at the time it became a Lender under the Credit Agreement, or (b) was a Lender or an Existing Lender (or Affiliate of a Lender or an Existing Lender) at the time it became a party to a particular Swap Transaction with the Borrower or any of its Subsidiaries.
“Swap Obligation” of any Person means all obligations (including, without limitation, any amounts which accrue after the commencement of any proceeding under any Debtor Relief Law with respect to such Person, whether or not allowed or allowable as a claim under any proceeding under any Debtor Relief Law) of such Person in respect of any Swap Transaction.
“Swap Transaction” means any trade or other transaction entered into by a Person under a Swap Agreement.
“Synthetic Leases” means, in respect of any Person, all leases which shall have been, or should have been, in accordance with GAAP, treated as operating leases on the financial statements of the Person liable (whether contingently or otherwise) for the payment of rent thereunder and which were properly treated as indebtedness for borrowed money for purposes of U.S. federal income taxes, if the lessee in respect thereof is obligated to either purchase for an amount in excess of, or pay upon early termination an amount in excess of, 80% of the residual value of the Property subject to such operating lease upon expiration or early termination of such lease.
“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.
“Termination Date” means the earlier of the Maturity Date and the date of termination of the Loan Commitments pursuant to Sections 2.06 or 10.02.
“Total Net Debt” means Debt less Available Cash.
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“Transactions” means, with respect to (a) the Borrower, the execution, delivery and performance by the Borrower of this Agreement, and each other Loan Document to which it is a party, the borrowing of Loans, the use of the proceeds thereof and the issuance of Letters of Credit hereunder, and the grant of Liens by the Borrower on Mortgaged Properties and other Properties pursuant to the Security Instruments and (b) any Guarantor, the execution, delivery and performance by such Guarantor of each Loan Document to which it is a party, the guaranteeing of the Obligations and the other obligations under the Guarantee Agreement by such Guarantor and such Guarantor’s grant of the security interests and provision of Collateral under the Security Instruments, and the grant of Liens by such Guarantor on Mortgaged Properties and other Properties pursuant to the Security Instruments.
“Type” means, relative to any Loan, the portion thereof, if any, being maintained as an ABR Loan or a Eurodollar Loan.
“U.S. Person” means any Person that is a “United States Person” as defined in Section 7701(a)(30) of the Code.
“UCC” means the Uniform Commercial Code as in effect in the State of New York; provided that, if perfection or the effect of perfection or non-perfection or the priority of any security interest in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York, “UCC” means the Uniform Commercial Code as in effect from time to time in such other jurisdiction for purposes of the provisions hereof relating to such perfection, effect of perfection or non-perfection or priority.
“Unsecured Notes” means any senior unsecured notes, subordinated unsecured notes or senior subordinated unsecured notes, in each case, issued by the Borrower or a Guarantor in one or more transactions. For the avoidance of doubt, the Subordinated Notes shall not constitute Unsecured Notes for purposes of this Agreement.
“Unsecured Notes Documents” means, as applicable, both individually and collectively, any Unsecured Notes and any related Unsecured Notes Indenture.
“Unsecured Notes Indenture” means, collectively, any indenture by and among the Borrower or a Guarantor, as issuer, the guarantors, if any, party thereto and a trustee, and any and all related documentation entered into in connection therewith, pursuant to which Unsecured Notes shall have been issued, as the same may be amended, restated, modified or supplemented from time to time.
“Wholly-Owned Subsidiary” means any Subsidiary of which all of the outstanding Equity Interests (other than any directors’ qualifying shares mandated by Governmental Requirements), on a fully-diluted basis, are owned by the Borrower or one or more of the Wholly-Owned Subsidiaries or are owned by the Borrower and one or more of the Wholly-Owned Subsidiaries.
“Working Interest” means the property interest which entitles the owner thereof to explore and develop certain land for oil and gas production purposes, whether under an oil and gas lease or unit, a compulsory pooling order or otherwise.
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Section 1.03 Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to have the same meaning and effect as the word “shall”. Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth in the Loan Documents herein), (b) any reference herein to any law shall be construed as referring to such law as amended, modified, codified or reenacted, in whole or in part, and in effect from time to time, (c) any reference herein to any Person shall be construed to include such Person’s successors and assigns (subject to the restrictions contained in the Loan Documents herein), (d) 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, (e) with respect to the determination of any time period, the word “from” means “from and including” and the word “to” means “to and including” and (f) any reference herein to Articles, Sections, Annexes, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Annexes, Exhibits and Schedules to, this Agreement. No provision of this Agreement or any other Loan Document shall be interpreted or construed against any Person solely because such Person or its legal representative drafted such provision.
Section 1.04 Accounting Terms and Determinations; GAAP. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all determinations with respect to accounting matters hereunder shall be made, and all financial statements and certificates and reports as to financial matters required to be furnished to the Administrative Agent or the Lenders hereunder shall be prepared, in accordance with GAAP, applied on a basis consistent with the Financial Statements except for changes in which the Borrower’s independent certified public accountants concur and which are disclosed to Administrative Agent on the next date on which financial statements are required to be delivered to the Lenders pursuant to Section 8.01(a); provided that, unless the Borrower and the Required Lenders shall otherwise agree in writing, no such change shall modify or affect the manner in which compliance with the covenants contained herein is computed such that all such computations shall be conducted utilizing financial information presented consistently with prior periods.
Section 2.01 Loan Commitments. Subject to the terms and conditions set forth herein, each Lender agrees to make Loans to the Borrower during the Availability Period in an aggregate principal amount that will not result in (a) such Lender’s Revolving Credit Exposure exceeding the lesser of such Lender’s Applicable Percentage of the Borrowing Base and such Lender’s Maximum Credit Amount or (b) the Revolving Credit Exposures exceeding the lesser of the Borrowing Base and the Aggregate Maximum Credit Amount. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, repay and reborrow the Loans.
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Section 2.02 Loans and Borrowings.
Borrowings; Several Obligations. Each Loan shall be made as part of a Borrowing consisting of Loans made by the Lenders ratably in accordance with their respective Loan Commitments. The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the Loan Commitments are several and no Lender shall be responsible for any other Lender’s failure to make Loans as required.
Types of Loans. Each Borrowing shall be comprised entirely of ABR Loans or Eurodollar Loans as the Borrower may request in accordance herewith. Each Lender at its option may make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Agreement.
Minimum Amounts; Limitation on Number of Borrowings. At the commencement of each Interest Period for any Eurodollar Borrowing, such Borrowing shall be in an aggregate amount that is an integral multiple of $500,000 and not less than $1,000,000. At the time that each ABR Borrowing is made, such Borrowing shall be in an aggregate amount that is an integral multiple of $250,000 and not less than $1,000,000; provided that an ABR Borrowing may be in an aggregate amount that is equal to the entire unused balance of the Aggregate Maximum Credit Amount or that is required to finance the reimbursement of a Letter of Credit Disbursement as contemplated by Section 2.08(e). Borrowings of more than one Type may be outstanding at the same time; provided that there shall not at any time be more than a total of six (6) Eurodollar Borrowings outstanding. Notwithstanding any other provision of this Agreement, the Borrower shall not be entitled to request, or to elect to continue, any Borrowing if the Interest Period requested with respect thereto would end after the Maturity Date.
Notes. The Loans made by each Lender shall, if requested by such Lender in writing, be evidenced by a single promissory note of the Borrower in substantially the form of Exhibit A, dated, in the case of (i) any Lender party hereto as of the date of this Agreement, as of the date of this Agreement or (ii) any Lender that becomes a party hereto pursuant to an Assignment and Assumption, as of the effective date of the Assignment and Assumption, payable to the order of such Lender in a principal amount equal to its Maximum Credit Amount as in effect on such date, and otherwise duly completed. In the event that any Lender’s Maximum Credit Amount increases or decreases for any reason (whether pursuant to Section 2.06, Section 12.04(b) or otherwise), the Borrower shall deliver or cause to be delivered on the effective date of such increase or decrease, a new Note payable to the order of such Lender in a principal amount equal to its Maximum Credit Amount after giving effect to such increase or decrease, and otherwise duly completed and the affected Lender shall deliver the Note being replaced to the Borrower immediately. The date, amount, interest rate and Interest Period of each Loan made by each Lender, and all payments made on account of the principal thereof, shall be recorded by such Lender on its books for its Note, and, prior to any transfer, may be endorsed by such Lender on a schedule attached to such Note or any continuation thereof or on any separate record maintained by such Lender. Failure to make any such notation or to attach a schedule shall not affect any Lender’s or the Borrower’s rights or obligations in respect of such Loans or affect the validity of such transfer by any Lender of its Note.
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Section 2.03 Requests for Borrowings. To request a Borrowing, the Borrower shall notify the Administrative Agent of such request by telephone, email or facsimile request or by delivery of a written Borrowing Request not later than (a) Noon, New York time, three (3) Business Days before the date of the proposed Borrowing, in the case of Eurodollar Borrowings, or (b) 11:00 a.m. New York time on the same Business Day, in the case of ABR Borrowings. Each such telephonic, email or facsimile request not evidenced by delivery of a written Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Borrowing Request in the form attached hereto as Exhibit E. Each such telephonic, email, facsimile or written Borrowing Request shall specify the following information in compliance with Section 2.02:
the aggregate amount of the requested Borrowing;
the date of such Borrowing, which shall be a Business Day;
in the case of Eurodollar Borrowings, the initial Interest Period to be applicable to such Borrowing, which shall be a period contemplated by the definition of the term “Interest Period”;
the amount of the then effective Borrowing Base, the current Revolving Credit Exposures (without regard to the requested Borrowing) and the pro forma Revolving Credit Exposures (giving effect to the requested Borrowing); and
the location and number of the Borrower’s account to which funds are to be disbursed, which shall comply with the requirements of Section 2.05.
In the case of Eurodollar Borrowings, if no Interest Period is specified with respect to any requested Borrowing, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration. Each Borrowing Request shall constitute a representation that the amount of the requested Borrowing shall not cause the Revolving Credit Exposures to exceed the lesser of the Aggregate Maximum Credit Amount and the then effective Borrowing Base.
Promptly following receipt of a Borrowing Request in accordance with this Section 2.03, the Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lender’s Loan to be made as part of the requested Borrowing.
Section 2.04 Interest Elections.
(a) Continuance. Each Eurodollar Borrowing initially shall have an initial Interest Period as specified in such Borrowing Request. Thereafter, the Borrower may elect to continue such Borrowing and may elect Interest Periods therefor, all as provided in this Section 2.04. The Borrower may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing.
(b) Interest Election Requests. To make an election pursuant to this Section 2.04, the Borrower shall notify the Administrative Agent of such election by telephone by the time that a
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Borrowing Request would be required under Section 2.03. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Interest Election Request in the form attached hereto as Exhibit F and signed by the Borrower.
(c) Information in Interest Election Requests. Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.02:
the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to Section 2.04(c)(iii) shall be specified for each resulting Borrowing);
the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day; and
the Interest Period to be applicable to such Borrowing after giving effect to such election, which shall be a period contemplated by the definition of the term “Interest Period”.
If any such Interest Election Request does not specify an Interest Period, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration.
(d) Notice to Lenders by the Administrative Agent. Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each Lender of the details thereof and of such Lender’s portion of each resulting Borrowing.
(e) Effect of Failure to Deliver Timely Interest Election Request and Events of Default and Borrowing Base Deficiencies on Interest Election. If the Borrower fails to deliver a timely Interest Election Request with respect to a Borrowing prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period, such Borrowing shall be continued as a Loan having an Interest Period of one month. Notwithstanding any contrary provision hereof, if an Event of Default or a Borrowing Base Deficiency has occurred and is continuing, then no outstanding Borrowing may be continued as a Eurodollar Borrowing (and any Interest Election Request that requests the continuation of any Borrowing shall be ineffective).
Section 2.05 Funding of Borrowing.
(a) Funding by Lenders. Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 2:00 p.m., New York time, to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders. The Administrative Agent will make such Loans available to the Borrower by promptly crediting the amounts so received, in like funds, to an account of the Borrower designated by the Borrower (or, in the case of the initial Borrowing on the Closing Date, to an account of the Palmetto Seller designated by the Borrower) in the applicable Borrowing Request; provided that Loans made to finance the reimbursement of a Letter of Credit
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Disbursement as provided in Section 2.08(e) shall be remitted by the Administrative Agent to the Issuer that made such Letter of Credit Disbursement. Nothing herein shall be deemed to obligate any Lender to obtain the funds for its Loan in any particular place or manner or to constitute a representation by any Lender that it has obtained or will obtain the funds for its Loan in any particular place or manner.
(b) Presumption of Funding by the Lenders. Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any Advance that such Lender will not make available to the Administrative Agent such Lender’s share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with Section 2.05(a) and may, in reliance upon such assumption, make available to the Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the applicable Lender and the Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at (i) in the case of such Lender, the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation or (ii) in the case of the Borrower, the interest rate applicable to Loans. If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lender’s Loan included in such Borrowing.
Section 2.06 Termination and Reduction of Aggregate Maximum Credit Amount.
(a) Scheduled Termination of Loan Commitments. Unless previously terminated, the Loan Commitments shall terminate on the Maturity Date. If at any time the Aggregate Maximum Credit Amount or the Borrowing Base is terminated or reduced to zero, then the Loan Commitments shall terminate on the effective date of such termination or reduction.
(b) Optional Termination and Reduction of Aggregate Credit Amounts.
The Borrower may at any time terminate, or from time to time reduce, the Aggregate Maximum Credit Amount; provided that (A) each reduction of the Aggregate Maximum Credit Amount shall be in an amount that is an integral multiple of $500,000 and not less than $1,000,000 and (B) the Borrower shall not terminate or reduce the Aggregate Maximum Credit Amount if, after giving effect to any concurrent prepayment of the Loans in accordance with Section 3.03(c), the Revolving Credit Exposures would exceed the Total Commitments.
The Borrower shall notify the Administrative Agent of any election to terminate or reduce the Aggregate Maximum Credit Amount under Section 2.06(b)(i) at least three (3) Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the Lenders of the contents thereof. Each notice delivered by the Borrower pursuant to this Section 2.06(b)(ii) shall be irrevocable. Any termination or reduction of the Aggregate Maximum Credit Amount shall be permanent and may not be reinstated. Each reduction
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of the Aggregate Maximum Credit Amount shall be made ratably among the Lenders in accordance with each Lender’s Applicable Percentage.
(a) For the period from and including the Closing Date to but excluding the date of the first determination of the Borrowing Base pursuant to the further provisions of this Section 2.07, the initial amount of the Borrowing Base has been set by the Administrative Agent and acknowledged by the Borrower and agreed to by the Lenders to be $110,000,000. For each and every determination or redetermination of the Borrowing Base under this Agreement, the Borrowing Base shall be determined or redetermined based on the oil and gas reserves attributable to the Oil and Gas Properties of the Borrower and its Subsidiaries.
(b) Promptly after December 31 of each calendar year, commencing December 31, 2015, and in any event prior to April 1st of each calendar year (commencing April 1, 2016), the Borrower shall furnish to the Administrative Agent a Reserve Report in form and substance reasonably satisfactory to the Administrative Agent, prepared by an Approved Engineer, which Reserve Report shall be dated as of December 31 of the immediately preceding calendar year. In addition, within ninety (90) days after each June 30, commencing June 30, 2015, the Borrower shall furnish to the Administrative Agent a Reserve Report in form and substance satisfactory to the Administrative Agent prepared by the Borrower’s petroleum engineers, which report shall be dated as of June 30 of such calendar year. Each such Reserve Report shall be accompanied by additional data concerning pricing, hedging, quantities and purchasers of production, and other information and engineering and geological data as the Administrative Agent or the Required Lenders may reasonably request. Within fifteen (15) days after receipt of such Reserve Report and all such information, the Administrative Agent shall make an initial determination of the new Borrowing Base (the “Proposed Borrowing Base”) and upon such initial determination shall promptly notify the Lenders in writing of its initial determination of the Proposed Borrowing Base. Such initial determinations made by the Administrative Agent shall be so made by the Administrative Agent in the exercise of its sole discretion in accordance with the Administrative Agent’s customary practices and standards for oil and gas lending as they exist at the particular time, and may include a consideration of the value of the Oil and Gas Properties that are subject to legal, valid and enforceable mortgage liens held by the Administrative Agent for the ratable benefit of the Lenders. In no event shall the Proposed Borrowing Base exceed the Aggregate Maximum Credit Amount of the Lenders. The Required Lenders shall approve or reject the Administrative Agent’s initial determinations of the Proposed Borrowing Base by written notice to the Administrative Agent within fifteen (15) days of the Administrative Agent’s notification of its initial determinations; provided, however, that with respect to any Proposed Borrowing Base that is equal to or less than the Borrowing Base then in effect (but not with respect to any increase in the Borrowing Base) the failure by any Lender to confirm or disapprove in writing the Administrative Agent’s determination of the Proposed Borrowing Base shall be deemed an approval of the Proposed Borrowing Base. If the Required Lenders fail to approve any such determination of the Proposed Borrowing Base made by the Administrative Agent hereunder in such fifteen (15) day period, then the Administrative Agent shall poll the Lenders to ascertain the highest Proposed Borrowing Base then acceptable to the Required Lenders for purposes of this Section 2.07(b) and, subject to the last sentence of this Section 2.07(b), such amounts shall become the new Borrowing Base, effective on the date
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specified in this Section 2.07. Until such approval or deemed approval, the Borrowing Base in effect before the Proposed Borrowing Base shall remain in effect. Upon agreement by the Administrative Agent and the Required Lenders of the new Borrowing Base, the Administrative Agent shall, by written notice to the Borrower and the Lenders, designate the new Borrowing Base available to the Borrower. Such designation shall be effective as of the Business Day specified in such written notice (or, if no effective date is specified in such written notice, the next Business Day following delivery of such written notice), and such new Borrowing Base shall remain in effect until the next determination or redetermination of the Borrowing Base in accordance with this Agreement. Anything herein contained to the contrary notwithstanding, any determination or redetermination of the Borrowing Base resulting in any increase of the Borrowing Base in effect immediately prior to such determination or redetermination shall require the approval of all the Lenders in their sole discretion in accordance with their respective customary practices and standards for oil and gas lending as they exist at the particular time, and may include a consideration of the value of the Oil and Gas Properties that are subject to legal, valid and enforceable mortgage liens held by the Administrative Agent for the ratable benefit of the Lenders.
(c) In addition to each scheduled redetermination of the Borrowing Base pursuant to Section 2.07(b) (and in addition to any redetermination of the Borrowing Base pursuant to Section 2.07(f) and (g)), the Borrower may by notifying the Administrative Agent thereof, and the Administrative Agent may, at the direction of the Required Lenders, by notifying the Borrower thereof, each elect to cause the Borrowing Base to be redetermined once between each scheduled Redetermination pursuant to Section 2.07(b). If such discretionary redetermination of the Borrowing Base pursuant to the provisions of this Section 2.07(c) is initiated by the Borrower, the Borrower shall deliver a written request to the Administrative Agent together with a Reserve Report in form and substance satisfactory to the Administrative Agent, prepared by the Borrower’s petroleum engineers, containing information similar to the Reserve Reports delivered pursuant to Section 2.07(b), and such other updated engineering, production, operating and other data as the Administrative Agent, the Issuer or any Lender may reasonably request; provided that if the Required Lenders have requested the discretionary redetermination of the Borrowing Base pursuant to the provisions of this Section 2.07(c), the Borrower shall deliver to the Administrative Agent such Reserve Report and other information within thirty (30) days of receipt of a request therefor. The Administrative Agent shall have fifteen (15) days following receipt of such requested information to make an initial redetermination of the Borrowing Base, and the Administrative Agent and the Required Lenders shall approve and designate the new Borrowing Base in accordance with the procedures and standards described in Section 2.07(b).
(d) With the delivery of each Reserve Report, the Borrower shall provide to the Administrative Agent a certificate from a Responsible Officer certifying that, to the best of such Responsible Officer’s knowledge and in all material respects: (i) the information contained in each such Reserve Report and any other information delivered in connection therewith is true and correct, (ii) the Borrower or the Guarantors owns good and defensible title to the Oil and Gas Properties evaluated in each such Reserve Report and such Properties are free of all Liens except for Liens permitted by Section 9.03, (iii) except as set forth on an exhibit to the certificate, on a net basis there are no gas imbalances, take or pay or other prepayments in excess of the volume specified in Section 7.20 with respect to their Oil and Gas Properties evaluated in such Reserve Report that would require the Borrower or any of its Subsidiaries to deliver Hydrocarbons either
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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 Oil and Gas Properties have been transferred since the date of the last Borrowing Base determination except as set forth on an exhibit to the certificate, which certificate shall list all of its Oil and Gas Properties sold and in such detail as reasonably required by the Administrative Agent, (v) attached to the certificate is a list of all marketing agreements entered into subsequent to the later of the date hereof or the most recently delivered Reserve Report that the Borrower could reasonably be expected to have been obligated to list on Schedule 7.20 had such agreement been in effect on the date hereof, (vi) attached thereto is a schedule of the Oil and Gas Properties evaluated by such Reserve Report that are Mortgaged Properties and demonstrating the percentage of the present value that such Mortgaged Properties represent, and (vii) the outstanding amount of the Debt of the Borrower or any of its Subsidiaries does not exceed the amount permitted to be incurred pursuant to Section 9.02(f).
(e) Notwithstanding anything herein the contrary, in the event that the Borrower does not furnish any required Reserve Report within ten (10) days of date the required herein, the Administrative Agent and the Required Lenders may nonetheless designate the Borrowing Base from time to time thereafter until the Administrative Agent receives such Reserve Report, whereupon the Administrative Agent and the Required Lenders or all Lenders, as applicable, shall designate a new Borrowing Base in accordance with the general procedures outlined in Section 2.07(b).
(f) In addition to any redetermination described in Section 2.07(b) or (c), if at any time the aggregate fair market value of Oil and Gas Properties sold or disposed of pursuant to Section 9.12(d), together with the aggregate net fair market value to the Borrower of all Material Swap Transactions, in each case, since the most recent redetermination of the Borrowing Base, exceeds five percent (5%) of the value of proved developed Oil and Gas Properties included in the most recently delivered Reserve Report, then the Administrative Agent may, at the direction of the Required Lenders, by notifying the Borrower thereof, reduce the Borrowing Base, effective immediately upon such sale, disposition or consummation of Material Swap Transaction by an amount equal to the Borrowing Base value (as determined by the Administrative Agent in its reasonable judgment) of such Oil and Gas Properties sold or disposed of and Swap Transactions in respect of commodities assigned, terminated (other than as a result of the expiration thereof), unwound, sold or liquidated, and such new Borrowing Base shall be effective and applicable to the Borrower, the Administrative Agent, the Issuer and the Lenders until the next redetermination or modification of the Borrowing Base pursuant to this Agreement. Upon any such redetermination, the Administrative Agent shall promptly deliver a New Borrowing Base Notice to the Borrower and the Lenders.
(g) Notwithstanding the requirements of Section 12.02(b)(ii), any decrease of the Borrowing Base resulting solely as a result of any incurrence of Debt incurred by the Borrower or any of its Subsidiaries pursuant to Section 9.02(f) shall become effective upon the Administrative Agent’s notice thereof to the Borrower and the Lenders, and shall not require any approval of the Lenders or the Required Lenders.
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Section 2.08 Letters of Credit.
(a) General. Subject to the terms and conditions set forth herein, the Borrower may request the Issuer to issue Letters of Credit for its own account or for the account of any of its Subsidiaries, in a form reasonably acceptable to the Administrative Agent and such Issuer, at any time and from time to time during the Availability Period; provided that the Borrower may not request the issuance, amendment, renewal or extension of Letters of Credit hereunder if a Borrowing Base Deficiency exists at such time or would exist as a result thereof. In the event of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of any Letter of Credit Agreement submitted by the Borrower to, or entered into by the Borrower with, an Issuer relating to any Letter of Credit, the terms and conditions of this Agreement shall control.
(b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions. To request the issuance of a Letter of Credit (or the amendment, renewal or extension of an outstanding Letter of Credit), the Borrower shall deliver as permitted by Section 12.01(a) (or transmit by electronic communication, if arrangements for doing so have been approved by the Issuer) to the Issuer and the Administrative Agent (not less than five (5) Business Days in advance of the requested date of issuance, amendment, renewal or extension) a notice in the form of Exhibit G:
requesting the issuance of a Letter of Credit or identifying the Letter of Credit issued by such Issuer to be amended, renewed or extended;
specifying the date of issuance, amendment, renewal or extension (which shall be a Business Day);
specifying the date on which such Letter of Credit is to expire (which shall comply with Section 2.08(c));
specifying the amount of such Letter of Credit;
specifying the name and address of the beneficiary thereof and such other information as shall be necessary to prepare, amend, renew or extend such Letter of Credit; and
specifying the amount of the then effective Borrowing Base and whether a Borrowing Base Deficiency exists at such time, the current Revolving Credit Exposures (without regard to the requested Letter of Credit or the requested amendment, renewal or extension of an outstanding Letter of Credit) and the pro forma Revolving Credit Exposures (giving effect to the requested Letter of Credit or the requested amendment, renewal or extension of an outstanding Letter of Credit).
Each notice shall constitute a representation that after giving effect to the requested issuance, amendment, renewal or extension, as applicable, (i) the Letter of Credit Exposure shall not exceed the Letter of Credit Commitment and (ii) the Revolving Credit Exposure shall not exceed the lesser of the Aggregate Maximum Credit Amount and the then effective Borrowing Base.
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If requested by the Issuer, the Borrower also shall submit a letter of credit application on such Issuer’s standard form in connection with any request for a Letter of Credit.
(c) Expiration Date. Each Letter of Credit shall expire at or prior to the close of business on the earlier of (i) the date one (1) year after the date of the issuance of such Letter of Credit (or, in the case of any renewal or extension thereof, one (1) year after such renewal or extension) and (ii) the date that is five Business Days prior to the Maturity Date.
(d) Participations. By the issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing the amount thereof) and without any further action on the part of the Issuer that issues such Letter of Credit or the Lenders, each Issuer that issues a Letter of Credit hereunder hereby grants to each Lender, and each Lender hereby acquires from such Issuer, a participation in such Letter of Credit equal to such Lender’s Applicable Percentage of the aggregate amount available to be drawn under such Letter of Credit. In consideration and in furtherance of the foregoing, each Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for the account of the Issuer that issues a Letter of Credit hereunder, such Lender’s Applicable Percentage of each Letter of Credit Disbursement made by such Issuer and not reimbursed by the Borrower on the date due as provided in Section 2.08(e), or of any reimbursement payment required to be refunded to the Borrower for any reason. Each Lender acknowledges and agrees that its obligation to acquire participations pursuant to this Section 2.08(d) in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit or the occurrence and continuance of a Default, the existence of a Borrowing Base Deficiency or reduction or termination of the Loan Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever.
(e) Reimbursement. If the Issuer shall make any Letter of Credit Disbursement in respect of a Letter of Credit issued by such Issuer, the Borrower shall reimburse such Letter of Credit Disbursement by paying to the Administrative Agent for the account of the applicable Issuer at the Alternate Base Rate plus the Applicable Margin, an amount equal to such Letter of Credit Disbursement not later than 12:00 p.m., New York time, on the day such Letter of Credit Disbursement is made, if the Borrower shall have received notice of such Letter of Credit Disbursement prior to 10:00 a.m., New York time, on such date, or, if such notice has not been received by the Borrower prior to such time on such date, then not later than 2:00 p.m., New York time, on the next succeeding Business Day; provided that if such Letter of Credit Disbursement is not less than $1,000,000, the Borrower shall, subject to the conditions to Borrowing set forth herein, be deemed to have requested, and the Borrower does hereby request under such circumstances, that such payment be financed with an ABR Loan in an equivalent amount and, to the extent so financed, the Borrower’s obligation to make such payment shall be discharged and replaced by the resulting ABR Loan. If the Borrower fails to make such payment when due, the Administrative Agent shall notify each Lender of the applicable Letter of Credit Disbursement, the payment then due from the Borrower in respect thereof and such Lender’s Applicable Percentage thereof. Promptly following receipt of such notice, each Lender shall pay to the Administrative Agent its Applicable Percentage of the payment then due from the Borrower, in the same manner as provided in Section 2.05 with respect to Loans made by such Lender (and Section 2.05 shall apply, mutatis mutandis, to the payment obligations of the Lenders), and the Administrative Agent shall promptly pay to the Issuer that issued such Letter
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of Credit the amounts so received by it from the Lenders. Promptly following receipt by the Administrative Agent of any payment from the Borrower pursuant to this Section 2.08(e), the Administrative Agent shall distribute such payment to the Issuer that issued such Letter of Credit or, to the extent that Lenders have made payments pursuant to this Section 2.08(e) to reimburse such Issuer, then to such Lenders and such Issuer as their interests may appear. Any payment made by a Lender pursuant to this Section 2.08(e) to reimburse the Issuer for any Letter of Credit Disbursement (other than the funding of ABR Loans as contemplated above) shall not constitute a Loan and shall not relieve the Borrower of its obligation to reimburse such Letter of Credit Disbursement. Any Letter of Credit Disbursement not reimbursed by the Borrower or funded as a Loan prior to 2:00 p.m., New York time, shall bear interest for such day at the ABR plus the Applicable Margin.
(f) Obligations Absolute. The obligation (a “Reimbursement Obligation”) of the Borrower to reimburse Letter of Credit Disbursements as provided in Section 2.08(e) shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of any Letter of Credit, any Letter of Credit Agreement or this Agreement, or any term or provision therein, (ii) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect, (iii) payment by the Issuer under a Letter of Credit issued by such Issuer against presentation of a draft or other document that does not comply with the terms of such Letter of Credit or any Letter of Credit Agreement, or (iv) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section 2.08(f), constitute a legal or equitable discharge of, or provide a right of setoff against, the Borrower’s obligations hereunder. Neither the Administrative Agent, the Lenders nor the Issuer, nor any of their Related Parties shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of the Issuer; provided that the foregoing shall not be construed to excuse the Issuer from liability to the Borrower to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Borrower to the extent permitted by Governmental Requirements) suffered by the Borrower that are caused by such Issuer’s failure to exercise commercially reasonable care when issuing Letters of Credit and determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof or suffered by the Borrower as a result of Issuer’s gross negligence or willful misconduct. The parties hereto expressly agree that, in the absence of gross negligence or willful misconduct on the part of the Issuer (as finally determined by a court of competent jurisdiction), such Issuer shall be deemed to have exercised all requisite care in each such determination. In furtherance of the foregoing and without limiting the generality thereof, the parties agree that, with respect to documents presented which appear on their face to be in substantial compliance with the terms of a Letter of Credit, the Issuer that issued such Letter of Credit may, in its sole discretion, either accept and make payment upon such documents without responsibility for further investigation, regardless
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of any notice or information to the contrary, or refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit.
(g) Disbursement Procedures. Each Issuer shall, promptly following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit issued by such Issuer. Such Issuer shall promptly notify the Administrative Agent and the Borrower by telephone (confirmed by telecopy) of such demand for payment and whether such Issuer has made or will make a Letter of Credit Disbursement thereunder; provided that any failure to give or delay in giving such notice shall not relieve the Borrower of its obligation to reimburse such Issuer and the Lenders with respect to any such Letter of Credit Disbursement.
(h) Interim Interest. If the Issuer shall make any Letter of Credit Disbursement, then, until the Borrower shall have reimbursed such Issuer for such Letter of Credit Disbursement (either with its own funds or a Borrowing under Section 2.08(e)), the unpaid amount thereof shall bear interest, for each day from and including the date such Letter of Credit Disbursement is made to but excluding the date that the Borrower reimburses such Letter of Credit Disbursement, at the rate per annum then applicable to ABR Loans. Interest accrued pursuant to this Section 2.08(h) shall be for the account of such Issuer, except that interest accrued on and after the date of payment by any Lender pursuant to Section 2.08(e) to reimburse such Issuer shall be for the account of such Lender to the extent of such payment.
(i) Replacement of an Issuer. The Issuer may be replaced or resign at any time by written agreement among the Borrower, the Administrative Agent, such resigning or replaced Issuer and, in the case of a replacement, the successor Issuer. The Administrative Agent shall notify the Lenders of any such resignation or replacement of an Issuer. At the time any such resignation or replacement shall become effective, the Borrower shall pay all unpaid fees accrued for the account of the resigning or replaced Issuer pursuant to Section 3.04(b). In the case of the replacement of an Issuer, from and after the effective date of such replacement, (i) the successor Issuer shall have all the rights and obligations of the replaced Issuer under this Agreement with respect to Letters of Credit to be issued thereafter and (ii) references herein to the “Issuer” shall be deemed to refer to such successor or to any previous Issuer, or to such successor and all previous Issuers, as the context shall require. After the resignation or replacement of an Issuer hereunder, the resigning or replaced Issuer shall remain a party hereto and shall continue to have all the rights and obligations of an Issuer under this Agreement with respect to Letters of Credit issued by it prior to such resignation or replacement, but shall not be required to issue additional Letters of Credit.
(j) Cash Collateralization. If (i) any Event of Default shall occur and be continuing and the Borrower receives notice from the Administrative Agent or the Required Lenders demanding the deposit of cash collateral pursuant to this Section 2.08(j), (ii) the Borrower is required to Cash Collateralize a Defaulting Lender’s or Impacted Lender’s Letter of Credit Exposure pursuant to Section 2.10(d) or (e) or (iii) the Borrower is required to pay to the Administrative Agent the excess attributable to a Letter of Credit Exposure in connection with any prepayment pursuant to Section 3.03(c), then the Borrower shall deposit, in an account with the Administrative Agent, in the name of the Administrative Agent and for the benefit of the Lenders (such account, the “Cash Collateral Account”), an amount in cash equal to, in the case of an Event of Default or a Cash Collateralization pursuant to Section 2.10(d), the Letter of Credit
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Exposure, and in the case of a payment required by Section 3.03(c), the amount of such excess as provided in Section 3.03(c), as of such date plus any accrued and unpaid interest thereon; provided that the obligation to deposit such cash collateral shall become effective immediately, and such deposit shall become immediately due and payable, without demand or other notice of any kind, upon the occurrence of any Event of Default with respect to the Borrower or any of its Subsidiaries described in Section 10.01(h) or Section 10.01(i). The Borrower hereby grants to the Administrative Agent, for the benefit of each Issuer and the Lenders, an exclusive first priority and continuing perfected security interest in and Lien on such account and all cash, checks, drafts, certificates and instruments, if any, from time to time deposited or held in such account, all deposits or wire transfers made thereto, any and all investments purchased with funds deposited in such account, all interest, dividends, cash, instruments, financial assets and other Property from time to time received, receivable or otherwise payable in respect of, or in exchange for, any or all of the foregoing, and all proceeds, products, accessions, rents, profits, income and benefits therefrom, and any substitutions and replacements therefor. The Borrower’s obligation to deposit amounts pursuant to this Section 2.08(j) shall be absolute and unconditional, without regard to whether any beneficiary of any such Letter of Credit has attempted to draw down all or a portion of such amount under the terms of a Letter of Credit, and, to the fullest extent permitted by Governmental Requirements, shall not be subject to any defense or be affected by a right of set-off, counterclaim or recoupment which the Borrower or any of its Subsidiaries may now or hereafter have against any such beneficiary, the Issuer, the Administrative Agent, the Lenders or any other Person for any reason whatsoever. Such deposit shall be held as collateral securing the payment and performance of the Borrower’s and any Guarantor’s obligations under this Agreement and the other Loan Documents. The Administrative Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over such account. Interest or profits, if any, on such investments shall accumulate in such account. Moneys in such account shall be applied by the Administrative Agent to reimburse, on a pro rata basis, each Issuer for Letter of Credit Disbursements for which it has not been reimbursed and, to the extent not so applied, shall be held for the satisfaction of the reimbursement obligations of the Borrower for the Letter of Credit Exposure at such time or, if the maturity of the Loans has been accelerated, be applied to satisfy other obligations of the Borrower and the Guarantors, if any, under this Agreement or the other Loan Documents. If the Borrower is required to provide an amount of cash collateral hereunder as a result of the occurrence of an Event of Default, and the Borrower is not otherwise required to pay to the Administrative Agent the excess attributable to a Letter of Credit Exposure in connection with any prepayment pursuant to Section 3.03(c), then such amount (to the extent not applied as aforesaid) shall be returned to the Borrower within three Business Days after all Events of Default have been cured or waived.
Section 2.09 Intentionally Omitted.
Section 2.10 Defaulting Lenders or Impacted Lenders. Notwithstanding any provision of this Agreement to the contrary, if any Lender becomes a Defaulting Lender or Impacted Lender, as the case may be, then the following provisions shall apply for so long as such Lender is a Defaulting Lender or Impacted Lender, as the case may be:
(a) Any payment of principal, interest, fees or other amounts received by the Administrative Agent for the account of such Defaulting Lender (whether voluntary or
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mandatory, at maturity, pursuant to Article X or otherwise) or received by the Administrative Agent from a Defaulting Lender pursuant to Section 12.08 shall be applied at such time or times as may be determined by the Administrative Agent as follows: first, to the payment of any amounts owing by such Defaulting Lender to the Administrative Agent hereunder; second, to the payment on a pro rata basis of any amounts owing by such Defaulting Lender to the Issuer hereunder; third, to Cash Collateralize the Issuer’s fronting exposure with respect to such Defaulting Lender in accordance with Section 2.08(j); fourth, as the Borrower may request (so long as no Default or Event of Default exists), to the funding of any Loan in respect of which such Defaulting Lender has failed to fund its portion thereof as required by this Agreement, as determined by the Administrative Agent; fifth, if so determined by the Administrative Agent and the Borrower, to be held in a deposit account and released pro rata in order to (x) satisfy such Defaulting Lender’s potential future funding obligations with respect to Loans under this Agreement and (y) Cash Collateralize the Issuer’s future fronting exposure with respect to such Defaulting Lender with respect to future Letters of Credit issued under this Agreement, in accordance with Section 2.08(j); sixth, to the payment of any amounts owing to the Lenders or the Issuer as a result of any judgment of a court of competent jurisdiction obtained by any Lender or the Issuer against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement; seventh, so long as no Default or Event of Default exists, to the payment of any amounts owing to the Borrower as a result of any judgment of a court of competent jurisdiction obtained by the Borrower against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement; and eighth, to such Defaulting Lender or as otherwise directed by a court of competent jurisdiction; provided that if (x) such payment is a payment of the principal amount of any Loans or Letter of Credit Disbursements in respect of which such Defaulting Lender has not fully funded its appropriate share, and (y) such Loans were made or the related Letters of Credit were issued at a time when the conditions set forth in Section 6.02 were satisfied or waived, such payment shall be applied solely to pay the Loans of, and Letter of Credit Disbursements owed to, all Non-Defaulting Lenders on a pro rata basis prior to being applied to the payment of any Loans of, or Letter of Credit Disbursements owed to, such Defaulting Lender until such time as all Loans and funded and unfunded participations in Letter of Credit Agreements are held by the Lenders pro rata in accordance with the Commitments under the applicable Facility without giving effect to Section 2.10(d). 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 2.10(a) shall be deemed paid to and redirected by such Defaulting Lender, and each Lender irrevocably consents hereto.
(b) fees shall cease to accrue on the unused amount of such Defaulting Lender’s Applicable Percentage of the Borrowing Base pursuant to Section 3.04(a) and no fees shall be payable to such Defaulting Lender upon an increase in the Borrowing Base if such Lender is a Defaulting Lender pursuant to clause (a), (b) or (d) of the definition thereof;
(c) the Applicable Percentage of the Aggregate Maximum Credit Amount or Loans or participation interests in Letters of Credit of such Defaulting Lender shall not be included in determining whether the Majority Lenders or the Required Lenders have taken or may take any action hereunder (including any consent to any amendment or waiver pursuant to Section 12.02);
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(d) if any Letter of Credit Exposure exists at the time a Lender becomes a Defaulting Lender or Impacted Lender then:
all or any part of such Defaulting Lender’s or Impacted Lender’s Letter of Credit Exposure shall be reallocated among the Non-Defaulting Lenders in accordance with their respective Applicable Percentages but only to the extent that as a result thereof (x) the sum of all Non-Defaulting Lenders’ Revolving Credit Exposure plus such Defaulting Lender’s or Impacted Lender’s Letter of Credit Exposure would not exceed the Non-Defaulting Lenders’ Applicable Percentage of the lesser of (A) the existing Aggregate Maximum Credit Amount or (B) the Borrowing Base then in effect, (y) the sum of each Non-Defaulting Lender’s Revolving Credit Exposure plus such Non-Defaulting Lender’s share under this clause (i) of such Defaulting Lender’s or Impacted Lender’s Letter of Credit Exposure would not exceed such Non-Defaulting Lender’s Applicable Percentage of the lesser of (A) the existing Aggregate Maximum Credit Amount or (B) the Borrowing Base then in effect and (z) the conditions set forth in Section 6.02 are satisfied at such time; provided however, 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;
if the reallocation described in clause (i) above cannot, or can only partially, be effected, the Borrower shall within three (3) Business Days following notice by the Administrative Agent Cash Collateralize such Defaulting Lender’s or such Impacted Lender’s 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 2.08(j) for so long as such Letter of Credit Exposure is outstanding;
if the Borrower Cash Collateralizes any portion of such Defaulting Lender’s or Impacted Lender’s Letter of Credit Exposure pursuant to this Section 2.10(d), the Borrower shall not be required to pay any fees to such Defaulting Lender or Impacted Lender pursuant to Section 3.04(b) with respect to such Defaulting Lender’s or Impacted Lender’s Letter of Credit Exposure during the period such Defaulting Lender’s or Impacted Lender’s Letter of Credit Exposure is Cash Collateralized; and
if the Letter of Credit Exposure of the Non-Defaulting Lenders is reallocated pursuant to this Section 2.10(d), then the fees payable to the Non-Defaulting Lenders pursuant to Section 3.04 (b) shall be adjusted to give effect to such reallocations in accordance with such Non-Defaulting Lenders’ Applicable Percentages;
(e) so long as any Lender is a Defaulting Lender or an Impacted Lender, the Issuer shall not be required to issue, extend, renew, amend or increase any Letter of Credit, unless it is satisfied that the related exposure will be 100% covered by the Loan Commitments of the Non-Defaulting Lenders and/or Cash Collateralized in accordance with this Section 2.10(e) (and, if applicable, Section 2.08(j)), and participating interests in any such newly issued or increased Letter of Credit shall be allocated among Non-Defaulting Lenders in a manner consistent with
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Section 2.10(d)(i) (and Defaulting Lenders or Impacted Lenders shall not participate therein); and
(f) any amount payable to such Defaulting Lender hereunder (whether on account of principal, interest, fees or otherwise and including any amount that would otherwise be payable to such Defaulting Lender pursuant to Section 4.01(c) but excluding Section 5.06) shall, in lieu of being distributed to such Defaulting Lender, subject to any Governmental Requirements, (i) first, be applied to the payment of any amounts owing by such Defaulting Lender to the Administrative Agent hereunder, (ii) second, to the payment of any amounts then owing by such Defaulting Lender to the Issuer hereunder, and (iii) third, any remaining funds to be held in a segregated account as cash collateral for, and application to any future funding obligations of such Defaulting Lender hereunder or as otherwise directed by a court of competent jurisdiction.
(g) In the event that the Administrative Agent, the Borrower, and the Issuer agree in writing, that a Defaulting Lender or Impacted Lender has adequately remedied all matters that caused such Lender to be a Defaulting Lender or Impacted Lender, then the Revolving Credit Exposure of the Lenders shall be readjusted and reallocated to reflect the inclusion of such Lender’s Loan Commitment and on such date such Lender shall purchase at par such of the Loans and 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 Loans and participations in Letters of Credit in accordance with its Applicable Percentage after giving effect to such reallocation; provided however; that no adjustments will be made retroactively with respect to fees accrued or payments made by or on behalf of the Borrower while that Lender was a Defaulting Lender or Impacted Lender; and provided, further, that except to the extent otherwise expressly agreed by the affected parties, no change hereunder from Defaulting Lender or Impacted 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 or Impacted Lender. In the event that the Administrative Agent, the Borrower, and the Issuer agrees that an Impacted Lender has adequately remedied all matters that caused such Lender to be an Impacted Lender, then the Letter of Credit Exposure of the Lenders shall be readjusted and reallocated on such date such that the Impacted Lender shall purchase at par participations in Letters of Credit from the other Lenders as the Administrative Agent shall determine may be necessary in order for such Lender to hold such participations in Letters of Credit in accordance with its Applicable Percentage after giving effect to such reallocation.
Section 3.01 Repayment of Loans. The Borrower hereby unconditionally promises to pay to the Administrative Agent for the account of each Lender the then unpaid principal amount of each Loan on the Maturity Date.
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ABR Loans. Each ABR Loan comprising an ABR Borrowing shall bear interest at the Alternate Base Rate plus the Applicable Margin, but in no event to exceed the Highest Lawful Rate.
Eurodollar Loans. Each Eurodollar Loan comprising a Eurodollar Borrowing shall bear interest at the LIBO Rate for the Interest Period in effect for such Eurodollar Loan plus the Applicable Margin, but in no event to exceed the Highest Lawful Rate.
Post-Default and Borrowing Base Deficiency Rate. Notwithstanding the foregoing, (i) if an Event of Default has occurred and is continuing, or if any principal of or interest on any Loan or any fee or other amount payable by the Borrower or any Guarantor hereunder or under any other Loan Document is not paid when due (after giving effect to any applicable grace period) whether at stated maturity, upon acceleration or otherwise, and including any payments in respect of a Borrowing Base Deficiency under Section 3.03(c), then all Loans outstanding, in the case of an Event of Default, and such overdue amount, in the case of a failure to pay amounts when due, shall bear interest, after as well as before judgment, at the Alternate Base Rate plus two percent (2%), but in no event to exceed the Highest Lawful Rate, and (ii) following Administrative Agent’s notice of any Borrowing Base Deficiency pursuant to Section 3.03(c), the amount of such Borrowing Base Deficiency shall bear interest, after as well as before judgment, at the rate then applicable to such Loans, plus the Applicable Margin, if any, plus an additional two percent (2%), but in no event to exceed the Highest Lawful Rate.
Interest Payment Dates. Accrued interest on each Loan shall be payable in arrears on: (i) with respect to any ABR Loan, the last day of each March, June, September and December; (ii) with respect to any Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part, and (iii) in any case, on the Termination Date; provided that (w) interest accrued pursuant to Section 3.02(c)(i) shall be payable on demand, (x) in the event of any repayment or prepayment of any Loan (other than an optional prepayment of an ABR Loan prior to the Termination Date), accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment, (y) in the event of any conversion of any Eurodollar Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion, and (z) as to any Eurodollar Loan having an Interest Period longer than three (3) months, each day that is three months, or a multiple thereof, after the first day of such Interest Period.
Interest Rate Computations. All interest hereunder shall be computed on the basis of a year of 360 days, unless such computation would exceed the Highest Lawful Rate, in which case interest shall be computed on the basis of a year of 365 days (or 366 days in a leap year), except that interest computed by reference to the Alternate Base Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable Alternate Base Rate or LIBO Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error, and be binding upon the parties hereto.
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Inability to Determine Interest Rate. If prior to the first date of any Interest Period:
the Administrative Agent determines (which determination shall be conclusive and binding upon the Borrower) that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the LIBO Rate for such Interest Period, or
the Administrative Agent shall have received notice from the Majority Lenders that the LIBO Rate determined or to be determined for such Interest Period will not adequately and fairly reflect the cost to such Lenders (as conclusively certified by such Lenders) of making or maintaining their affected Loans during such Interest Period,
the Administrative Agent shall give telecopy or telephonic notice thereof to the Borrower and the relevant Lenders as soon as practicable thereafter. If such notice is given (x) any Eurodollar Loans requested to be made on the first day of such Interest Period shall be made as ABR Loans, (y) any Loans that were to have been converted on the first day of such Interest Period to Eurodollar Loans shall be continued as ABR Loans and (z) any outstanding Eurodollar Loans shall be converted, on the last day of the then-current Interest Period, to ABR Loans. Until such notice has been withdrawn by the Administrative Agent, no further Eurodollar Loans shall be made or continued as such, nor shall the Borrower have the right to convert Loans under the relevant Facility to Eurodollar Loans.
Optional Prepayments. The Borrower shall have the right at any time and from time to time to prepay any Borrowing in whole or in part, subject to prior notice in accordance with Section 3.03(b).
Notice and Terms of Optional Prepayment. The Borrower shall notify the Administrative Agent by telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case of prepayment of a Eurodollar Borrowing, not later than 1:00 pm, New York time, three Business Days before the date of prepayment, or (ii) in the case of prepayment of an ABR Borrowing, not later than 1:00 pm, New York time, one Business Day before the date of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date and the principal amount of each Borrowing or portion thereof to be prepaid. Promptly following receipt of any such notice relating to a Borrowing, the Administrative Agent shall advise the Lenders of the contents thereof. Each partial prepayment of any Borrowing shall be in an amount that would be permitted in the case of an Advance of a Borrowing of the same Type as provided in Section 2.02. Each prepayment of a Borrowing shall be applied ratably to the Loans included in the prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the extent required by Section 3.02.
Mandatory Prepayments.
Borrowing Base Deficiency. If a Borrowing Base Deficiency exists other than as a result of a redetermination of the Borrowing Base in accordance
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with the provisions of Section 2.07(f) or Section 9.02(f), then the Administrative Agent shall give the Borrower and the Lenders prompt written notice thereof. The Borrower shall, within ten (10) days after receipt of written notice of such condition from the Administrative Agent elect by written notice to the Administrative Agent to take one or more of the following actions to remedy the Borrowing Base Deficiency:
(1)prepay Advances or, if the Advances have been repaid in full, Cash Collateralize the Letter of Credit Exposure in an aggregate amount equal to such deficiency within ten (10) days after the Borrower’s written election;
(2)add additional Oil and Gas Properties acceptable to the Administrative Agent, in its sole discretion, to the Borrowing Base having a value, based on the same valuation methodology approved by the Required Lenders in determining the Borrowing Base that was used to value the then existing Oil and Gas Properties, such that the Borrowing Base Deficiency is cured within thirty (30) days after the Borrower’s written election; or
(3)commencing with the thirtieth (30th) day following the date of which the Administrative Agent gave the Borrower notice of such Borrowing Base Deficiency and every thirty days after such thirtieth (30th) thereafter (or any such day is not a Business Day, on the next Business Day after such day), pay the Borrowing Base Deficiency in six (6) equal monthly installments for the prepayment of 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 the Borrowing Base Deficiency is eliminated in a period of six (6) months.
Other Borrowing Base Deficiency. If a Borrowing Base Deficiency results from a redetermination of the Borrowing Base in accordance with the provisions of Section 2.07(f) or Section 9.02(f), then the Administrative Agent shall give the Borrower and the Lenders prompt written notice thereof. The Borrower shall, promptly following the receipt of the proceeds of the Material Swap Transaction, the sale or disposition of Oil and Gas Properties, or the issuance of Unsecured Notes, as applicable, but in any event, within one (1) Business Day thereof, pay to the Administrative Agent from such proceeds an amount sufficient to eliminate such Borrowing Base Deficiency.
Reduction of Loan Commitments. On the date of each reduction of the Aggregate Maximum Credit Amount pursuant to Section 2.06, the Borrower agrees to make a prepayment in respect of the outstanding amount of the Advances to the extent, if any, that the Revolving Credit Exposure exceeds the lesser of (A) the Aggregate Maximum Credit Amount, as so reduced, and (B) the Borrowing Base.
Accrued Interest. Each prepayment under this Section 3.03(c) shall be accompanied by accrued interest on the amount prepaid to the date of such
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prepayment and amounts, if any, required to be paid pursuant to Section 5.02 as a result of such prepayment.
No Premium or Penalty. Prepayments permitted or required under this Section 3.03 shall be without premium or penalty, except as required under Section 5.02.
Commitment Fees. Except as provided in Section 2.10(b), the Borrower agrees to pay to the Administrative Agent for the account of each Lender a commitment fee (the “Commitment Fee”), which shall accrue at the rate per annum determined based on the Commitment Fee Rate on the daily unused amount of the aggregate of each Lender’s Applicable Percentage of the Borrowing Base during the period from and including the date of this Agreement to but excluding the Termination Date (the face amount of any issued and outstanding Letter of Credit shall count as usage for purposes hereof). Accrued Commitment Fees shall be payable in arrears on the last day of March, June, September and December of each year and on the Termination Date, commencing on the first such date to occur after the date hereof. All Commitment Fees shall be computed on the basis of a year of 360 days, unless such computation would exceed the Highest Lawful Rate, in which case such Commitment Fees shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).
Letter of Credit Fees. Except as provided in Section 2.10(d), the Borrower agrees to pay (i) to the Administrative Agent for the account of each Lender a participation fee with respect to its participations in Letters of Credit, which shall accrue at the same Applicable Margin used to determine the interest rate applicable to Eurodollar Loans on the average daily amount of such Lender’s Letter of Credit Exposure (excluding any portion thereof attributable to unreimbursed Letter of Credit Disbursements) during the period from and including the date of this Agreement to but excluding the later of the date on which such Lender’s Commitment terminates and the date on which such Lender ceases to have any Letter of Credit Exposure; (ii) to the Issuer, for its own account, a fronting fee equal to the greater of $500 or 0.125% of the face amount of each outstanding Letter of Credit; and (iii) to the Issuer, for its own account, its standard fees with respect to the amendment, renewal or extension of any Letter of Credit issued by such Issuer or processing of drawings thereunder. Participation fees accrued through and including the last day of March, June, September and December of each year shall be payable on the third Business Day following such last day, commencing on the first such date to occur after the date of this Agreement. Any other fees payable to the Issuer pursuant to this Section 3.04(b) shall be payable within 10 days after demand. All participation fees and fronting fees shall be computed on the basis of a year of 360 days, unless such computation would exceed the Highest Lawful Rate, in which case such fees shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).
Administrative Agent Fees. The Borrower agrees to pay to the Administrative Agent, for its own account, fees payable in the amounts and at the times specified in the Fee Letter.
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Section 4.01 Payments Generally; Pro Rata Treatment; Sharing of Set-offs.
Payments by the Borrower. The Borrower shall make each payment required to be made by it hereunder (whether of principal, interest, fees or reimbursement of Letter of Credit Disbursements, or of amounts payable under Section 5.01, Section 5.02, Section 5.03 or otherwise) prior to 2:00 p.m., New York time, on the date when due (after giving effect to applicable grace periods), in immediately available funds, without defense, deduction, recoupment, set-off or counterclaim. Fees, once paid, shall be fully earned and shall not be refundable under any circumstances. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative Agent at its offices specified in Section 12.01, except payments to be made directly to an Issuer as expressly provided herein and except that payments pursuant to Section 5.01, Section 5.02, Section 5.03 and Section 12.03 shall be made directly to the Persons entitled thereto. The Administrative Agent shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof, and any such payments payable to a Lender shall be made in accordance with such Lender’s Applicable Percentage, unless otherwise provided herein. If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments hereunder shall be made in dollars.
Application of Insufficient Payments. If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, unreimbursed Letter of Credit Disbursements, interest and fees then due hereunder, such funds shall be applied (i) first, towards payment of interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second, towards payment of principal and unreimbursed Letter of Credit Disbursements then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal and unreimbursed Letter of Credit Disbursements then due to such parties.
Sharing of Payments by Lenders. If any Lender shall, by exercising any right of set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Loans or participations in Letter of Credit Disbursements resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Loans and participations in Letter of Credit Disbursements and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Loans and participations in Letter of Credit Disbursements of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Loans and participations in Letter of Credit
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Disbursements; provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this Section 4.01(c) shall not be construed to apply to any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or participations in Letter of Credit Disbursements to any assignee or Participant, other than to the Borrower or any Consolidated Subsidiary thereof (as to which the provisions of this Section 4.01(c) shall apply). The Borrower consents to the foregoing and agrees, to the extent it may effectively do so under Governmental Requirements, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the Borrower rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Borrower in the amount of such participation.
Section 4.02 Presumption of Payment by the Borrower. Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders or the Issuer that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or such Issuer, as the case may be, the amount due. In such event, if the Borrower has not in fact made such payment, then each of the Lenders or such Issuer, as the case may be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or such 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 the Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.
Eurodollar Changes in Law. If any Change in Law shall:
impose, modify or deem applicable any reserve (including marginal, special, emergency or supplemental reserves), special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender for Eurocurrency liabilities under Regulation D of the Board (as the same may be amended, supplemented or replaced from time to time) or otherwise, except to the extent reflected in the Adjusted LIBO Rate by virtue of the Statutory Reserve Rate; or
impose on any Lender or the London interbank market any other condition affecting this Agreement or Eurodollar Loans made by such Lender;
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and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurodollar Loan (or of maintaining its obligation to make any such Loan) or to reduce the amount of any sum received or receivable by such Lender (whether of principal, interest or otherwise), then the Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender for such additional costs incurred or reduction suffered.
Capital Requirements. If any Lender or the Issuer determines that any Change in Law regarding capital or liquidity requirements has or would have the effect of reducing the rate of return on such Lender’s or such Issuer’s capital or on the capital of such Lender’s or such Issuer’s holding company, if any, as a consequence of this Agreement or the Loans made by, or participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by such Issuer, to a level below that which such Lender or such Issuer or such Lender’s or such Issuer’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s or such Issuer’s policies and the policies of such Lender’s or such Issuer’s holding company with respect to capital adequacy), then from time to time the Borrower will pay to such Lender or such Issuer, as the case may be, such additional amount or amounts as will compensate such Lender or such Issuer or such Lender’s or such Issuer’s holding company for any such reduction suffered.
Certificates. A certificate of a Lender or the Issuer setting forth in reasonable detail the basis of its request and the amount or amounts necessary to compensate such Lender or such Issuer or its holding company, as the case may be, as specified in Section 5.01(a) or (b) shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender or such Issuer, as the case may be, the amount shown as due on any such certificate within 10 days after receipt thereof.
Effect of Failure or Delay in Requesting Compensation. Failure or delay on the part of any Lender or the Issuer to demand compensation pursuant to this Section 5.01 shall not constitute a waiver of such Lender’s or such Issuer’s right to demand such compensation, provided that no Lender may make any such demand more than 180 days after the Termination Date, nor for any amount which has accrued more than 270 days prior to such Lender or Issuer delivering the certificate required in Section 5.01(c) unless such compensation demand results from a Change in Law that has a retroactive effect, in which case the time periods given above will be extended to take into account such retroactive period.
Section 5.02 Break Funding Payments. In the event of (a) the payment of any principal of any Eurodollar Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any Eurodollar Loan into an ABR Loan other than on the last day of the Interest Period applicable thereto, or (c) the failure to borrow, convert, continue or prepay any Eurodollar Loan on the date specified in any notice delivered pursuant hereto, then, in any such event, the Borrower shall compensate each Lender for the loss, cost and expense attributable to such event. In the case of a Eurodollar Loan, such loss, cost or expense to any Lender shall be deemed to include an amount determined by such Lender to be the excess, if any, of (i) the amount of interest which would have accrued on the principal amount of such Loan had such event not occurred, at the LIBO Rate that would have been applicable to such Loan, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or
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continue, for the period that would have been the Interest Period for such Loan), over (ii) the amount of interest which would accrue on such principal amount for such period at the interest rate which such Lender would bid were it to bid, at the commencement of such period, for dollar deposits of a comparable amount and period from other banks in the eurodollar market.
A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section 5.02 shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof.
Section 5.03 Taxes. For purposes of this Section 5.03, the term “Lender” includes the Issuer and the term “applicable law” includes FATCA.
Payments Free of Taxes. Any and all payments by or on account of any obligation of the Borrower or any Guarantor under any Loan Document shall be made free and clear of and without deduction or withholding for any Taxes, except as required by applicable law; provided that if the Borrower or any Guarantor shall be required by applicable law to deduct any Indemnified Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions and withholdings (including deductions and withholdings applicable to additional sums payable under this Section 5.03(a)), the Administrative Agent, Lender or Issuer (as the case may be) receives an amount equal to the sum it would have received had no such deductions or withholdings been made, (ii) the Borrower or such Guarantor shall make such deductions or withholdings and (iii) the Borrower or such Guarantor shall pay the full amount deducted or withheld to the relevant Governmental Authority in accordance with Governmental Requirements.
Payment of Other Taxes by the Borrower. The Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with Governmental Requirements or at the option of the Administrative Agent timely reimburse it for the payment of, any Other Taxes.
Indemnification by the Borrower. The Borrower shall indemnify the Administrative Agent, each Lender and each Issuer, within ten (10) days after written demand therefor, for the full amount of any Indemnified Taxes paid by the Administrative Agent, such Lender or such Issuer, as the case may be, on or with respect to any payment by or on account of any obligation of the Borrower hereunder (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section 5.03) and any penalties, interest and 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 of the Administrative Agent, a Lender or an Issuer as to the amount of such payment or liability under this Section 5.03 shall be delivered to the Borrower and shall be conclusive absent manifest error.
Indemnification by the Lenders. Each Lender shall severally indemnify the Administrative Agent, within 10 days after demand therefor, for (i) any Indemnified Taxes attributable to such Lender (but only to the extent that the Borrower has not already indemnified the Administrative Agent for such Indemnified Taxes and without limiting the obligation of the
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Borrower to do so), (ii) any Taxes attributable to such Lender’s failure to comply with the provisions of Section 12.04(c)(iii) 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 Section 5.03(d).
Evidence of Payments. As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrower or a Guarantor to a Governmental Authority, the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.
Foreign Lenders. Any Foreign Lender that is entitled to an exemption from or reduction of any withholding Tax, with respect to payments made under this Agreement or any other Loan Document shall deliver to the Borrower (with a copy to the Administrative Agent), (x) on or before the date it becomes a party hereto, (y) thereafter when reasonably requested by the Borrower or the Administrative Agent and (z) promptly upon the expiration, obsolescence or invalidity of any previously delivered form, (i) such properly completed and executed documentation prescribed by Governmental Requirements or reasonably requested by the Borrower as will permit such payments to be made without withholding or at a reduced rate, including but not limited to appropriate IRS Form W-8 (and any required attachments thereto) or W-9, as applicable (or, in each case, any successor form). Notwithstanding anything to the contrary in the preceding sentence, the completion, execution and submission of such documentation (other than such documentation set forth in clause (ii) of this Section 5.03(f) and Section 5.03(g)) shall not be required if in the Lender’s reasonable judgment such completion, execution or submission would subject such Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Lender.
FATCA. 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 required to be deducted and withheld from such payment.
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Refund. 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 5.03 (including by the payment of additional amounts pursuant to Section 5.03(a)), 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 5.03 with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including Taxes) of such indemnified party incurred in connection with such refund 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, 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) if the payment 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 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 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.
Survival. Each party’s obligations under this Section 5.03 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 5.04 Designation of Different Lending Office. If any Lender requests compensation under Section 5.01, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 5.03, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (a) would eliminate or reduce amounts payable pursuant to Section 5.01 or Section 5.03, as the case may be, in the future and (b) 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 5.05 Illegality. Notwithstanding any other provision of this Agreement, in the event that it becomes unlawful for any Lender or its applicable lending office to honor its obligation to make or maintain Eurodollar Loans either generally or having a particular Interest Period hereunder, then (a) such Lender shall promptly notify the Borrower and the Administrative Agent thereof and such Lender’s obligation to make such Eurodollar Loans shall be suspended (the “Affected Loans”) until such time as such Lender may again make and maintain such Eurodollar Loans and (b) all Affected Loans which would otherwise be made by such Lender shall be made instead as ABR Loans (and, if such Lender so requests by notice to
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the Borrower and the Administrative Agent, all Affected Loans of such Lender then outstanding shall be automatically converted into ABR Loans on the date specified by such Lender in such notice) and, to the extent that Affected Loans are so made as (or converted into) ABR Loans, all payments of principal which would otherwise be applied to such Lender’s Affected Loans shall be applied instead to its ABR Loans.
Section 5.06 Replacement of a Lender. If any Lender (an “Affected Lender”) (a) makes a demand upon the Borrower for amounts pursuant to Section 5.01 (and the payment of such amounts are, and are likely to continue to be, materially more onerous in the reasonable judgment of the Borrower than with respect to the other Lenders), (b) in connection with any proposed increase in the Borrowing Base pursuant to Section 2.07 refuses to consent to such increase, or (c) any Lender has not approved (or is not deemed to have approved) any amendment to, or waiver of, the terms of this Agreement or any other Loan Document approved by Administrative Agent and Required Lenders, the Borrower may, within 30 days of receipt by the Borrower of such demand or such non-consent or non-approval, as applicable, give notice (a “Replacement Notice”) in writing to the Administrative Agent and such Affected Lender of its intention to cause such Affected Lender to sell all of its Loans, Loan Commitments and/or Notes to an Eligible Assignee (a “Replacement Lender”) designated in such Replacement Notice; provided, however, that no Replacement Notice may be given by the Borrower and no Lender may be replaced pursuant to this Section 5.06 if (i) such replacement conflicts with any Governmental Requirements or regulation, (ii) any Event of Default (other than an Event of Default that has been waived by the Required Lenders) shall have occurred and be continuing at the time of such replacement, or (iii) prior to any such replacement, such Affected Lender shall have taken any necessary action under Section 5.04 (if applicable) so as to eliminate the continued need for payment of amounts owing pursuant to Section 5.01 or shall, if applicable, have waived its right to payment of the specific amounts that give rise or would give rise to such Replacement Notice (it being understood for sake of clarity that the Affected Lender shall be under no obligation to waive such rights to payment and that such Affected Lender, if it is replaced in accordance with this Section 5.06, shall be entitled to be reimbursed for all breakage losses in connection with such replacement). If the Administrative Agent shall in the exercise of its reasonable discretion and within 30 days of its receipt of such Replacement Notice, notify the Borrower and such Affected Lender in writing that the Replacement Lender is satisfactory to the Administrative Agent (such consent not being required where the Replacement Lender is already a Lender or an Affiliate of a Lender or an Eligible Assignee), then such Affected Lender shall, subject to the payment of any amounts due pursuant to Section 5.02, assign, in accordance with Section 12.04, all of its Loan Commitments, Loans, Notes (if any), and other rights and obligations under this Agreement and all other Loan Documents (including Reimbursement Obligations, if applicable) designated in the Replacement Notice to such Replacement Lender; provided, however, that (A) such assignment shall be without recourse, representation or warranty (other than that it has not previously transferred its interest) and shall be on terms and conditions reasonably satisfactory to such Affected Lender and such Replacement Lender, (B) the purchase price paid by such Replacement Lender shall be in the amount of such Affected Lender’s Loans designated in the Replacement Notice, and/or its Percentage of outstanding Reimbursement Obligations, as applicable, together with all accrued and unpaid interest and fees in respect thereof, plus all other amounts (including the amounts demanded and unreimbursed under Section 5.01), and (C) the Borrower shall pay to the Affected Lender and the Administrative Agent all reasonable out-of-pocket expenses incurred by the Affected Lender and
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the Administrative Agent in connection with such assignment and assumption (including the processing fees described in Section 12.04). If the Affected Lender fails to execute an Assignment and Assumption after five Business Days notice from the Administrative Agent, such failure to execute shall not impair the validity of the removal of the Affected Lender and the mandatory assignment of such Affected Lender’s Loan Commitments, Loans, Notes (if any), and other rights and obligations under this Agreement and all of the Loan Documents and such assignment shall be effective without the execution of an Assignment and Assumption by the Affected Lender. If the Administrative Agent fails to notify the Borrower within 30 days of its receipt of such Replacement Notice that such Replacement Lender is satisfactory, then such Replacement Lender shall be deemed satisfactory to the Administrative Agent. Upon the effective date of an assignment described above, the Replacement Lender shall become a “Lender” for all purposes under the Loan Documents.
Section 6.01 Closing Date. The obligations of the Lenders to make the initial Loans and of the Issuer to issue Letters of Credit in connection with the initial Borrowing hereunder shall not become effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 12.02), and the Lenders and the Issuer agree that each of the following conditions have been satisfied or waived as of the Closing Date:
The Arranger, the Administrative Agent and the Lenders shall have received all fees and other amounts due and payable on or prior to the Closing Date, including, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Borrower hereunder.
The Administrative Agent shall have received a certificate of the General Partner of the Borrower and of each Guarantor setting forth (i) resolutions of the board of directors or other managing body of the General Partner with respect to the authorization of the Borrower or such Guarantor to execute and deliver the Loan Documents to which it is a party and to enter into the transactions contemplated in those documents, (ii) the individuals who are authorized to sign the Loan Documents to which the Borrower (acting through the General Partner) or such Guarantor is a party, (iii) specimen signatures of such authorized individuals, and (iv) the articles or certificate of incorporation or formation and bylaws, operating agreement or partnership agreement, as applicable, of the Borrower, its General Partner and each Guarantor, in each case, certified as being true and complete. The Administrative Agent and the Lenders may conclusively rely on such certificate until the Administrative Agent receives notice in writing from the Borrower to the contrary.
The Administrative Agent shall have received certificates of the appropriate state agencies with respect to the existence, qualification and good standing of the Borrower, the General Partner and each Guarantor.
[Intentionally Omitted].
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The Administrative Agent shall have received from each party hereto counterparts (in such number as may be requested by the Administrative Agent) of this Agreement signed on behalf of such party.
The Administrative Agent shall have received duly executed Notes payable to the order of each Lender that has requested a Note not later than two (2) Business Days prior to the Closing Date, which Notes shall be in a principal amount equal to its Maximum Credit Amount dated as of the date hereof.
The Administrative Agent shall have received from each party thereto duly executed counterparts (in such number as may be requested by the Administrative Agent) of the Security Instruments, including the Guarantee Agreement and the other Security Instruments described on Exhibit C. In connection with the execution and delivery of the Security Instruments, (i) the Administrative Agent shall be reasonably satisfied that the Security Instruments create first priority, perfected Liens (subject only to Excepted Liens) on at least 80% of the total value of the Proved Reserves evaluated in the Initial Reserve Report and (ii) the Collateral Agent shall have received original stock or membership interest certificates (if such interests are certificated) evidencing all of the issued and outstanding Equity Interests in each Guarantor, together with the appropriate undated stock powers, or other equivalent instruments of transfer reasonably acceptable to the Administrative Agent, for each certificate duly executed in blank by the registered owner thereof; provided that any original stock or membership interest certificates (if any) held by the Existing Agent may be delivered to the Administrative Agent within a reasonable time after the Closing Date.
No event or circumstance that could cause a Material Adverse Effect shall have occurred.
The Administrative Agent shall have received: (A) reasonably satisfactory evidence that, upon the consummation of the Transactions, the Palmetto Buyer has (or contemporaneously with the funding of the Loans hereunder on the Closing Date shall have) acquired, pursuant to the Palmetto PSA, title in the aggregate to Oil and Gas Properties included in the Palmetto Reserve Report equal to or exceeding 95% of the present value of all of the Oil and Gas Properties included in the Palmetto Reserve Report, free of any Liens other than Permitted Liens and Liens in favor of the Collateral Agent; (B) a certificate of a Responsible Officer of the General Partner (1) certifying that, upon the consummation of the Transactions, the Palmetto Buyer has (or will have) consummated the acquisition contemplated by the Palmetto PSA substantially in accordance with its terms and all conditions to the obligations of the parties set forth in the Palmetto PSA (other than the payment of the purchase price thereunder) shall have been satisfied or waived, and no provision thereof shall have been waived, amended, supplemented or otherwise modified to the extent such waiver, amendment, supplement or other modification would reasonably be expected to adversely affect the Lenders (except as otherwise agreed by the Lenders), (2) certifying that the Oil and Gas Properties described in the Palmetto Reserve Report have been (or are to be) acquired pursuant to the Palmetto PSA, (3) certifying as to the final purchase price paid (or to be paid) under the Palmetto PSA after giving effect to all adjustments as of the closing date for such acquisition, and specifying, by category, the amount of such adjustment, (4) certifying that attached thereto is a true and complete executed copy of the Palmetto PSA pursuant to which such Purchaser has
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acquired (or will acquire) such Oil and Gas Properties, and (5) certifying that attached thereto is a true and complete executed copy of the Initial Subordinated Note, if any; and (C) duly executed releases and/or terminations of any financing statements or mortgages specifically referencing and burdening the Oil and Gas Properties included in the Palmetto Reserve Report.
The Administrative Agent shall have received an opinion of (i) Akin Gump Strauss Hauer & Feld, LLP, special New York counsel to the Borrower and (ii) special local counsel to the Borrower in each jurisdiction where the Mortgaged Properties are located, such local counsel to be acceptable to Administrative Agent, each, in form and substance satisfactory to the Administrative Agent, as to such matters incident to the Transactions as the Administrative Agent may reasonably request.
The Administrative Agent shall have received a copy of the Initial Reserve Report.
The Administrative Agent shall have received a certificate of insurance coverage of the Borrower and its Subsidiaries evidencing that the Borrower and its Subsidiaries are carrying insurance in accordance with Section 7.12.
The Administrative Agent shall have received the Financial Statements.
The Administrative Agent shall have received the Assignment Agreement duly executed and delivered by the parties thereto.
The Administrative Agent shall have received the Fee Letter duly executed and delivered by the parties thereto.
The Administrative Agent shall have received financial projections of the Borrower and its Subsidiaries for the three (3) fiscal year period commencing with the 2015 Fiscal Year and continuing through the 2017 Fiscal Year prepared by the Borrower in good-faith and based on assumptions believed by the Borrower to be reasonable at the time made.
The Administrative Agent shall have received evidence reasonably satisfactory to it, that the Borrower shall have maintained in effect all Swap Transactions disclosed to the Administrative Agent in January 2015 and entered into (or contemporaneously with the funding of the Loans hereunder on the Closing Date to be entered into) the Swap Transactions set forth on Schedule 6.01(q) with Approved Counterparties (the “Minimum Hedges”).
The Administrative Agent shall have received evidence reasonably satisfactory to it that the Borrower has at least $4,000,000 of unused availability under the Borrowing Base immediately following the effectiveness of this Agreement.
The Administrative Agent shall have received appropriate UCC search certificates reflecting no prior Liens encumbering the Properties, the Borrower, and its Subsidiaries for each of the following jurisdictions: Oklahoma, Kansas, Delaware, Texas and any other jurisdiction requested by the Administrative Agent; other than those being assigned or released on or prior to the Closing Date or Liens permitted by Section 9.03.
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No, action, suit, investigation or other proceeding is pending or threatened before any arbitrator or Governmental Authority seeking to restrain, enjoin or prohibit or declare illegal, or seeking damages from the Borrower in connection with the transactions contemplated in this Agreement or which could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect.
The Administrative Agent is satisfied, in its sole discretion, with the results of its due diligence examination of the Borrower, the Guarantors and the Properties owned by the Borrower or Guarantors, including the Borrower’s and the Guarantors’ proposed development of their Properties, the location discount/premium and transportation costs for all Hydrocarbons produced on such Properties, existing Hydrocarbon sales and all aspects of the Borrower’s and the Guarantors’ existing and contemplated Hydrocarbon marketing activities.
The Administrative Agent and each Lender shall have received all Act disclosures requested by them prior to execution of this Agreement.
The Administrative Agent shall have received such other documents as the Administrative Agent or special counsel to the Administrative Agent may reasonably request.
Section 6.02 Each Credit Event. The obligation of each Lender to make a Loan on the occasion of any Borrowing (including the initial funding), and of each Issuer to issue, amend, renew or extend any Letter of Credit, is subject to the satisfaction of the following conditions:
At the time of and immediately after giving effect to such Borrowing or the issuance, amendment, renewal or extension of such Letter of Credit, as applicable, no Default shall have occurred and be continuing and no Borrowing Base Deficiency shall exist or result therefrom.
At the time of and immediately after giving effect to such Borrowing or the issuance, amendment, renewal or extension of such Letter of Credit, as applicable, no Material Adverse Effect shall have occurred.
The representations and warranties of the Borrower and the Guarantors, if any, set forth in this Agreement and in the other Loan Documents shall be true and correct on and as of the date of such Borrowing or the date of issuance, amendment, renewal or extension of such Letter of Credit, as applicable, except to the extent any such representations and warranties are expressly limited to an earlier date, in which case such representations and warranties shall have been true and correct as of such specified earlier date.
The making of such Loan or the issuance, amendment, renewal or extension of such Letter of Credit, as applicable, would not conflict with, or cause any Lender or the Issuer to violate or exceed, any applicable Governmental Requirement, and no Change in Law shall have occurred, and no litigation shall be pending or threatened, which does or, with respect to any threatened litigation, seeks to, enjoin, prohibit or restrain, the making or repayment of any Loan, the issuance, amendment, renewal, extension or repayment of any Letter of Credit or any participations therein or the consummation of the transactions contemplated by this Agreement or any other Loan Document.
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The receipt by the Administrative Agent of a Borrowing Request in accordance with Section 2.03 or a request for a Letter of Credit in accordance with Section 2.08(b), as applicable.
Each request for a Borrowing and each issuance, amendment, renewal or extension of any Letter of Credit shall be deemed to constitute a representation and warranty by the Borrower on the date thereof as to the satisfaction of the conditions specified in Section 6.02(a) through (d).
The Borrower represents and warrants to the Lenders that:
Section 7.01 Organization; Powers. Each of the Borrower and its Subsidiaries is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, has all requisite power and authority to own its assets and to carry on its business as now conducted, and is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required, except where failure to have such power, authority and qualifications could not reasonably be expected to have a Material Adverse Effect.
Section 7.02 Authority; Enforceability. The Transactions are within the Borrower’s and each Guarantor’s limited partnership or limited liability company powers, as applicable, and have been duly authorized by all necessary limited partnership or limited liability company action, as applicable, and, if required, partner or member action. When executed and delivered, each Loan Document and each of the agreements by which the Borrower or any Guarantor acquires ownership of the Mortgaged Properties to which the Borrower and any Guarantor is a party will have been duly executed and delivered by the Borrower and such Guarantor and will constitute a legal, valid and binding obligation of the Borrower and such Guarantor, as applicable, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.
Section 7.03 Approvals; No Conflicts. The Transactions (a) do not require any consent, license, or approval of, registration or filing with, or any other action by, any Governmental Authority or any other third Person (including the members or any class of directors of the Borrower or any other Person, whether interested or disinterested), except such as have been obtained or made and are in full force and effect, and except for the filing and recording of Security Instruments to perfect the Liens created by such Security Instruments, (b) will not violate any Governmental Requirements or regulation or the charter, by-laws, operating agreement or other organizational documents of the Borrower or any of the Guarantors or any order of any Governmental Authority, (c) will not violate or result in a default under any indenture, agreement or other instrument binding upon the Borrower or any of the Guarantors or their Properties, or give rise to a right thereunder to require any payment to be made by the Borrower or any of the Guarantors and (d) will not result in the creation or imposition of any
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Lien on any Property of the Borrower or any of the Guarantors (other than the Liens created by the Loan Documents). The Borrower and each of the Guarantors has obtained all consents, licenses and approvals required in connection with the execution, delivery and performance by the Borrower and the Guarantors and the validity against the Borrower and each of the Guarantors of the Loan Documents to which it is a party, and such consents, licenses and approvals are in full force and effect.
Section 7.04 Financial Statements.
The Borrower has delivered to the Administrative Agent and the Lenders the Financial Statements, and the Financial Statements are correct and complete in all material respects and present fairly the consolidated financial condition of the Borrower and its Consolidated Subsidiaries as of their respective dates and for their respective periods in accordance with GAAP, applied on a consistent basis.
Since December 31, 2014, (i) there has been no event, development or circumstance that has had or could reasonably be expected to have a Material Adverse Effect and (ii) the business of the Borrower and its Subsidiaries has been conducted only in the ordinary course consistent with past business practices.
Neither the Borrower nor any of its Subsidiaries has any Material Indebtedness (including Disqualified Capital Stock), or any contingent liabilities, off-balance sheet liabilities or partnerships, liabilities for taxes, unusual forward or long-term commitments or unrealized or anticipated losses from any unfavorable commitments, except for the (i) Obligations hereunder, (ii) as referred to or reflected or provided for in the Financial Statements, or (iii) Debt otherwise permitted hereunder.
Section 7.05 Litigation. Except as set forth on Schedule 7.05, there are no actions, suits, investigations or proceedings by or before any arbitrator or Governmental Authority pending against or, to the knowledge of the Borrower, threatened against or affecting the Borrower or any of its Subsidiaries (a) which, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect (unless fully covered by standard insurance which is acknowledged and uncontested by the applicable insurer and with standard deductibles) or (b) that involve any Loan Document or the Transactions. Since the date of this Agreement, there has been no change in the status of the matters disclosed in Schedule 7.05 that, individually or in the aggregate, has resulted in, or could reasonably be expected to result in a Material Adverse Effect.
Section 7.06 Environmental Matters. Except as could not be reasonably expected to have a Material Adverse Effect (or with respect to (c), (d) and (e) below, where the failure to take such actions could not be reasonably expected to have a Material Adverse Effect):
except as set forth on Schedule 7.06, no Property of the Borrower or any of its Consolidated Subsidiaries nor the operations conducted thereon violate any order or requirement of any court or Governmental Authority or any Environmental Laws.
no Property of the Borrower or any of its Consolidated Subsidiaries nor the operations currently conducted thereon or, to the knowledge of the Borrower, by any prior
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owner or operator of such Property or operation, are in violation of or subject to any existing, pending or threatened action, suit, investigation, inquiry or proceeding by or before any court or Governmental Authority or to any remedial obligations under Environmental Laws.
all notices, permits, licenses, exemptions, approvals or similar authorizations, if any, required to be obtained or filed in connection with the operation or use of any and all Property of the Borrower and each of its Subsidiaries, including, without limitation, past or present treatment, storage, disposal or release of a hazardous substance, oil and gas waste or solid waste into the environment, have been duly obtained or filed or requested, and the Borrower and each of its Consolidated Subsidiaries are in compliance with the terms and conditions of all such notices, permits, licenses and similar authorizations.
the Borrower has taken all steps reasonably necessary to determine and has determined that, except as set forth on Schedule 7.06, no oil, hazardous substances, solid waste or oil and gas waste, have been disposed of or otherwise released and there has been no threatened release of any oil, hazardous substances, solid waste or oil and gas waste on or to any Property of the Borrower or any of the Guarantors except in compliance with Environmental Laws and so as not to pose an imminent and substantial endangerment to public health or welfare or the environment.
to the extent applicable, all Property of the Borrower and each of the Guarantors currently satisfies all design, operation, and equipment requirements imposed by the OPA, and the Borrower does not have any reason to believe that such Property, to the extent subject to the OPA, will not be able to maintain compliance with the OPA requirements during the term of this Agreement.
except as set forth on Schedule 7.06, neither the Borrower nor any of its Consolidated Subsidiaries has any known contingent liability or Remedial Work in connection with any release or threatened release of any oil, hazardous substance, solid waste or oil and gas waste into the environment.
Section 7.07 Compliance with the Laws and Agreements. Each of the Borrower and its Consolidated Subsidiaries are in compliance with all Governmental Requirements applicable to it or its Property and all agreements and other instruments binding upon it or its Property, and possesses all licenses, permits, franchises, exemptions, approvals and other authorizations granted by Governmental Authorities necessary for the ownership of its Property and the present conduct of its business, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.
Section 7.08 Investment Company Act. Neither the Borrower nor any of its Consolidated Subsidiaries is an “investment company” or a company “controlled” by an “investment company,” within the meaning of, or subject to regulation under, the Investment Company Act of 1940, as amended.
Section 7.09 Taxes. Each of the Borrower and its Consolidated Subsidiaries has timely filed or caused to be filed all Tax returns and reports required to have been filed and has paid or caused to be paid all Taxes required to have been paid by it, except Taxes that are being
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contested in good faith by appropriate proceedings and for which the Borrower or such Consolidated Subsidiary, as applicable, has set aside on its books adequate reserves in accordance with GAAP. The charges, accruals and reserves on the books of the Borrower and its Consolidated Subsidiaries in respect of Taxes and other governmental charges are, in the reasonable opinion of the Borrower, adequate. No tax Lien has been filed and, to the knowledge of the Borrower, no claim is being asserted with respect to any such Tax or other such governmental charge, except for tax Liens or claims that could not reasonably be expected to have a Material Adverse Effect.
The Borrower and its Consolidated Subsidiaries have complied in all material respects with ERISA and, where applicable, the Code regarding each Plan, if any, that they maintain.
No act, omission or transaction has occurred that could result in imposition on the Borrower, any of its Subsidiaries or any ERISA Affiliate (whether directly or indirectly) of (i) either a civil penalty assessed pursuant to subsections (c), (i) or (l) of Section 502 of ERISA or a tax imposed pursuant to Chapter 43 of Subtitle D of the Code or (ii) breach of fiduciary duty liability damages under Section 409 of ERISA.
No Plan (other than a defined contribution plan) or any trust created under any such Plan has been terminated since September 2, 1974. No liability to the PBGC (other than for the payment of current premiums which are not past due) by the Borrower, any of its Subsidiaries or any ERISA Affiliate has been or is expected to be incurred with respect to any Plan. No ERISA Event with respect to any Plan has occurred.
Full payment when due has been made of all amounts which the Borrower, any of its Subsidiaries or any ERISA Affiliate is required under the terms of each Plan, if any, or Governmental Requirements to have paid as contributions to such Plan as of the date hereof, and no failure to satisfy the minimum funding standard (within the meaning of Section 302 of ERISA and Section 412 of the Code), whether or not waived, exists with respect to any Plan.
Each Pension Plan satisfies the minimum funding requirements of Section 412 of the Code and, if applicable, Part 3 of Title I of ERISA.
Neither the Borrower nor its Subsidiaries sponsors or maintains an employee welfare benefit plan, as defined in Section 3(1) of ERISA that provides benefits to former employees of such entities, other than as required by Part 6 of Title I of ERISA.
Neither the Borrower nor its Subsidiaries nor any ERISA Affiliate would be subject to any withdrawal liability under Part 1 of Subtitle E of Title IV of ERISA if the Borrower, its Subsidiaries or any ERISA Affiliate were to engage in a “complete withdrawal” (as defined in Section 4203 of ERISA) or a “partial withdrawal” (as defined in Section 4205 of ERISA) for any Multiemployer Plan.
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Neither the Borrower, its Subsidiaries nor any ERISA Affiliate is required to provide security under Section 401(a)(29) of the Code due to a Pension Plan amendment that results in an increase in current liability for any Pension Plan.
Section 7.11 Disclosure; No Material Misstatements.
Schedule 7.11 describes, as of the Closing Date, all Material Indebtedness of the Borrower or any of its Consolidated Subsidiaries, and all obligations of the Borrower or any of its Consolidated Subsidiaries to issuers of surety or appeal bonds (other than operator’s bonds, plugging and abandonment bonds, and similar surety obligations obtained in the ordinary course of business) issued for the account of the Borrower or any of its Consolidated Subsidiaries.
Taken as a whole, none of the reports, Financial Statements, certificates, Reserve Reports or other information furnished by or on behalf of the Borrower or any of its Subsidiaries to the Administrative Agent, in connection with the negotiation of this Agreement or any other Loan Document or delivered hereunder or under any other Loan Document (as modified or supplemented by other information so furnished) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which (including the time at which) they were made, not misleading; provided that, with respect to projected financial information, prospect information, geological and geophysical data and engineering projections, the Borrower represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time.
Section 7.12 Insurance. The Borrower has, and has caused each of its Subsidiaries to, maintain, with financially sound and reputable insurance companies, insurance in such amounts and against such risks as are customarily maintained by companies engaged in the same or similar businesses operating in the same or similar locations. The loss payable clauses or provisions in said insurance policy or policies insuring any of the Collateral for the Loans are endorsed in favor of and made payable to the Administrative Agent as its interests may appear and such policies pertaining to liability coverage name the Administrative Agent and the Lenders as “additional insureds,” and, in either case, provide that the insurer will give at least thirty (30) days prior notice of any cancellation to the Administrative Agent.
Section 7.13 Restriction on Liens. Neither the Borrower nor any of the Guarantors is a party to any material agreement or arrangement, or subject to any order, judgment, writ or decree, that either restricts or purports to restrict its ability to grant Liens to the Administrative Agent, the Collateral Agent and the Lenders on or in respect of their Properties to secure the Obligations.
Section 7.14 Subsidiaries. Except as set forth on Schedule 7.14 or as disclosed in writing to the Administrative Agent (which shall promptly furnish a copy to the Lenders), which shall be a supplement to Schedule 7.14, the Borrower has no Subsidiaries. The Borrower has no Foreign Subsidiaries.
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Section 7.15 Location of Business and Offices. The Borrower’s jurisdiction of organization is Delaware; the name of the Borrower as listed in the public records of its jurisdiction of organization is Sanchez Production Partners LP, and the organizational identification number of the Borrower in its jurisdiction of organization has been provided to the Administrative Agent (or, in each case, as set forth in a notice delivered to the Administrative Agent pursuant to Section 8.01(n) in accordance with Section 12.01). The Borrower’s principal place of business and chief executive offices are located at the address specified in Section 12.01 (or as set forth in a notice delivered pursuant to Section 8.01(n) and Section 12.01(c)). Each Subsidiary’s jurisdiction of organization, name as listed in the public records of its jurisdiction of organization, organizational identification number in its jurisdiction of organization, and the location of its principal place of business and chief executive office is stated on Schedule 7.14 (or as set forth in a notice delivered pursuant to Section 8.01(n)).
Section 7.16 Properties; Titles; Etc. Subject to Excepted Liens, each of the Obligors have good and indefeasible title to all of its Oil and Gas Properties evaluated in the most recently delivered Reserve Report, free and clear of all Liens except for Excepted Liens. The Borrower has good and defensible title to all of the Equity Interests in the Subsidiaries listed on Schedule 7.14, except for Excepted Liens. No material Oil and Gas Properties of any Obligor comprise a “building” or “mobile home” (each as defined in Regulation H promulgated under the Flood Insurance Laws).
The quantum and nature of the interest of the Obligors in and to their Hydrocarbon Interests as set forth in the most recent Reserve Report includes the entire interest of the Obligors in such Hydrocarbon Interests as of the date of such Reserve Report and are complete and accurate in all material respects as of the date of such Reserve Report; there are no “back-in” or “reversionary” interests held by third parties which could materially reduce the interest of the Obligors in such Hydrocarbon Interests except as taken into account in such Reserve Report. The Working Interests held by the Obligors in their Oil and Gas Properties shall not in any material respect obligate any of such Persons to bear the costs and expenses relating to the maintenance, development, and operations of such Oil and Gas Properties in an amount in excess of the Working Interest of such Person in each such Hydrocarbon Interest set forth in the most recent Reserve Report.
All oil and gas leases and instruments and other similar agreements comprising the Borrower’s and its Consolidated Subsidiaries Oil and Gas Properties necessary for the conduct of business of the Borrower and its Consolidated 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 under any such leases, instruments or agreements, in each case which would affect in any material respect the conduct of the business of the Borrower and its Subsidiaries. Neither the Borrower, any of the Guarantors nor, to the knowledge of the Borrower, any other party to any leases, instruments or agreements comprising its Oil and Gas Properties evaluated in the most recently delivered Reserve Report, has given or threatened to give written notice of any default under or inquiry into any possible default under, or action to alter, terminate, rescind or procure a judicial reformation of, any such lease, instrument or agreement.
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All of the Properties of the Borrower and its Consolidated Subsidiaries that are reasonably necessary for the operation of their business are in good repair, working order and condition in all material respects and have been maintained by the Borrower and its Consolidated Subsidiaries as is customary in the oil and gas industry. Since the date of the most recent financial statements delivered pursuant to Sections 6.01(m) and 8.01, neither the business nor the Properties of the Borrower and its Consolidated Subsidiaries have 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.
Except for Excepted Liens or as otherwise disclosed in writing to the Administrative Agent:
In each case only with respect to any of the Obligors’ Oil and Gas Properties that have been assigned a discounted present value equal to or in excess of $2,000,000 in any Reserve Report, (A) all rentals, royalties, overriding royalties, shut-in royalties and other payments due under or with respect to any such Hydrocarbon Interests evaluated in any Reserve Report have been properly and timely paid in the ordinary course of business and (B) all material expenses payable under the terms of the contracts and agreements comprising such Oil and Gas Properties (other than those described above in clause (A)) have been properly and timely paid in the ordinary course of business, except in each case where such payments are being contested in good faith by appropriate proceedings and for which adequate reserves complying with GAAP have been made;
All of the proceeds from the sale of Hydrocarbons produced from the Borrower’s and its Consolidated Subsidiaries’ Hydrocarbon Interests are being properly and timely paid to the Borrower without suspense, other than any such proceeds the late payment or non-payment of which could not reasonably be expected to materially adversely affect the value of the Borrower’s and its Consolidated Subsidiaries’ Hydrocarbon Interests taken as a whole; and
No material amount of proceeds that has been received by the Borrower or any of its Consolidated Subsidiaries from the sale of Hydrocarbons produced from the Oil and Gas Properties evaluated in the most recently delivered Reserve Report is subject to any claim for any refund or refund obligation.
Section 7.17 Title. Upon satisfaction of the covenants in Section 8.18, the Administrative Agent shall have received title opinions, title reports or other title due diligence reflecting that the Borrower or the Guarantors shall have title reasonably satisfactory to the Administrative Agent in such Oil and Gas Properties of the Borrower and the Guarantors constituting 80% of the Proved Reserves evaluated in the Initial Reserve Report.
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Section 7.18 Security Instruments.
The provisions of the Pledge and Security Agreement delivered to the Administrative Agent are effective to create in favor of the Collateral Agent, for the ratable benefit of the Administrative Agent, the Lenders and the other secured parties, a legal, valid and enforceable security interest in the pledged Collateral (as defined therein) and proceeds thereof and (i) when certificates, if any, representing or constituting the pledged Collateral are delivered to the Collateral Agent and (ii) upon the filing of UCC-1 Financing Statements with the secretary of state of each jurisdiction of formation for each of the debtors party thereto, the Pledge and Security Agreement shall constitute a first priority Acceptable Security Interest in, all right, title and interest of the Obligors, as applicable, in such pledged Collateral and the proceeds thereof, subject to Excepted Liens.
On the Closing Date, the Equity Interests listed on Schedule I to the Pledge and Security Agreement will constitute all the issued and outstanding Equity Interests in the direct and indirect Material Domestic Subsidiaries of the Borrower; all such Equity Interests have been duly and validly issued and are fully paid and nonassessable; and the relevant pledgor of said shares is the record and beneficial owner of said shares.
The provisions of the Mortgages will be effective to grant to the Administrative Agent, for the ratable benefit of the Lenders, legal, valid and enforceable mortgage liens on (i) all of the right, title and interest of the Borrower and its Subsidiaries in the Mortgaged Property to the extent described therein and (ii) at least 80% of the total value of the Proved Reserves evaluated in the Initial Reserve Report. Once such Mortgages have been recorded in the appropriate recording office and all recording taxes have been paid with respect thereto, the Mortgages will constitute perfected first liens on, and security interest in, such mortgaged property, subject to Excepted Liens.
On the Closing Date, 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. No other filings or recordings are required in order to perfect the security interests created under any Security Instruments.
Section 7.19 Maintenance of Properties. Except for such acts or failures to act as could not be reasonably expected to have a Material Adverse Effect, the Oil and Gas Properties (and Properties unitized therewith) have been maintained, operated and developed in a good and workmanlike manner and in conformity with all Government Requirements and in conformity with the provisions of all leases, subleases or other contracts comprising a part of the Hydrocarbon Interests and other contracts and agreements forming a part of the Oil and Gas Properties. Specifically in connection with the foregoing, except as could not reasonably be expected to have a Material Adverse Effect, (a) no Oil and Gas Property is subject to having allowable production reduced below the full and regular allowable (including the maximum permissible tolerance) because of any overproduction (whether or not the same was permissible at the time) and (b) none of the wells comprising a part of the Oil and Gas Properties (or Properties unitized therewith) is deviated from the vertical more than the maximum permitted by Government Requirements, and such wells are, in fact, bottomed under and are producing from,
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and the well bores are wholly within, the Oil and Gas Properties (or in the case of wells located on Properties unitized therewith, such unitized Properties). All pipelines, wells, gas processing plants, platforms and other material improvements, fixtures and equipment owned in whole or in part by the Borrower or any of its Subsidiaries that are necessary to conduct normal operations are being maintained in a state adequate to conduct normal operations, and with respect to such of the foregoing which are operated by the Borrower or any of its Subsidiaries, in a manner consistent with the Borrower’s or its Subsidiaries’ past practices (other than those the failure of which to maintain in accordance with this Section 7.19 could not reasonably be expect to have a Material Adverse Effect).
Section 7.20 Gas Imbalances; Prepayments. Except as set forth on Schedule 7.20 with respect to the Closing Date or on the most recent certificate delivered pursuant to Section 2.07(d), on a net basis there are no gas imbalances, take or pay or other prepayments which would require the Borrower or any of its Subsidiaries to deliver, in the aggregate, three percent (3%) or more of the monthly production from Hydrocarbons produced from the Oil and Gas Properties at some future time without then or thereafter receiving full payment therefor.
Section 7.21 Marketing of Production. Except for the contracts listed and in effect on the date hereof on Schedule 7.21, and thereafter either disclosed in writing to the Administrative Agent or included in the most recently delivered Reserve Report (with respect to all of which contracts the Borrower represents that it or the Guarantors are receiving a price for all production sold thereunder which is computed substantially in accordance with the terms of the relevant contract and are not having deliveries curtailed substantially below the subject Property’s delivery capacity), no material agreements exist which are not cancelable on 60 days notice or less without penalty or detriment for the sale of production from the Borrower’s or the Guarantors’ Hydrocarbons (including, without limitation, calls on or other rights to purchase, production, whether or not the same are currently being exercised) that (a) pertain to the sale of production at a fixed price and (b) have a maturity or expiry date of more than six (6) months after the Closing Date.
Section 7.22 Swap Transactions. Schedule 7.22 sets forth, as of February 28, 2015, and after the date hereof, each report required to be delivered by the Borrower pursuant to Section 8.01(c) will set forth, a true and complete list of all Swap Agreements and Swap Transactions of the Borrower and each of its Subsidiaries, the material terms thereof (including the type, term, effective date, termination date and notional amounts or volumes), the net marked-to-market value thereof, all credit support agreements relating thereto (including any margin required or supplied) and the counterparty to each such agreement.
Section 7.23 Use of Loans and Letters of Credit. The proceeds of the Loans and the Letters of Credit shall be used (a) for the acquisition, exploration, operation, maintenance and development of Oil and Gas Properties and related properties, facilities, rights and interests located in any of the United States of America (including the Palmetto Acquisition), (b) for general corporate purposes, including Restricted Payments, provided that if the Borrowing Base Utilization Percentage is equal to or exceeds 90% before or after giving effect to the requested Loan or Letter of Credit, then no proceeds of any Loan or any Letter of Credit may be used to fund Restricted Payments under Section 9.04, (c) for the payment of expenses incurred by the Borrower in connection with the Transactions, (d) to provide working capital, and (e) for the
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issuance of Letters of Credit. The Borrower and its Subsidiaries are not engaged principally, or as one of its or their important activities, in the business of extending credit for the purpose, whether immediate, incidental or ultimate, of buying or carrying margin stock (within the meaning of Regulation T, U or X of the Board). No part of the proceeds of any Loan or Letter of Credit will be used for any purpose which violates the provisions of Regulations T, U or X of the Board.
Section 7.24 Solvency. After giving effect to the transactions contemplated hereby, (a) the aggregate assets (after giving effect to amounts that could reasonably be received by reason of indemnity, offset, insurance or any similar arrangement), at a fair valuation, of the Borrower and the Guarantors, taken as a whole, will exceed the aggregate Debt of the Borrower and the Guarantors on a consolidated basis, (b) each of the Borrower and the Guarantors will not have incurred or intended to incur, and will not believe that it will incur, Debt beyond its ability to pay such Debt (after taking into account the timing and amounts of cash to be received by each of the Borrower and the Guarantors and the amounts to be payable on or in respect of its liabilities, and giving effect to amounts that could reasonably be received by reason of indemnity, offset, insurance or any similar arrangement) as such Debt becomes absolute and matures and (c) each of the Borrower and the Guarantors will not have (and will have no reason to believe that it will have thereafter) unreasonably small capital for the conduct of its business.
Section 7.25 Patriot Act; OFAC; Sanctions.
None of the Borrower, any of its Subsidiaries or, to the knowledge of the Borrower, any director, officer of the Borrower or any of its Subsidiaries is a Person that is, or is owned or controlled by Persons that are: (i) the subject of any sanctions administered or enforced 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 (collectively, “Sanctions”), or (ii) located, organized or resident in a country or territory that is, or whose government is, the subject of Sanctions.
The Borrower will not, directly or indirectly, use the proceeds of the Loans, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other Person, (i) to fund any activities or business of or with any Person, or in any country or territory, that, at the time of such funding, is, or whose government is, the subject of Sanctions, or (ii) in any other manner that would result in a violation of Sanctions by any Person (including any Person participating in the Loans, whether as underwriter, advisor, investor, or otherwise).
Each of the Obligors is in compliance with the Foreign Corrupt Practices Act, 15 U.S.C. §§ 78dd-1, et seq., and any foreign counterpart thereto. None of the Obligors or their Subsidiaries has made a payment, offering, or promise to pay, or authorized the payment of, money or anything of value (a) in order to assist in obtaining or retaining business for or with, or directing business to, any foreign official, foreign political party, party official or candidate for foreign political office, (b) to a foreign official, foreign political party or party official or any candidate for foreign political office, and (c) with the intent to induce the recipient to misuse his or her official position to direct business wrongfully to such Credit Party or its Subsidiary or to any other Person, in violation of the Foreign Corrupt Practices Act, 15 U.S.C. §§78dd-1, et seq.
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.
Section 7.26 Seniority Designation. For the purposes of any Unsecured Notes Documents or any Permitted Refinancing Debt, the Obligations have been irrevocably designated as “senior indebtedness” (or such other applicable term denoting seniority) ranking, as applicable, equally in right of payment with any senior unsecured notes issued under such Unsecured Notes Documents and senior in right of payment to any subordinated unsecured notes or senior subordinated unsecured notes issued under such Unsecured Notes Documents, without giving effect to rights in the Collateral of the Administrative Agent, the Collateral Agent, the Issuer, the Lenders and the other beneficiaries thereof.
Until the Loan Commitments have expired or been terminated and the principal of and interest on each Loan and all fees payable hereunder and all other amounts payable under the Loan Documents shall have been paid in full and all Letters of Credit shall have expired or terminated and all Letter of Credit Disbursements shall have been reimbursed, the Borrower covenants and agrees with the Lenders that:
Section 8.01 Financial Statements; Ratings Change; Other Information. The Borrower will furnish to the Administrative Agent:
Annual Financial Statements and Annual Budget. As soon as available, but in any event not later than ninety (90) days after the end of each fiscal year, (i) Borrower’s audited consolidated balance sheet and related statements of operations, partners’ equity and cash flows as of the end of and for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on by independent public accountants of recognized national standing and reasonably acceptable to the Administrative Agent (without a “going concern” or like qualification or exception and without any qualification or exception as to the scope of such audit) to the effect that such consolidated financial statements present fairly in all material respects the financial position and results of operations of the Borrower and its Consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied and (ii) a budget for the then current fiscal year, including a pro forma balance sheet and income and cash flow projections.
Quarterly Financial Statements. As soon as available, but 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, its consolidated balance sheet and related statements of operations, partners’ equity and cash flows as of the end of and for such quarter and the then elapsed portion of the fiscal year, setting forth in each case in comparative form the figures for the corresponding period or periods of (or, in the case of the balance sheet, as of the end of) the previous fiscal year, all certified by a Financial Officer as presenting fairly in all material respects the financial position and results of operations of the Borrower and its Consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes.
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Certificate of Financial Officer -- Compliance. Concurrently with any delivery of financial statements under Section 8.01(a) or Section 8.01(b), a certificate of a Financial Officer in substantially the form of Exhibit B hereto (i) certifying as to whether a Default has occurred and, if a Default has occurred, specifying the details thereof and any action taken or proposed to be taken with respect thereto, (ii) commencing with the delivery of the financial statements for the fiscal quarter ending June 30, 2015, setting forth reasonably detailed calculations demonstrating compliance with Section 9.01, (iii) stating whether any change in GAAP or in the application thereof has occurred since December 31, 2014 and, if any such change has occurred, specifying the effect of such change on the financial statements accompanying such certificate, and (iv) setting forth as of the last Business Day of such calendar month or fiscal year, a true and complete list of all Swap Agreements and Swap Transactions of the Borrower and each of its Consolidated Subsidiaries, the material terms thereof (including the type, term, effective date, termination date and notional amounts or volumes), the net mark-to-market value therefor, any new credit support agreements relating thereto not listed on Schedule 7.22, any margin required or supplied under any credit support document and the counterparty to each such agreement.
Certificate of Accounting Firm -- Defaults. Concurrently with any delivery of financial statements under Section 8.01(a), a certificate of the accounting firm that reported on such financial statements stating whether they obtained knowledge during the course of their examination of such financial statements of any Default (which certificate may be limited to the extent required by accounting rules or guidelines).
Certificate of Insurer -- Insurance Coverage. Concurrently with any delivery of financial statements under Section 8.01(a), a certificate of insurance coverage from each insurer with respect to the insurance required by Section 8.07, in form and substance satisfactory to the Administrative Agent, and, if requested by the Administrative Agent or any Lender, all copies of the applicable policies.
Other Accounting Reports. Within five (5) Business Days after receipt thereof, a copy of each other written report or letter submitted to the Borrower or any of its Subsidiaries by independent accountants in connection with any annual, interim or special audit made by them of the books of the Borrower or any such Subsidiary, and a copy of any response by the Borrower or any such Subsidiary to such letter or report.
Notices Under Material Instruments. Promptly after the furnishing thereof, copies of any financial statement, report or notice furnished to or by any Person pursuant to the terms of any preferred stock designation, indenture (including any Unsecured Notes Indenture), loan or credit or other similar agreement, other than this Agreement and not otherwise required to be furnished to the Lenders pursuant to any other provision of this Section 8.01.
Reserve Report/Lists of Purchasers. Concurrently with the delivery of any Reserve Report to the Administrative Agent pursuant to Section 2.07, (i) a list of all Persons purchasing Hydrocarbons from the Borrower or any of its Subsidiaries, and (ii) a monthly cash flow budget for the following twelve month period, projecting monthly production, volumes, revenues, expenses, taxes and budgeted capital expenditures.
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Notice of Sales of Oil and Gas Properties. In the event the Borrower or any of its Subsidiaries intends to sell, transfer, assign or otherwise dispose of any Oil or Gas Properties included in the most recently delivered Reserve Report (or any Equity Interests in any Subsidiary owning interests in such Oil and Gas Properties) during any period between two successive Scheduled Redetermination Dates having a fair market value, individually or in the aggregate, in excess of $250,000, prior written notice of such disposition, the price thereof, the anticipated date of closing, and any other details thereof requested by the Administrative Agent.
Notice of Swap Liquidation. In the event the Borrower or any of its Subsidiaries intends to assign, terminate (other than as a result of the expiration thereof), unwind, sell or liquidate one or more Swap Transactions having a net fair market value to either counterparty of such Swap Transactions, in excess of $250,000 (any such transaction a “Material Swap Transaction”), prompt (but in any event at least five (5) days prior to such assignment, termination, unwinding, sale, or liquidation) written notice of such assignment, termination, unwinding, sale, or liquidation and the value thereof, and any other details thereof as requested by the Administrative Agent. In the event that the Borrower or any of its Subsidiaries consummates a Material Swap Transaction as described in the previous sentence, the Borrower shall retain, or cause its Subsidiaries to retain, as applicable, the proceeds of such transaction pending a redetermination of the Borrowing Base in accordance with the provisions of Section 2.07(f). In the event that a Material Swap Transaction creates a payment obligation upon settlement from the Borrower or any of its Subsidiaries, the notice must be accompanied by a certification from a Responsible Officer that after giving effect to such payment obligation, Borrower is in compliance with Section 9.01.
Notice of Casualty Events. Prompt written notice, and in any event within ten (10) Business Days, of the occurrence of any Casualty Event or the commencement of any action or proceeding that could reasonably be expected to result in a Casualty Event.
Information Regarding Borrower and Guarantors. Prompt written notice (and in any event within ten (10) days prior thereto) of any change (i) in the Borrower or any Guarantor’s corporate name or in any trade name used to identify such Person in the conduct of its business or in the ownership of its Properties, (ii) in the location of the Borrower or any Guarantor’s chief executive office or principal place of business, (iii) in the Borrower or any Guarantor’s identity or corporate structure or in the jurisdiction in which such Person is incorporated or formed, (iv) in the Borrower or any Guarantor’s jurisdiction of organization or such Person’s organizational identification number in such jurisdiction of organization, and (v) in the Borrower or any Guarantor’s federal taxpayer identification number, if any.
Production Report and Lease Operating Statements. Concurrently with the delivery of any Reserve Report to the Administrative Agent pursuant to Section 2.07, a report setting forth, for each calendar month during the then-current fiscal year to date, the volume of production and sales attributable to production (and the prices at which such sales were made and the revenues derived from such sales) for each such calendar month from the Oil and Gas Properties, and setting forth the related ad valorem, severance and production taxes and lease operating expenses attributable thereto and incurred for each such calendar month.
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Notices of Certain Changes. Promptly, but in any event within five (5) Business Days after the execution thereof, copies of any amendment, modification or supplement to the certificate or articles of incorporation, by-laws, operating agreement, any preferred stock designation or any other organizational document of the Borrower or any of the Guarantors, including but not limited to the documents referred to in Section 9.18.
Reserve Reports and Related Information. Promptly, but in any event on or before the applicable due date therefor, each Reserve Report specified in Section 2.07, together with the other information provided for therein.
Notice of Incurrence or Repayment of Permitted Unsecured Debt or the Subordinated Note. Prompt written notice, but in any event within five (5) Business Days after the incurrence or repayment thereof, of any Debt incurred by the Borrower or any of its Subsidiaries that is permitted to be incurred pursuant to Section 9.02(h) or any Debt outstanding under the Subordinated Note. Each such notice shall state the amount of the new Debt incurred or repaid and the aggregate amount of Debt incurred and outstanding pursuant to Section 9.02(h) and under the Subordinated Note.
Other Requested Information. Promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of the Borrower or any of its Subsidiaries (including, without limitation, any Plan or Multiemployer Plan and any reports or other information required to be filed under ERISA), or compliance with the terms of this Agreement or any other Loan Document, as the Administrative Agent or any Lender may reasonably request.
Section 8.02 Notices of Material Events. The Borrower will furnish to the Administrative Agent and each Lender, promptly after any Responsible Officer obtains knowledge thereof, written notice of the following:
the occurrence of any Default;
(i) the filing or commencement of, or the threat in writing of, any action, suit, investigation, inquiry, arbitration or proceeding by or before any arbitrator or Governmental Authority against or affecting the Borrower, any Subsidiary thereof or any of their Properties; (ii) any material adverse development in any action, suit, proceeding, investigation or arbitration (whether or not previously disclosed to the Lenders); and (iii) any demand or lawsuit by any landowner or other third party threatened in writing against the Borrower, any Subsidiary thereof or any of their Properties in connection with any Environmental Laws (excluding routine testing and corrective action) that, in the case of each of clauses (i) through (iii) of this subsection, if adversely determined, could reasonably be expected to result in liability in excess of $500,000;
the occurrence of any ERISA Event that, alone or together with any other ERISA Events that have occurred, could reasonably be expected to result in liability of the Borrower and its Subsidiaries in an aggregate amount exceeding $500,000; and
any other development that results in, or could reasonably be expected to result in, a Material Adverse Effect.
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Each notice delivered under this Section 8.02 shall be accompanied by a statement of a Responsible Officer setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto.
Section 8.03 Existence; Conduct of Business. The Borrower will, and will cause each of its Consolidated Subsidiaries to, do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence and the rights, licenses, permits, privileges and franchises material to the conduct of its business and maintain, if necessary, its qualification to do business in each other jurisdiction in which any of its Oil and Gas Properties is located or the ownership of its Properties requires such qualification, except where the failure to so qualify could not reasonably be expected to have a Material Adverse Effect; provided that the foregoing shall not prohibit any merger, consolidation, liquidation or dissolution permitted under Section 9.11.
Section 8.04 Payment of Obligations. The Borrower will, and will cause each of its Consolidated Subsidiaries to, pay its obligations, including Tax liabilities of the Borrower and all of its Consolidated Subsidiaries before the same shall become delinquent or in default, except where (a) the validity or amount thereof is being contested in good faith by appropriate proceedings, (b) the Borrower or such Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP and (c) the failure to make payment pending such contest could not reasonably be expected to result in a Material Adverse Effect or result in the seizure or levy of any Property of the Borrower or any of its Consolidated Subsidiaries.
Section 8.05 Performance of Obligations Under Loan Documents. The Borrower will pay the Notes according to the reading, tenor and effect thereof, and the Borrower will, and the Borrower will cause each of the Guarantors to do and perform every act and discharge all of the Obligations, including, without limitation, this Agreement, at the time or times and in the manner specified.
Section 8.06 Operation and Maintenance of Properties. The Borrower will, and will cause each of its Consolidated Subsidiaries to:
operate its Oil and Gas Properties and other material Properties or cause such Oil and Gas Properties and other material Properties to be operated in accordance with prudent industry practices and in compliance with all applicable contracts and agreements and in compliance with all Governmental Requirements, including, without limitation, applicable proration requirements and Environmental Laws, and all Governmental Requirements, rules and regulations of every other Governmental Authority from time to time constituted to regulate the development and operation of its Oil and Gas Properties and the production and sale of Hydrocarbons and other minerals therefrom, except, in each case, where the failure to comply could not reasonably be expected to have a Material Adverse Effect.
keep and maintain all Property material to the conduct of its business in good working order and condition, ordinary wear and tear excepted, preserve, maintain and keep in good repair, working order and efficiency (ordinary wear and tear excepted) all of its material Oil and Gas Properties and other material Properties, including, without limitation, all material equipment, machinery and facilities.
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promptly pay and discharge, or make reasonable and customary efforts to cause to be paid and discharged, all delay rentals, royalties, expenses and indebtedness accruing under the leases or other agreements affecting or pertaining to its Oil and Gas Properties and will do all other things necessary to keep unimpaired their rights with respect thereto and prevent any forfeiture thereof or default thereunder.
promptly perform or make reasonable and customary efforts to cause to be performed, in accordance with industry standards and in all material respects, the obligations required by each and all of the assignments, deeds, leases, sub-leases, contracts and agreements affecting its interests in its Oil and Gas Properties and other material Properties.
to the extent the Borrower or one of its Subsidiaries is not the operator of any Property, the Borrower shall use reasonable efforts to cause the operator to comply with this Section 8.06.
Section 8.07 Insurance. The Borrower will, and will cause each of its Subsidiaries to, maintain, with financially sound and reputable insurance companies, insurance in such amounts and against such risks as are customarily maintained by companies engaged in the same or similar businesses operating in the same or similar locations. The loss payable clauses or provisions in said insurance policy or policies insuring any of the Collateral for the Loans shall be endorsed in favor of and made payable to the Administrative Agent as its interests may appear and such policies shall name the Administrative Agent and the Lenders as “additional insureds” and provide that the insurer will give at least thirty (30) days prior notice of any cancellation to the Administrative Agent.
Section 8.08 Books and Records; Inspection Rights. The Borrower will, and will cause each of its Subsidiaries to, keep proper books of record and account in which full, true and correct entries are made of all dealings and transactions in relation to its business and activities. The Borrower will, and will cause each of its Subsidiaries to, permit any representatives designated by the Administrative Agent or any Lender, upon reasonable prior notice, to visit and inspect its Properties, to examine and make extracts from its books and records, and to discuss its affairs, finances and condition with its officers and independent accountants, all at such reasonable times and as often as reasonably requested.
Section 8.09 Compliance with Laws. The Borrower will, and will cause each of its Subsidiaries to, comply with all laws, rules, regulations and orders of any Governmental Authority applicable to them or their Property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.
Section 8.10 Environmental Matters.
Except as could reasonably be expected to result in a Material Adverse Effect, the Borrower shall, and shall cause each of its Subsidiaries to: (i) comply, and shall cause its Properties and operations and each of its Subsidiaries and each Subsidiary’s Properties and operations to comply, with all applicable Environmental Laws; (ii) not dispose of or otherwise release, and shall cause each Subsidiary not to dispose of or otherwise release, any oil, oil and gas waste, hazardous substance, or solid waste on, under, about or from any of the Borrower’s or
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its Subsidiaries’ Properties or any other Property to the extent caused by the Borrower’s or any of its Subsidiaries’ operations except in compliance with applicable Environmental Laws; (iii) timely obtain or file, and shall cause each of its Subsidiaries to timely obtain or file, all notices, permits, licenses, exemptions, approvals, registrations or other authorizations, if any, required under applicable Environmental Laws to be obtained or filed in connection with the operation or use of the Borrower’s or its Subsidiaries’ Properties; (iv) promptly commence and diligently prosecute to completion, and shall cause each of its Subsidiaries to promptly commence and diligently prosecute to completion, any assessment, evaluation, investigation, monitoring, containment, cleanup, removal, repair, restoration, remediation or other remedial obligations (collectively, the “Remedial Work”) in the event any Remedial Work is required under applicable Environmental Laws because of or in connection with the actual or suspected past, present or future disposal or other release of any oil, oil and gas waste, hazardous substance or solid waste on, under, about or from any of the Borrower’s or the Guarantors’ Properties; and (v) establish and implement, and shall cause each of its Subsidiaries to establish and implement, such procedures as may be reasonably necessary to continuously determine and assure that the Borrower’s and the Guarantors’ obligations under this Section 8.10(a) are timely and fully satisfied.
The Borrower will, and will cause each of the Guarantors to, provide environmental audits and tests in accordance with American Society of Testing Materials standards upon request by the Administrative Agent (or as otherwise required to be obtained by the Administrative Agent by any Governmental Authority), in connection with any future acquisitions of Oil and Gas Properties to the extent such Oil and Gas Properties are included as Collateral for the Borrowing Base.
Section 8.11 Further Assurances.
The Borrower at its sole expense will, and will cause each of the Guarantors to, promptly execute and deliver to the Administrative Agent all such other documents, agreements and instruments reasonably requested by the Administrative Agent to comply with, cure any defects or accomplish the conditions precedent, covenants and agreements of the Borrower or any of the Guarantors, as the case may be, in the Loan Documents, including the Notes, or to further evidence and more fully describe the Collateral intended as security for the Obligations, or to correct any omissions in this Agreement or the Security Instruments, or to state more fully the obligations secured therein, or to perfect, protect or preserve any Liens created pursuant to this Agreement or any of the Security Instruments or the priority thereof, or to make any recordings, file any notices or obtain any consents, all as may be reasonably necessary or appropriate, in the sole discretion of the Administrative Agent, in connection therewith.
The Borrower hereby authorizes the Administrative Agent to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Collateral intended as security for the Obligations. A carbon, photographic or other reproduction of the Security Instruments or any financing statement covering such Collateral or any part thereof shall be sufficient as a financing statement where permitted by law. The Administrative Agent will promptly send the Borrower any financing or continuation statements
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it files and the Administrative Agent will promptly send the Borrower the filing or recordation information with respect thereto.
Section 8.12 Title Information.
On or before the delivery to the Administrative Agent and the Lenders of each Reserve Report required by Section 2.07(b), to the extent requested by the Administrative Agent, the Borrower will deliver title information in form and substance acceptable to the Administrative Agent covering enough of the Oil and Gas Properties evaluated by such Reserve Report that were not included in the immediately preceding Reserve Report, so that the Administrative Agent shall have received together with title information previously delivered to the Administrative Agent, satisfactory title information on at least 80% of the total value of the Proved Reserves evaluated by such Reserve Report.
If the Borrower has provided title information for additional Properties under Section 2.07(b), the Borrower shall, within 60 days of notice from the Administrative Agent that title defects or exceptions exist with respect to such additional Properties, either (i) cure any such title defects or exceptions (including defects or exceptions as to priority) which are not permitted by Section 9.03 raised by such information, (ii) substitute acceptable Mortgaged Properties with no title defects or exceptions except for Excepted Liens (other than Excepted Liens described in clauses (d), (e) and (h) of such definition) having an equivalent value or (iii) deliver title information in form and substance reasonably acceptable to the Administrative Agent so that the Administrative Agent shall have received, together with title information previously delivered to the Administrative Agent, reasonably satisfactory title information on at least 80% of the value of the Proved Reserves evaluated by such Reserve Report.
If the Borrower is unable to cure any title defect requested by the Administrative Agent or the Lenders to be cured within the 60-day period or the Borrower does not comply with the requirements to provide acceptable title information covering 80% of the value of the Proved Reserves evaluated in the most recent Reserve Report, such default shall not be a Default, but instead the Administrative Agent and/or the Required Lenders shall have the right to exercise the following remedy in their sole discretion from time to time, and any failure to so exercise this remedy at any time shall not be a waiver as to future exercise of the remedy by the Administrative Agent or the Lenders. To the extent that the Administrative Agent or the Required Lenders are not reasonably satisfied with title to any Oil and Gas Properties after the 60-day period has elapsed, such unacceptable Oil and Gas Properties shall not count towards the 80% requirement in this Section 8.12(c), and the Administrative Agent may send a notice to the Borrower and the Lenders that the then outstanding Borrowing Base shall be reduced by an amount as determined by the Required Lenders to cause the Borrower to be in compliance with the requirement to provide acceptable title information on 80% of the value of the Proved Reserves. This new Borrowing Base shall become effective immediately after receipt of such notice.
Section 8.13 Additional Collateral; Additional Guarantors.
In connection with each redetermination of the Borrowing Base, the Borrower shall review the Reserve Report and the list of current Mortgaged Properties to
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ascertain whether the Mortgaged Properties represent at least 80% of the total value of the Proved Reserves evaluated in the most recently completed Reserve Report after giving effect to exploration and production activities, acquisitions, dispositions and production. In the event that the Mortgaged Properties do not represent at least 80% of such total value, then the Borrower shall, and shall cause its Subsidiaries to, grant to the Administrative Agent or its designee as security for the Obligations a first-priority Lien (provided the Excepted Liens of the type described in clauses (i) to (iv) and (vi) of the definition thereof may exist, but subject to the provisos at the end of such definition) on additional Oil and Gas Properties not already subject to a Lien of the Security Instruments such that after giving effect thereto, the Mortgaged Properties will represent at least 80% of such total value. All such Liens will be created and perfected by and in accordance with the provisions of deeds of trust, security agreements and financing statements or other Security Instruments, all in form and substance reasonably satisfactory to the Administrative Agent or its designee and in sufficient executed (and acknowledged where necessary or appropriate) counterparts for recording purposes. In order to comply with the foregoing, if any Subsidiary places a Lien on its Oil and Gas Properties and such Subsidiary is not a Guarantor, then it shall become a Guarantor and comply with Section 8.13(b).
In the event that (i) the Borrower determines that any Subsidiary is a Material Domestic Subsidiary or (ii) any Subsidiary that is a Domestic Subsidiary incurs or guarantees any Debt, then the Borrower shall promptly cause such Subsidiary to guarantee the Obligations. In connection with any such guaranty, the Borrower shall, or shall cause such Subsidiary to, (A) execute and deliver a supplement to the Guarantee Agreement in the form of Annex 1 to the Guarantee Agreement executed by such Subsidiary, (B) pledge all of the Equity Interests of such Subsidiary (including, without limitation, delivery of original stock or membership interest certificates (if such interests are certificated) evidencing all of the issued and outstanding Equity Interests of such Subsidiary to Collateral Agent, together with appropriate undated stock powers, or other equivalent instruments of transfer reasonably acceptable to Administrative Agent, for each certificate duly executed in blank by the registered owner thereof) and (C) execute and deliver such other additional closing documents, certificates and legal opinions as shall reasonably be requested by the Administrative Agent or its designee, including without limitation:
the execution and delivery of a supplement to the Pledge and Security Agreement in the form of Annex 1 to the Pledge and Security Agreement;
a certificate of the Subsidiary that is a Material Domestic Subsidiary or Domestic Subsidiary that becomes a Guarantor pursuant to this Section 8.13(b), (A) setting forth resolutions of the managers, board of directors or other managing body with respect to the authorization of such Person to execute and deliver the Loan Documents to which it is a party and to enter into the transactions contemplated in those documents, (B) setting forth the individuals who are authorized to sign the Loan Documents to which the Person is a party, (C) providing specimen signatures of such authorized individuals, (D) setting forth the articles or certificate of incorporation or formation and bylaws, operating agreement or partnership agreement, as applicable, of such Person, in each case, certified as being true and complete and (E) certifying that the representations and warranties of such Person contained in the Loan Documents to which it is a party are true correct on and as of the date thereof;
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certificates of the appropriate state agencies with respect to the existence, qualification and good standing of such Subsidiary that becomes a Guarantor pursuant to this Section 8.13(b);
an opinion of special New York counsel to the Borrower, providing opinions with respect to such Subsidiary that becomes a Guarantor pursuant to this Section 8.13(b) regarding the authority of such Subsidiary to execute the supplement to the Guarantee Agreement, the Pledge and Security Agreement and any other Security Instrument to which such Subsidiary is a party, the enforceability of such documents with regard to such Subsidiary, and the perfection of Liens created under such Security Instruments; and
UCC search certificates reflecting no prior Liens encumbering such Subsidiary that becomes a Guarantor pursuant to this Section 8.13(b) other than Liens permitted by Section 9.03.
Section 8.14 ERISA Compliance. The Borrower will promptly furnish, and will cause its Subsidiaries to promptly furnish, to the Administrative Agent (a) promptly after the filing thereof with the United States Secretary of Labor, the Internal Revenue Service or the PBGC, copies of each annual and other report with respect to each Plan, if any, or any trust created thereunder, (b) immediately upon becoming aware of the occurrence of any ERISA Event or of any “prohibited transaction,” as described in Section 406 of ERISA or in Section 4975 of the Code, in connection with any Plan or any trust created thereunder, a written notice signed by the President or the principal Financial Officer of the General Partner on behalf of the Borrower or the Borrower’s Subsidiaries, as the case may be, specifying the nature thereof, what action the Borrower, its Subsidiaries or the ERISA Affiliate is taking or proposes to take with respect thereto, and, when known, any action taken or proposed by the Internal Revenue Service, the Department of Labor or the PBGC with respect thereto, and (c) immediately upon receipt thereof, copies of any notice of the PBGC’s intention to terminate or to have a trustee appointed to administer any Plan. With respect to each Pension Plan, if any, the Borrower will, and the Borrower will cause each of its Subsidiaries to, (i) satisfy in full and in a timely manner, without incurring any late payment or underpayment charge or penalty and without giving rise to any lien, all of the contribution and funding requirements of Section 412 of the Code (determined without regard to subSection (c) thereof) and of Section 302 of ERISA (determined without regard to subSection (c) thereof), and (ii) pay, or cause to be paid, to the PBGC in a timely manner, without incurring any late payment or underpayment charge or penalty, all premiums required pursuant to sections 4006 and 4007 of ERISA.
Section 8.15 [Intentionally Omitted]
Section 8.16 Title. With respect to Oil and Gas Properties acquired after the Closing Date or not previously included in the Borrowing Base, and to the extent necessary for the Administrative Agent to receive satisfactory title information on at least 80% of the total value of the Proved Reserves to be included in the Borrowing Base, the Borrower shall from time to time upon the reasonable request of the Administrative Agent, 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 opinions (including,
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if requested, supplemental or new title opinions addressed to it), title reports, or other title due diligence, which title diligence shall be in form and substance reasonably acceptable to the Administrative Agent and shall include information regarding the before payout and after payout ownership interests held by the Borrower and its Subsidiaries, for all wells located on the Oil and Gas Properties shown in the most recent Reserve Report.
Section 8.17 Keepwell. The Borrower hereby absolutely, unconditionally and irrevocably undertakes to provide such funds or other support as may be needed from time to time by each other Obligor to honor all of its obligations under its Guarantee Agreement in respect of Swap Obligations (provided, however, that the Borrower shall only be liable under this Section 8.17 for the maximum amount of such liability that can be hereby incurred without rendering its obligations under this Section 8.17 or otherwise under any guarantee voidable under applicable law relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount). The obligations of the Borrower under this Section 8.17 shall remain in full force and effect until the Obligations have been paid in full and all Commitments hereunder have terminated. The Borrower intends that this Section 8.17 constitute, and this Section 8.17 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 8.18 Additional Covenants Upon Issuance of Unsecured Notes. If the Borrower or any Guarantor issues any Unsecured Notes permitted under Section 9.02(f) hereof, the Borrower shall:
deliver, or cause to be delivered, to the Administrative Agent not later than three (3) Business Days following the date on which any final prospectus or final offering memorandum prepared in connection with the original issuance of any Unsecured Notes is delivered to the prospective or actual holders of the Unsecured Notes, a true and correct copy of such final prospectus or final offering memorandum;
deliver to the Administrative Agent not more than five (5) Business Days after the date of issuance of any Unsecured Notes by the Borrower or any Guarantor, a true and correct copy of the Unsecured Notes Indenture (or any supplement (if any) to the Unsecured Notes Indenture) entered into by the Borrower or any Guarantor in connection with the Unsecured Notes;
deliver to the Administrative Agent concurrently with the issuance of any Unsecured Notes, a certificate of a Responsible Officer confirming such issuance and setting forth the aggregate principal amount of Unsecured Notes issued;
deliver to the Administrative Agent promptly such other related materials evidencing the issuance of the Unsecured Notes as the Administrative Agent may reasonably request; and
if, after giving effect to the issuance of any Unsecured Notes and the automatic reduction of the Borrowing Base pursuant to Section 9.02(f), a Borrowing Base Deficiency results, repay Loans and cash collateralize Letters of Credit in accordance with Section 3.03(c)(ii).
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Until the Loan Commitments have expired or been terminated and the principal of and interest on each Loan and all fees payable hereunder and all other amounts payable under the Loan Documents have been paid in full and all Letters of Credit have expired or terminated and all Letter of Credit Disbursements shall have been reimbursed, the Borrower covenants and agrees with the Lenders that:
Section 9.01 Financial Covenants.
Current Ratio. The Borrower will not permit, as of the last day of any fiscal quarter, commencing with the fiscal quarter ending June 30, 2015, its Current Ratio to be less than 1.0 to 1.0.
Maximum Total Net Debt to Adjusted EBITDA. The Borrower will not permit, as of the last day of any fiscal quarter, commencing with the fiscal quarter ending June 30, 2015, its ratio of (i) Total Net Debt of the Borrower and its Consolidated Subsidiaries to (ii) Adjusted EBITDA for the Rolling Period ending on such date (but subject to clause (d) below), to be greater than, with respect to any fiscal quarter ending prior to the Leverage Ratio Adjustment Date, 4.50 to 1.0 and, with respect to any fiscal quarter ending on or after the Leverage Ratio Adjustment Date, 4.0 to 1.0.
Maximum Senior Secured Debt to Adjusted EBITDA. The Borrower will not permit, as of the last day of any fiscal quarter ending prior to the Leverage Ratio Adjustment Date, commencing with the fiscal quarter ending June 30, 2015, its ratio of (i) Senior Secured Net Debt of the Borrower and its Consolidated Subsidiaries to (ii) Adjusted EBITDA for each Rolling Period ending on such date (but subject to clause (d) below), to be greater than 3.50 to 1.0.
(d)Notwithstanding anything to the contrary in this Agreement (including the definition of “Rolling Period”), (i) Adjusted EBITDA for the four fiscal quarter period ending June 30, 2015, shall equal Adjusted EBITDA for the fiscal quarter ending June 30, 2015 multiplied by four (4), (ii) Adjusted EBITDA for the four fiscal quarter period ending September 30, 2015, shall equal Adjusted EBITDA for the two fiscal quarter period ending September 30, 2015 multiplied by two (2) and (iii) Adjusted EBITDA for the four fiscal quarter period ending December 31, 2015, shall equal Adjusted EBITDA for the three fiscal quarter period ending December 31, 2015 multiplied by four-thirds (4/3).
Section 9.02 Debt. Neither the Borrower nor any of its Subsidiaries will incur, create, assume or suffer to exist any Debt, except:
the Notes or other Obligations arising under the Loan Documents or any guaranty of or suretyship arrangement for the Notes or other Obligations arising under the Loan Documents;
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accounts payable and other accrued expenses, liabilities or other obligations to pay (for the deferred purchase price of Property or services) from time to time incurred in the ordinary course of business with respect to which no more than 90 days have elapsed since the date of invoice or that are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP;
intercompany Debt between the Borrower and any of its Subsidiaries or between Subsidiaries to the extent permitted by Section 9.05(d); provided that such Debt is not held, assigned, transferred, negotiated or pledged to any Person other than the Borrower or one of its Wholly-Owned Subsidiaries, and, provided further, that any such Debt owed by either the Borrower or a Guarantor shall be subordinated to the Obligations on terms set forth in the Guarantee Agreement;
endorsements of negotiable instruments for collection in the ordinary course of business;
Debt of any Obligor in respect of workers’ compensation claims, performance bonds, surety bonds, and appeal bonds issued for its account, in each case in the ordinary course of business, or surety/bonds to governmental agencies;
Debt incurred under Unsecured Notes and any guarantees by a Guarantor in respect thereof in an aggregate principal amount that would not cause, as of the date on which such Debt is incurred, the ratio of Total Net Debt to Adjusted EBITDA to exceed the maximum amount then permitted under Section 9.01(b) after giving pro forma effect to such incurrence, provided that (1) such Unsecured Notes and any Unsecured Notes Indenture under which such Unsecured Notes are issued contain customary terms and conditions for unsecured notes of similar type and of like tenor and amount and do not contain any financial covenants that are, taken as a whole, more onerous to the Borrower and its Subsidiaries than those imposed by this Agreement (as determined in good faith by the senior management of the General Partner) (as in effect on the date of Incurrence of such Debt), (2) the final stated maturity date and the average life (based on the stated final maturity date and payment schedule provided at the date of issuance) of such Unsecured Notes shall not be earlier than 180 days after the Maturity Date (as in effect on the date of Incurrence of such Debt), and (3) at the time of and immediately after giving effect to each incurrence of such Debt, no Default or Event of Default shall have occurred and be continuing, and provided, further, that immediately upon any incurrence of Debt permitted by this clause (f), the Borrowing Base then in effect shall be automatically reduced by an amount equal to 25% of the aggregate principal amount of such Debt incurred (calculated at the face amount of the Debt incurred without giving effect to any original issue discount) and (b) any Permitted Refinancing Debt in respect thereof;
Debt of an Obligor in the form of guarantees and other “Debt” of the type described in clause (g) or clause (h) of the definition of Debt, in each case, in respect of Debt otherwise permitted under this Section 9.02;
Debt outstanding under the Subordinated Notes; and
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other unsecured Debt not to exceed $5,000,000 in the aggregate at any one time outstanding.
Section 9.03 Liens. Neither the Borrower nor any of its Subsidiaries will create, incur, assume or permit to exist any Lien on any of its Properties (now owned or hereafter acquired), except:
Liens securing the payment of any Obligations;
Excepted Liens; or
Liens on Property not constituting Collateral for the Obligations and not otherwise permitted by the foregoing clauses of this Section 9.03; provided that the aggregate principal or face amount of all Debt secured under this Section 9.03(c) shall not exceed $100,000 at any time. The filing of a financing statement or other document or instrument in connection with any Lien permitted under the foregoing provisions of this Section 9.03 to perfect or otherwise provide notice of such Lien is permitted.
Section 9.04 Dividends, Distributions and Redemptions. The Borrower will not, and will not permit any of its Subsidiaries to, declare or make, or agree to pay or make, directly or indirectly, any Restricted Payment, return any capital to its stockholders, members or unitholders or make any distribution of its Property to its Equity Interest holders, except: (i) the Borrower may declare and pay dividends or distributions to its Equity Interest holders payable solely in additional Equity Interests (other than Disqualified Capital Stock but including cash in lieu of fractional Equity Interests to the extent of Available Cash), (ii) Subsidiaries may declare and pay dividends or distributions ratably with respect to their Equity Interests, (iii) so long as no Borrowing Base Deficiency, Default or Event of Default has occurred and is continuing or would result therefrom, after giving effect to such dividend or distributions, and any redetermination of the Borrowing Base as a result of such dividend, the Borrower would have at least 10% of unused borrowing capacity that can be accessed under this Agreement, and subject to Section 7.23, the Borrower may declare and pay, or incur a liability to make, quarterly cash distributions in an amount equal to Available Cash, (iv) the Borrower may make issuances and/or sales of Equity Interests (other than Disqualified Capital Stock) in the Borrower in exchange for, or purchase or redemption of, Equity Interests in the Borrower and cash payments in lieu of the issuance of fractioned Equity Interests in connection therewith as a split or other distribution of Equity Interests where the distributions are made on a pro rata basis to all of its equity holders, (v) the Borrower may repurchase its Equity Interests in connection with the administration of any long-term incentive plan, including (A) in connection with the cashless exchange of unit options, (B) the repurchase of restricted units from employees, directors and other recipients under such plan at nominal values, and (C) the repurchase of Equity Interests from employees, directors and other recipients to satisfy federal, state or local tax withholding obligations of such employees, directors and other recipients with respect to income deemed earned as the result of options, unit grants or other awards made under such plan, and (vi) the payment of reasonable compensation, fees and expenses (as determined by the Borrower) to, and indemnity provided on behalf of, the General Partner and directors, officers and employees of the General Partner, the Borrower or any Subsidiary.
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Section 9.05 Investments, Loans and Advances. Neither the Borrower nor any of its Subsidiaries will make or permit to remain outstanding any Investments in or to any Person, except that the foregoing restriction shall not apply to:
Investments reflected in the Financial Statements;
accounts or notes receivable arising out of extensions of trade credit, prepayments or similar transactions in the ordinary course of business;
cash and Cash Equivalents;
Investments (i) made by the Borrower in or to the Guarantors, (ii) made by any Subsidiary in or to the Borrower or any Guarantor, but subject to the conditions set forth in Section 9.02(c), if applicable, and (iii) made by the Borrower or any Guarantor in or to any Subsidiary that is not a Guarantor, provided that the aggregate of all Investments made by the Borrower or any Guarantor in or to any Subsidiary that is not a Guarantor shall not exceed $2,000,000 at any time;
Investments (including, without limitation, capital contributions) in general or limited partnerships or other types of entities (each, a “venture”) entered into by the Borrower or any of its Subsidiaries with others in the ordinary course of business; provided that (i) the interest in such venture is acquired in the ordinary course of business and on fair and reasonable terms and (ii) such venture interests acquired and capital contributions made (valued as of the date such interest was acquired or the contribution made) do not exceed, in the aggregate at any time outstanding an amount equal to $2,000,000;
subject to the limits in Section 9.06, Investments in direct ownership interests in additional Oil and Gas Properties and gas gathering systems related thereto or Persons owning Oil and Gas Properties and gas gathering systems related thereto or related to farm-out, farm-in, joint operating, joint venture or area of mutual interest agreements, gathering systems, pipelines or other similar arrangements which are usual and customary in the oil and gas exploration and production business located within the geographic boundaries of the United States of America;
loans or advances to employees, officers or directors in the ordinary course of business of the Borrower or any of its Subsidiaries, in each case only as permitted by Governmental Requirements, including Section 402 of the Sarbanes Oxley Act of 2002, but in any event not to exceed $250,000 in the aggregate at any time; or
Investments in stock, obligations or securities received in settlement of debts arising from Investments permitted under this Section 9.05 owing to the Borrower or any of its Subsidiaries 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 the Borrower or any of its Subsidiaries; provided that the Borrower shall give the Administrative Agent prompt written notice in the event that the aggregate amount of all Investments held at any one time under this Section 9.05(h) exceeds $250,000.
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Section 9.06 Nature of Business. The Borrower will not, and will not permit its Subsidiaries to, engage in any material line of business substantially different from those lines of business conducted by the Borrower and its Subsidiaries on the date hereof or any business substantially related or incidental thereto, and will not permit any of its Subsidiaries to, operate its business outside the boundaries of the United States and its adjoining waters, including, without limitation, the Gulf of Mexico.
Section 9.07 Limitation on Leases. Neither the Borrower nor any of its Subsidiaries will create, incur, assume or suffer to exist any obligation for the payment of rent or hire of Property of any kind whatsoever (real or personal but excluding leases of Hydrocarbon Interests), under leases or lease agreements which would cause the aggregate amount of all payments made by the Borrower and its Subsidiaries pursuant to all such leases or lease agreements, including, without limitation, any residual payments at the end of any lease, to exceed $2,000,000 in any period of twelve consecutive calendar months during the life of such leases.
Section 9.08 Proceeds of Notes. The Borrower will not permit the proceeds of the Loans or Letters of Credit to be used for any purpose other than those permitted by Section 7.23. Neither the Borrower nor any Person acting on behalf of the Borrower has taken or will take any action which might cause any of the Loan Documents to violate Regulations T, U or X or any other regulation of the Board or to violate Section 7 of the Securities Exchange Act of 1934 or any rule or regulation thereunder, in each case as now in effect or as the same may hereinafter be in effect. If requested by the Administrative Agent, the Borrower will furnish to the Administrative Agent and each Lender a statement to the foregoing effect in conformity with the requirements of FR Form U-1 or such other form referred to in Regulation U, Regulation T or Regulation X of the Board, as the case may be.
Section 9.09 ERISA Compliance. The Borrower and its Subsidiaries will not at any time:
engage in any transaction in connection with which the Borrower or any of its Subsidiaries could be subjected to either a civil penalty assessed pursuant to subsections (c), (i) or (l) of Section 502 of ERISA or a tax imposed by Chapter 43 of Subtitle D of the Code;
terminate any Pension Plan in a manner, or take any other action with respect to any Pension Plan, which could result in any liability of the Borrower or any of its Subsidiaries to the PBGC;
fail to make full payment when due of all amounts which, under the provisions of any Plan, agreement relating thereto or Governmental Requirements, the Borrower or any of its Subsidiaries is required to pay as contributions thereto;
permit to exist any failure to satisfy the minimum funding standards, within the meaning of Section 302 of ERISA or Section 412 of the Code, whether or not waived, with respect to any Pension Plan;
permit the actuarial present value of the benefit liabilities under any Pension Plan that is regulated under Title IV of ERISA to exceed the current value of the assets
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(computed on a plan termination basis in accordance with Title IV of ERISA) of such Pension Plan allocable to such benefit liabilities; the term “actuarial present value of the benefit liabilities” shall have the meaning specified in Section 4041 of ERISA;
contribute to or assume an obligation to contribute to any Multiemployer Plan;
acquire an interest in any Person that causes such Person to become an ERISA Affiliate with respect to the Borrower or any of its Subsidiaries if such Person sponsors, maintains or contributes to (i) any Multiemployer Plan, if such Person would, if it withdrew from such plan, be subject to withdrawal liability under Part 1 of Subtitle E of Title IV of ERISA in excess of $1,000,000, or (ii) any other Pension Plan under which the projected benefit obligation under the Pension Plan exceeds the fair market value of the Plan’s assets by $1,000,000;
incur a liability to or on account of a Pension Plan or Multiemployer Plan under sections 515, 4062, 4063, 4064, 4201 or 4204 of ERISA, as applicable;
contribute to or assume an obligation to contribute to any employee welfare benefit plan, as defined in Section 3(1) of ERISA maintained to provide benefits to former employees of such entities that the Borrower or its Subsidiaries reasonably believes may not be terminated by such entities in their sole discretion at any time without any material liability; or
amend a Pension Plan resulting in an increase in current liability such that the Borrower or any of its Subsidiaries is required to provide security to such Plan under Section 401(a)(29) of the Code.
Section 9.10 Sale or Discount of Receivables. Except for receivables obtained by the Borrower or any of its Subsidiaries out of the ordinary course of business or the settlement of joint interest billing accounts in the ordinary course of business or discounts granted to settle collection of accounts receivable or the sale of defaulted accounts arising in the ordinary course of business in connection with the compromise or collection thereof and not in connection with any financing transaction, neither the Borrower nor any of its Subsidiaries will discount or sell (with or without recourse) any of its notes receivable or accounts receivable.
Section 9.11 Mergers; Etc. Neither the Borrower nor any of its Subsidiaries will merge into or with or consolidate with any other Person, or sell, 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, except that any Wholly-Owned Subsidiary may merge with any other Wholly-Owned Subsidiary and that the Borrower may merge with any Wholly-Owned Subsidiary so long as the Borrower is the survivor.
Section 9.12 Sale of Properties. The Borrower will not, and will not permit any of the Guarantors to, sell, assign, farm-out, convey or otherwise transfer any Property except for: (a) the sale of Hydrocarbons in the ordinary course of business; (b) farmouts of undeveloped acreage and assignments in connection with such farmouts; (c) the sale or transfer of equipment that is no longer necessary for the business of the Borrower or such Subsidiary or is replaced by equipment of at least comparable value and use; (d) sales or other dispositions (excluding
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Casualty Events) of Oil and Gas Properties or any interest therein or Subsidiaries owning Oil and Gas Properties (including the MidCon Asset Sale); provided that (i) 100% of the consideration received in respect of such sale or other disposition shall be cash, (ii) the consideration received in respect of such sale or other disposition shall be equal to or greater than the fair market value of the Oil and Gas Property, interest therein or Subsidiary subject of such sale or other disposition (as reasonably determined by the board of directors (or comparable governing body) of the General Partner and, if requested by the Administrative Agent, the Borrower shall deliver a certificate of a Responsible Officer certifying to that effect), (iii) if such sale or other disposition of Oil and Gas Property or Subsidiary owning Oil and Gas Properties included in the most recently delivered Reserve Report during any period between two successive redeterminations of the Borrowing Base has a fair market value (as determined by the Administrative Agent), individually or in the aggregate, in excess of five percent (5%) of the Borrowing Base then in effect, the Borrowing Base shall be reduced, effective immediately upon such sale or disposition, by an amount equal to the value, if any, assigned such Property in the most recently delivered Reserve Report or such other amount as determined by the Required Lenders, (iv) if any such sale or other disposition is of a Subsidiary owning Oil and Gas Properties, such sale or other disposition shall include all the Equity Interests of such Subsidiary and (v) if, after giving effect to the sale or other disposition of such Oil and Gas Properties, the aggregate notional volumes of projected monthly production that remain hedged pursuant to Swap Transactions of the Borrower exceed for any period following the consummation of such sale or other disposition the notional volumes of projected monthly production from the Oil and Gas Properties of the Borrower and its Subsidiaries that the Borrower would be permitted to hedge in accordance with Section 9.17(a) if it were then entering into such Swap Transactions (for purposes of this Section 9.12(d), the “Maximum Hedge Amount”), then the Borrower shall unwind, novate, terminate or enter into offsetting positions (each of which shall be a permitted sale or disposition for purposes of this Section 9.12) with respect to an amount of the notional volumes hedged under Swap Transactions such that the aggregate notional volumes of projected monthly production covered by remaining Swap Transactions shall not exceed the Maximum Hedge Amount; (e) the sale or other disposition of cash, Cash Equivalents or Equity Interests in the Borrower; and (f) sales and other dispositions of Properties not regulated by Section 9.12(a) to (d) having a fair market value not to exceed $250,000 during any 12-month period.
Section 9.13 Transactions with Affiliates. The Borrower will not, and will not permit any Subsidiary to, enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of Property or the rendering of any service, with any Affiliate (other than the Guarantors and Wholly-Owned Subsidiaries of the Borrower) unless such transactions are upon fair and reasonable terms no less favorable to it than it would obtain in a comparable arm’s length transaction with a Person not an Affiliate (as determined in good faith by the board of directors (or comparable governing body) of the General Partner or the conflicts committee thereof); provided, however, that the foregoing shall not apply to (a) that certain Shared Services Agreement, dated May 8, 2014, between SP Holdings and the Borrower, (b) that certain Contract Operating Agreement, dated May 8, 2014, between SOG and the Borrower, (c) that certain Geophysical Seismic Data Use License Agreement, dated May 8, 2014, among SOG, the Borrower and certain Subsidiaries of the Borrower, (d) any issuances of Equity Interests or other awards, payments or grants in cash, Equity Interests or otherwise pursuant to, or the funding of, employment agreements, and incentive compensation plans approved by the General Partner’s board of directors, (e) any issuance (but not any redemption or purchase) by the Borrower of its
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units (including incentive distribution units) to the General Partner and (f) any transaction approved in good faith by the conflicts committee of the board of directors (or comparable governing body) of the General Partner.
Section 9.14 Subsidiaries. The Borrower shall not, and shall not permit its Subsidiaries to, create or acquire any additional Subsidiary unless the Borrower complies with Section 8.13(b). Except as otherwise permitted herein, the Borrower shall not, and shall not permit any of its Subsidiaries to, sell, assign or otherwise dispose of any Equity Interests in any of the Guarantors. The Borrower shall have no Foreign Subsidiaries.
Section 9.15 Negative Pledge Agreements; Dividend Restrictions. Neither the Borrower nor any of its Subsidiaries will create, incur, assume or suffer to exist any contract, agreement or understanding (other than this Agreement or the Security Instruments) that in any way prohibits or restricts (a) the granting, conveying, creation or imposition of any Lien on any of its Property in favor of the Collateral Agent, the Administrative Agent, the Issuer and the Lenders or (b) any Subsidiary from paying dividends or making distributions to the Borrower or any Guarantor, or which requires the consent of or notice to other Persons in connection therewith; provided that (i) the foregoing shall not apply to restrictions and conditions imposed by law, by this Agreement or any Unsecured Notes Documents, (ii) the foregoing shall not apply to customary restrictions and conditions contained in agreements relating to the sale of a Subsidiary pending such sale, provided that such restrictions and conditions apply only to the Subsidiary that is to be sold and such sale is permitted hereunder, (iii) clause (a) of the foregoing shall not apply to restrictions or conditions imposed by any agreement relating to secured Debt permitted by this Agreement if such restrictions or conditions apply only to the Property or assets securing such Debt and (iv) clause (a) of the foregoing shall not apply to customary provisions in leases and other contracts restricting the assignment thereof.
Section 9.16 Gas Imbalances, Take-or-Pay or Other Prepayments. The Borrower will not, and will not permit any of its Subsidiaries to, allow gas imbalances, take-or-pay or other prepayments with respect to the Oil and Gas Properties of the Borrower or any of its Subsidiaries that would require the Borrower or such Subsidiary to deliver, in the aggregate, three percent (3%) or more of the monthly production of Hydrocarbons of the Borrower and its Subsidiaries at some future time without then or thereafter receiving full payment therefor.
Section 9.17 Swap Transactions. Neither the Borrower nor any of its Subsidiaries will be a party to, or enter into, any Swap Transactions with any Person other than:
On the Closing Date (to the extent not entered into prior to the Closing Date) the Minimum Hedges and from and after the Closing Date other Swap Transactions by the Borrower in respect of commodities (A) with an Approved Counterparty and (B) the notional volumes for which (when aggregated with other commodity Swap Transactions then in effect (including the Minimum Hedges and any other Swap Transactions in effect on the Closing Date), other than basis differential swaps on volumes already hedged pursuant to other Swap Transactions) do not exceed, calculated separately for each of crude oil and natural gas, as of the date such Swap Transaction is executed:
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for the twenty-four (24) month period immediately following the date on which such Swap Transaction is executed, the lesser of (x) 100% of the Borrower’s and its Subsidiaries’ projected monthly production from Proved Developed Producing Reserves and (y) 90% of the Borrower’s and its Subsidiaries’ projected monthly production from Proved Reserves;
for the second twenty-four (24) month period immediately following the date on which such Swap Transaction is executed, the lesser of (x) 90% of the Borrower’s and its Subsidiaries’ projected monthly production from Proved Developed Producing Reserves and (y) 85% of the Borrower’s and its Subsidiaries’ projected monthly production from Proved Reserves; and
for the twelve (12) month period immediately following the period described in the immediately preceding subclause (ii), the lesser of (x) 85% of the Borrower’s and its Subsidiaries’ projected monthly production from Proved Developed Producing Reserves and (y) 80% of the Borrower’s and its Subsidiaries’ projected monthly production from Proved Reserves;
provided, however, that the aggregate notional volumes under all such commodity Swap Transactions (other than floor or put options) shall not exceed the most recent month’s actual production, calculated separately for each of crude oil and natural gas, in any given month; no Swap Transaction shall in any event have a tenor greater than five (5) years; and the projections of Proved Developed Producing Reserves and Proved Reserves that must be used in determining the maximum allowable hedging shall be based on the Borrower’s reasonable business judgment and consistent application of petroleum engineering methodologies for estimating Proved Developed Producing Reserves and Proved Reserves using the then-strip pricing.
In addition to Swap Transactions in respect of commodity prices permitted by Section 9.17(a) above, the Borrower shall be permitted to execute incremental Swap Transactions in connection with a proposed acquisition of Oil and Gas Properties or Persons owning Oil and Gas Properties during the period between (i) the date on which the Borrower signs a definitive acquisition agreement in connection with such proposed acquisition and (ii) the earliest of (A) the date such proposed acquisition is consummated, (B) the date such proposed acquisition is terminated and (C) 90 days after such definitive acquisition agreement was executed (or such longer period as to which the Administrative Agent may agree); provided that, (1) such Swap Transactions are with an Approved Counterparty; (2) the aggregate notional volumes under such incremental Swap Transactions shall not exceed 35% of the projected monthly production from the Borrower’s and its Subsidiaries’ Proved Reserves (as forecast based upon the most recent Reserve Report) for a period not exceeding 36 months from the date each such incremental Swap Transaction is executed; (3) to the extent aggregate notional volumes under all Swap Transactions of the Borrower exceed 100% of the projected monthly production from the Borrower’s and its Subsidiaries’ existing Proved Reserves (prior to the consummation of such proposed acquisition), the Borrower shall maintain at least 15% of unused borrowing capacity that can be accessed under this Agreement; (4) a Person approved in writing by Administrative Agent has guaranteed the obligations thereunder in the maximum aggregate amount (giving effect to any netting agreements) that the Borrower would be required to pay if such Swap Transaction were terminated at such time pursuant to a written guarantee agreement
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in favor of Administrative Agent for the benefit of the Lenders in a form reasonably acceptable to the Administrative Agent; and (5) all such incremental Swap Transactions entered into with respect to a proposed acquisition must be terminated, unwound or offset within 90 days following the date such proposed acquisition is terminated (it being understood, for avoidance of doubt, that such incremental Swap Transactions may be retained to the extent such Swap Transactions could be entered into, as of the date of termination of the proposed acquisition, pursuant to Section 9.17(a)).
Swap Transactions in respect of interest rates with an Approved Counterparty, which effectively convert interest rates from floating to fixed, the notional amounts of which (when aggregated with all other Swap Transactions of the Borrower and its Subsidiaries then in effect effectively converting interest rates from floating to fixed) do not exceed 75% of the outstanding principal amount of the Borrower’s Debt for borrowed money which bears interest at a floating rate at the time a particular such Swap Transaction is entered into.
In no event shall any Swap Agreement have any requirement, agreement or covenant for the Borrower or any of its Subsidiaries to post collateral or margin (other than the Collateral, to the extent permitted under this Agreement) to secure their obligations under such Swap Agreement or to cover market exposures. Notwithstanding anything to the contrary in this Section 9.17, there shall be no prohibition against the Borrower entering into any “put” contracts or commodity price floors so long as such agreements are entered into for non-speculative purposes and in the ordinary course of business for the purpose of hedging against fluctuations of commodity prices. The parties hereto acknowledge and agree that the Minimum Hedges are not prohibited by this Section 9.17.
Section 9.18 Tax Status as Partnership; Operating Agreements. The Borrower shall not alter its status as a partnership for purposes of United States federal income Taxes. The Borrower shall not, and shall not permit any Subsidiary to, amend or modify any provision of its articles, bylaws, or partnership or limited liability company organization or operating documents or agreements, or any agreements with Affiliates of the type referred to in Section 9.13, if such amendment or modification could reasonably be expected to be adverse to the Administrative Agent, the Collateral Agent, the Issuer and the Lenders in any material respect, without the prior written consent of the Administrative Agent and the Majority Lenders, which consent shall not be unreasonably withheld or delayed. The Borrower agrees that any amendments or modifications to any provisions of any of the instruments referenced above dealing with the purpose or business, voting rights or management or operation shall be deemed reasonably to have an adverse effect on the Administrative Agent, the Collateral Agent, the Issuer and the Lenders that is material.
Section 9.19 Acquisition Properties. The Borrower will not, and will not permit any of its Subsidiaries to, amend, modify or supplement any of the agreements or related documents by which the Borrower or any Guarantor acquires additional Oil and Gas Properties if the effect thereof could reasonably be expected to have a Material Adverse Effect (and provided that the Borrower promptly furnishes to the Administrative Agent a copy of such amendment, modification or supplement).
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Section 9.20 Accounting Changes. The Borrower shall not make any change in its (a) accounting policies or reporting practices, except as required by GAAP, or (b) fiscal year.
Section 9.21 Prepayment of Permitted Unsecured Notes; Payment on Subordinated Note; Amendments to Debt Documents. The Borrower will not, and will not permit any Subsidiary to:
call, make or offer to make any optional or voluntary Redemption of, or otherwise optionally or voluntarily Redeem, any of the Unsecured Notes (or any Permitted Refinancing Debt) in respect thereof; provided, however, that (i) the Borrower may prepay the Unsecured Notes (or any Permitted Refinancing Debt) with the proceeds of (A) any Permitted Refinancing Debt or any additional Unsecured Notes issued pursuant to Section 9.02(f), (B) the net cash proceeds of a sale of Equity Interests (other than Disqualified Stock) of the Borrower that is contemporaneous with such optional or voluntary Redemption or (C) a combination of any Permitted Refinancing Debt and the net cash proceeds of a sale of Equity Interests (other than Disqualified Stock) of the Borrower that is contemporaneous with such optional or voluntary Redemption; and (ii) so long as no Borrowing Base Deficiency then exists, no Event of Default or Default has occurred and is continuing or would result therefrom, and the Borrower would have at least 10% of unused borrowing capacity that can be accessed under this Agreement, the Borrower may optionally or voluntarily Redeem any Unsecured Notes (or any Permitted Refinancing Debt) in an amount equal to Available Cash; further provided, however, that (for the avoidance of doubt) nothing in this Section 9.21(a) shall limit the Borrower’s ability to make any scheduled payments or mandatory prepayments with respect to any Unsecured Notes;
make any (i) repayment or prepayment in respect of the principal amount of Debt outstanding under the Subordinated Note or (ii) payment in cash, Cash Equivalent or other Property (other than Subordinated Notes) in respect of accrued interest on the principal amount of Debt outstanding thereunder unless otherwise approved in advance in writing by the Required Lenders; provided, however, that the Borrower shall be permitted to Redeem Subordinated Notes with up to fifty percent (50%) of the proceeds of (x) any issuance of Equity Interests by the Borrower or (y) any asset sales and Casualty Events, in each case, so long as no Default, Event of Default or Borrowing Base Deficiency exists at the time of such repayment or results therefrom (after giving effect to such payment) and the Borrower would have at least 10% of unused borrowing capacity that can be accessed under this Agreement after giving effect to such payment and any related transactions; and further provided, however, that (for the avoidance of doubt), the Borrower shall be permitted to make payments of interest in-kind (by capitalizing the accrued but unpaid interest under the Subordinated Notes or by issuing additional Subordinated Notes); and
amend, modify, waive or otherwise change, consent or agree to any amendment, modification, waiver or other change to, (i) any of the terms of any Unsecured Notes Documents or any Permitted Refinancing Debt if the effect thereof would be to shorten its maturity or average life or increase the amount of any payment of principal thereof or increase the rate or shorten any period for payment of interest thereon, provided that the foregoing shall not prohibit the execution of (A) supplemental indentures associated with the incurrence of additional Unsecured Notes to the extent permitted by Section 9.02(f), (B) other indentures or
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agreements in connection with the issuance of Permitted Refinancing Debt, or (C) supplemental indentures to add guarantors if required by the terms of any Unsecured Notes Indenture provided such Person complies with Section 8.13(b); and (ii) any Subordinated Note if such amendment, modification or waiver could reasonably be expected to be adverse to the Administrative Agent, the Collateral Agent, the Issuer and the Lenders in any material respect, without the prior written consent of the Administrative Agent, the Issuer and the Required Lenders.
Section 9.22 Marketing Activities. The Borrower will not, and will not permit any of its Subsidiaries to, engage in marketing activities for any Hydrocarbons or enter into any contracts related thereto other than (a) contracts for the sale of Hydrocarbons scheduled or reasonably estimated to be produced from their Oil and Gas Properties during the period of such contract, (b) contracts for the sale of Hydrocarbons scheduled or reasonably estimated to be produced from Oil and Gas Properties of third parties during the period of such contract associated with the Oil and Gas Properties of the Borrower and its Subsidiaries that the Borrower or one of its Subsidiaries has the right to market pursuant to joint operating agreements, unitization agreements or other similar contracts that are usual and customary in the oil and gas business and (c) other contracts for the purchase and/or sale of Hydrocarbons of third parties (i) which have generally offsetting provisions (i.e. corresponding pricing mechanics, delivery dates and points and volumes) such that no “position” is taken and (ii) for which appropriate credit support has been taken to alleviate the material credit risks of the counterparty thereto.
Section 10.01 Events of Default. One or more of the following events shall constitute an “Event of Default”:
the Borrower shall fail to pay any principal of any Loan or any Reimbursement Obligation in respect of any Letter of Credit Disbursement when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or otherwise;
the Borrower shall fail to pay any interest on any Loan or any fee or any other amount (other than an amount referred to in Section 10.01(a)) payable under any Loan Document, when and as the same shall become due and payable, and such failure shall continue unremedied for a period of three Business Days;
any representation or warranty made or deemed made by or on behalf of the Borrower or any of its Subsidiaries in or in connection with any Loan Document or any amendment or modification of any Loan Document or waiver under such Loan Document, or in any report, certificate, financial statement or other document furnished pursuant to or in connection with any Loan Document or any amendment or modification thereof or waiver thereunder, shall prove to have been incorrect in any material respect when made or deemed made;
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the Borrower or any of its Subsidiaries shall fail to observe or perform any covenant, condition or agreement contained in Section 8.01(n), Section 8.02, Section 8.03 or in ARTICLE IX;
the Borrower or any of its Subsidiaries shall fail to observe or perform any covenant, condition or agreement contained in this Agreement (other than those specified in Section 10.01(a), Section 10.01(b) or Section 10.01(d)) or any other Loan Document, and such failure shall continue unremedied for a period of 30 days after the earlier to occur of (i) notice thereof from the Administrative Agent to the Borrower (which notice will be given at the request of any Lender) or (ii) a Responsible Officer of the General Partner or any of the Borrower’s Subsidiaries otherwise becoming aware of such default;
any event or condition occurs (after giving effect to any notice or cure period) that results in any Material Indebtedness becoming due prior to its scheduled maturity or that enables or permits (with or without the giving of notice, the lapse of time or both) the holder or holders of any Material Indebtedness or any trustee or agent on its or their behalf to cause any 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 or require the Borrower or any of its Subsidiaries to make an offer in respect thereof;
an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of the Borrower or any of its Subsidiaries or its debts, or of a substantial part of its assets, under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any of its Subsidiaries or for a substantial part of its assets, and, in any such case, such proceeding or petition shall continue undismissed for 90 days or an order or decree approving or ordering any of the foregoing shall be entered;
the Borrower or any of its Subsidiaries shall (i) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in Section 10.01(g), (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any of its Subsidiaries or for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) take any action for the purpose of effecting any of the foregoing; or any member of the Borrower shall make any request or take any action for the purpose of calling a meeting of the members of the Borrower to consider a resolution to dissolve and wind-up the Borrower’s affairs;
the Borrower or any of its Subsidiaries shall become unable, admit in writing its inability or fail generally to pay its debts as they become due;
one or more final judgments for the payment of money in an aggregate amount in excess of $2,500,000 (to the extent not covered by independent third party insurance
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provided by insurers of the highest claims paying rating or financial strength as to which the insurer does not dispute coverage and is not subject to an insolvency proceeding) or (ii) any one or more non monetary judgments that have, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, shall be rendered against the Borrower, any of its Subsidiaries or any combination thereof and the same shall remain undischarged for a period of 30 consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to attach or levy upon any assets of the Borrower or any of its Subsidiaries to enforce any such judgment;
the Loan Documents after delivery thereof shall for any reason, except to the extent permitted by the terms thereof, cease to be in full force and effect and valid, binding and enforceable in accordance with their terms against the Borrower or a Guarantor party thereto or shall be repudiated by them, or cease to create a valid and perfected Lien of the priority required thereby on any of the Collateral purported to be covered thereby, except to the extent permitted by the terms of this Agreement, or the Borrower or any of its Subsidiaries shall so state in writing;
an ERISA Event shall have occurred that, in the opinion of the Required Lenders, when taken together with all other ERISA Events that have occurred, could reasonably be expected to result in liability of the Borrower and its Subsidiaries in an aggregate amount exceeding $2,500,000 in any year; or
a Change in Control shall occur.
In the case of an Event of Default other than one described in Section 10.01(g), Section 10.01(h) or Section 10.01(i), at any time thereafter during the continuance of such Event of Default, the Administrative Agent, at the request of the Required Lenders, shall, by notice to the Borrower, take either or both of the following actions, at the same or different times: (i) terminate the Loan Commitments, and thereupon the Loan Commitments shall terminate immediately, and (ii) declare the Loans then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all fees and other obligations of the Borrower and the Guarantors accrued hereunder and under the Notes and the other Loan Documents (including, without limitation, the payment of cash collateral to secure the Letter of Credit Exposure as provided in Section 2.08(j)), shall become due and payable immediately, without presentment, demand, protest, notice of intent to accelerate, notice of acceleration or other notice of any kind, all of which are hereby waived by the Borrower and each Guarantor; and in case of an Event of Default described in Section 10.01(g), Section 10.01(h) or Section 10.01(i), the Loan Commitments shall automatically terminate and the Notes and the principal of the Loans then outstanding, together with accrued interest thereon and all fees and the other obligations of the Borrower and the Guarantors accrued hereunder and under the Notes and the other Loan Documents (including, without limitation, the payment of cash collateral to secure the Letter of Credit Exposure as provided in Section 2.08(j)), shall
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automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower and each Guarantor.
In the case of the occurrence of an Event of Default, the Administrative Agent and the Lenders will have all other rights and remedies available at law and equity.
All proceeds realized from the liquidation or other disposition of Collateral or otherwise received after maturity of the Notes, whether by acceleration or otherwise, shall be applied, respectively as follows:
First, to the Agents and the other Secured Parties, ratably, in an amount equal to the reimbursement of expenses and indemnities provided for under this Agreement and the Security Instruments;
Second, to the Secured Parties, ratably, in payment of that portion of the Obligations constituting interest due, in each case, under their respective Loan Documents or Swap Agreement;
Third, to the Secured Parties, ratably, in payment of that portion of the Obligations constituting fees due under their respective Loan Documents or Swap Agreement;
Fourth, ratably to the Secured Parties (and ratably among them) in payment of all of the remaining Obligations owing to the Lenders or an Affiliate of the Lenders under their respective Loan Documents or Swap Agreement;
Fifth, to serve as cash collateral to be held by the Administrative Agent to secure the Letter of Credit Exposure under this Agreement; and
Sixth, to the Borrower or to whomever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct, any surplus then remaining from such proceeds.
Section 10.03 Disposition of Proceeds. The Security Instruments contain an assignment by the Borrower and/or the Guarantors unto and in favor of the Collateral Agent (with respect to the Pledge and Security Agreement) and the Administrative Agent for the benefit of the Administrative Agent, the Issuer, the Lenders and any Swap Counterparty of all of the Borrower’s or each Guarantor’s interest in and to production and all proceeds attributable thereto that may be produced from or allocated to the Mortgaged Property. The Security Instruments further provide in general for the application of such proceeds to the satisfaction of the Obligations and other obligations described therein and secured thereby. Notwithstanding the assignment contained in such Security Instruments, except after the occurrence and during the continuance of an Event of Default, (a) the Collateral Agent, the Administrative Agent and the Lenders agree that they will neither notify the purchaser or purchasers of such production nor take any other action to cause such proceeds to be remitted to the Collateral Agent, the Administrative Agent or the Lenders, but the Lenders will instead permit such proceeds to be paid to the Borrower and its Subsidiaries and (b) the Lenders hereby authorize the Collateral
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Agent and the Administrative Agent to take such actions as may be necessary to cause such proceeds to be paid to the Borrower and/or its Subsidiaries.
Section 11.01 Appointment; Powers. Each of the Lenders and each Issuer hereby irrevocably appoints the Administrative Agent and the Collateral Agent as its agent and authorizes the Administrative Agent and the Collateral Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent and the Collateral Agent by the terms hereof and the other Loan Documents, together with such actions and powers as are reasonably incidental thereto.
Section 11.02 Duties and Obligations of Administrative Agent and Collateral Agent. The Administrative Agent and the Collateral Agent shall have no duties or obligations except those expressly set forth in the Loan Documents. Without limiting the generality of the foregoing, (a) the Administrative Agent and Collateral Agent shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing (the use of the term “agent” herein and in the other Loan Documents with reference to the Administrative Agent or the Collateral Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any Governmental Requirements; rather, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties), (b) neither the Administrative Agent nor the Collateral Agent shall have any duty to take any discretionary action or exercise any discretionary powers, except as provided in Section 11.03, and (c) except as expressly set forth herein, the Administrative Agent and the Collateral Agent shall have no duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Subsidiaries that is communicated to or obtained by the bank serving as Administrative Agent or the Collateral Agent or any of their Affiliates in any capacity. Neither the Administrative Agent nor the Collateral Agent shall be deemed to have knowledge of any Default unless and until written notice thereof is given to the Administrative Agent or the Collateral Agent by the Borrower or a Lender, and shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or under any other Loan Document or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or in any other Loan Document, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document, (v) the satisfaction of any condition set forth in ARTICLE VI or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent, (vi) the existence, value, perfection or priority of any collateral security or the financial or other condition of the Borrower and its Subsidiaries or any other obligor or guarantor, or (vii) any failure by the Borrower or any other Person (other than itself) to perform any of its obligations hereunder or under any other Loan Document or the performance or observance of any covenants, agreements or other terms or conditions set forth herein or therein. For purposes of determining compliance with the
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conditions specified in ARTICLE VI, each Lender shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender unless the Administrative Agent shall have received written notice from such Lender prior to the Closing Date specifying its objection thereto.
Section 11.03 Action by Agent. Neither the Administrative Agent nor the Collateral Agent shall 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 the Administrative Agent or the Collateral Agent is required to exercise in writing as directed by the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 12.02) and in all cases the Administrative Agent and the Collateral Agent shall be fully justified in failing or refusing to act hereunder or under any other Loan Documents unless it shall (a) receive written instructions from the Required Lenders or the Lenders, as applicable, (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 12.02) specifying the action to be taken and (b) be indemnified to its satisfaction by the Lenders against any and all liability and expenses which may be incurred by it by reason of taking or continuing to take any such action. The instructions as aforesaid and any action taken or failure to act pursuant thereto by the Administrative Agent or the Collateral Agent shall be binding on all of the Lenders. If a Default has occurred and is continuing, then the Administrative Agent or the Collateral Agent, as applicable, shall take such action with respect to such Default as shall be directed by the requisite Lenders in the written instructions (with indemnities) described in this Section 11.03, provided that, unless and until the Administrative Agent or the Collateral Agent shall have received such directions, the Administrative Agent or the Collateral Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default as it shall deem advisable in the best interests of the Lenders. In no event, however, shall the Administrative Agent or the Collateral Agent be required to take any action which exposes the Administrative Agent or the Collateral Agent to personal liability or which is contrary to this Agreement, the Loan Documents or Governmental Requirements. If a Default has occurred and is continuing, neither the Syndication Agent nor any Co-Documentation Agent shall have any obligation to perform any act in respect thereof. No Agent shall be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders or the Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 12.02), and otherwise neither the Administrative Agent nor the Collateral Agent shall be liable for any action taken or not taken by it hereunder or under any other Loan Document or under any other document or instrument referred to or provided for herein or therein or in connection herewith or therewith INCLUDING ITS OWN ORDINARY NEGLIGENCE, except for its own gross negligence or willful misconduct.
Section 11.04 Reliance by Agent. Each Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper Person. Each Agent also may rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person, and shall not incur any liability for relying thereon and each of the Borrower, the Lenders and each Issuer hereby waives the right to dispute such Agent’s record of such statement, except in the case of gross negligence or willful
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misconduct by such Agent. Each Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts. The Agents may deem and treat the payee of any Note as the holder thereof for all purposes hereof unless and until a written notice of the assignment or transfer thereof permitted hereunder shall have been filed with the Administrative Agent.
Section 11.05 Subagents. The Administrative Agent and the Collateral Agent may perform any and all its duties and exercise its rights and powers by or through any one or more sub-agents appointed by the Administrative Agent or the Collateral Agent, respectively. The Administrative Agent and the Collateral Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers through their respective Related Parties. The exculpatory provisions of the preceding Sections of this ARTICLE XI shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and the Collateral 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 Agent.
Section 11.06 Resignation or Removal of Agents. Subject to the appointment and acceptance of a successor Agent as provided in this Section 11.06, any Agent may resign at any time by notifying the Lenders, each Issuer and the Borrower, and any Agent may be removed at any time with or without cause by the Required Lenders. Upon any such resignation or removal, the Required Lenders shall have the right, subject to the consent of the Borrower, such consent not to be unreasonably withheld or delayed, to appoint a successor. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Agent gives notice of its resignation or removal of the retiring Agent, then the retiring Agent may, on behalf of the Lenders and each Issuer, appoint a successor Agent. Upon the acceptance of its appointment as Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. The fees payable by the Borrower to a successor Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the Agent’s resignation hereunder, the provisions of this ARTICLE XI and Section 12.03 shall continue in effect for the benefit of such retiring Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while it was acting as Agent.
Section 11.07 Agents and Lenders. Each bank serving as an Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not an Agent, and such bank and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if it were not an Agent hereunder.
Section 11.08 No Reliance. Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent, any other Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and each other Loan Document to which it is a party. Each Lender also acknowledges that it will, independently and without reliance upon the
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Administrative Agent, any other Agent or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document, any related agreement or any document furnished hereunder or thereunder. The Agents shall not be required to keep themselves informed as to the performance or observance by the Borrower or any of its Subsidiaries of this Agreement, the Loan Documents or any other document referred to or provided for herein or to inspect the Properties or books of the Borrower or its Subsidiaries. Except for notices, reports and other documents and information expressly required to be furnished to the Lenders by the Administrative Agent hereunder, no Agent or Arranger shall have any duty or responsibility to provide any Lender with any credit or other information concerning the affairs, financial condition or business of the Borrower (or any of its Affiliates) which may come into the possession of such Agent or any of its Affiliates. In this regard, each Lender acknowledges that Mayer Brown LLP is acting in this transaction as special counsel to the Administrative Agent with respect to this Agreement and to the Collateral Agent only. Each other party hereto will consult with its own legal counsel to the extent that it deems necessary in connection with the Loan Documents and the matters contemplated therein.
Section 11.09 Administrative Agent and Collateral Agent May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Borrower or any of its Subsidiaries, the Administrative Agent and the Collateral 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:
to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans and all other 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 the Lenders, the Collateral Agent, and the Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders, the Collateral Agent, and the Administrative Agent and their respective agents and counsel and all other amounts due the Lenders, the Collateral Agent, and the Administrative Agent under Section 12.03) allowed in such judicial proceeding; and
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 the Collateral Agent and, in the event that the Administrative Agent and the Collateral Agent shall consent to the making of such payments directly to the Lenders, to pay to the Administrative Agent and to the Collateral Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent, the Collateral Agent and their respective agents and counsel, and any other amounts due the Administrative Agent or the Collateral Agent under Section 12.03.
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Nothing contained herein shall be deemed to authorize the Administrative Agent or the Collateral 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 Obligations or the rights of any Lender or to authorize the Administrative Agent or the Collateral Agent to vote in respect of the claim of any Lender in any such proceeding.
Section 11.10 Authority of Administrative Agent and Collateral Agent to Release Collateral and Liens. Each Lender and each Issuer hereby authorizes the Administrative Agent or the Collateral Agent to release any collateral under any Security Instrument that is permitted to be sold or released pursuant to the terms of the Loan Documents or, upon the expiration and termination of the Loan Commitments and repayment in full of the principal of and interest on each Loan and all fees payable hereunder and all other amounts payable under the Loan Documents, 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 Issuer have been made), and the reimbursement of all Letter of Credit Disbursements. Each Lender and each Issuer hereby authorizes the Administrative Agent and the Collateral Agent to execute and deliver to the Borrower, at the Borrower’s sole cost and expense, any and all releases of Liens, termination statements, assignments or other documents reasonably requested by the Borrower in connection with any sale or other disposition of Property to the extent such sale or other disposition is permitted by the terms of Section 9.12 or is otherwise authorized by the terms of the Loan Documents.
Section 11.11 The Arranger, etc.. None of the Arranger, any Person identified as a “Syndication Agent,” any Person identified as a “Co-Documentation Agent,” any Person identified as “Lead Arranger” or any Person identified as “Bookrunner” shall have any duties, responsibilities or liabilities under this Agreement and the other Loan Documents other than its respective duties, responsibilities and liabilities in its capacity as a Lender hereunder to the extent it is a party to this Agreement as a Lender.
Except in the case of notices and other communications expressly permitted to be given by telephone (and subject to Section 12.01(b)), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows:
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if to the Borrower, to it at
Sanchez Production Partners LP
1000 Main Street, Suite 3000
Houston, Texas 77002
Telephone: 832-742-3818
Fax: 832-308-3720
Attn: Chief Financial Officer
if to the Administrative Agent, to it at
Royal Bank of Canada
Agency Services Group
4th Floor, 20 King Street West
Toronto, Ontario, Canada
M5H 1CA
Attention: Manager Agency
Facsimile: (416) 842-4023
Email: RBCAgentNotices@rbccm.com
With a copy to:
Royal Bank of Canada
2800 Post Oak Boulevard
Suite 3900
Houston, Texas 77056
Attention: Mark Lumpkin
Facsimile: 713-403-5624
for all correspondence related to Letter of Credit requests, to it at
Royal Bank of Canada
One Liberty Plaza
3rd Floor
New York, NY 10006-1404
Attention: Manager Trade Products
Telephone: 212-428-6235
Facsimile: 212-428-6332
if to any other Lender, in its capacity as such, or any other Lender in its capacity as an Issuer, to it at its address (or telecopy number) set forth in its Administrative Questionnaire.
Notices and other communications to the Lenders hereunder may be delivered or furnished by electronic communications pursuant to procedures approved by the Administrative Agent; provided that the foregoing shall not apply to notices pursuant to ARTICLE II, ARTICLE III, ARTICLE IV and ARTICLE V unless otherwise agreed by the Administrative Agent and the applicable Lender. The Administrative Agent or the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by
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electronic communications pursuant to procedures approved by it; provided that approval of such procedures may be limited to particular notices or communications.
Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt.
Section 12.02 Waivers; Amendments.
No failure on the part of the Administrative Agent, any other Agent, the Issuer or any Lender to exercise and no delay in exercising, and no course of dealing with respect to, any right, power or privilege, or any abandonment or discontinuance of steps to enforce such right, power or privilege, under any of the Loan Documents shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege under any of the Loan Documents preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies of the Administrative Agent, any other Agent, each Issuer and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or any other Loan Document or consent to any departure by the Borrower therefrom shall in any event be effective unless the same shall be permitted by Section 12.02(b), and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan or issuance of a Letter of Credit shall not be construed as a waiver of any Default, regardless of whether the Administrative Agent, any other Agent, any Lender or the Issuer may have had notice or knowledge of such Default at the time.
Neither this Agreement nor any provision hereof nor any Security Instrument securing the payment or performance of the Obligations hereunder, nor any provision thereof, may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Borrower and the Required Lenders or by the Borrower and the Administrative Agent, or the Collateral Agent (as applicable), with the consent of the Required Lenders; provided that the consent of the Required Lenders, or any other party other than the Borrower and the Administrative Agent, or the Collateral Agent (as applicable), shall not be required for amendments to the Security Instruments solely for the purpose of adding additional collateral to secure the payment and performance of the Obligations; provided further that no such agreement shall (i) increase the Maximum Credit Amount of any Lender without the written consent of such Lender, (ii) increase the Borrowing Base without the written consent of each Lender that is not a Defaulting Lender, decrease or maintain the Borrowing Base without the consent of the Required Lenders, or modify in any manner Section 2.07 without the consent of each Lender (except as permitted pursuant to Section 2.07(g)), (iii) reduce the principal amount of any Loan or Letter of Credit Disbursement or reduce the rate of interest thereon, or reduce any fees payable hereunder, or reduce any other Obligations hereunder or under any other Loan Document, without the written consent of each Lender affected thereby, (iv) postpone the scheduled date of payment of the principal amount of any Loan or Letter of Credit Disbursement, or any interest thereon, or any fees payable hereunder, or any other Obligations hereunder or under any other Loan Document, or reduce the amount of, waive or excuse any such payment, or
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postpone or extend the Termination Date or the Maturity Date without the written consent of each Lender affected thereby, (v) change any Loan Document in a manner that would alter the pro rata sharing of payments required thereby, without the written consent of each Lender, including without limitation, Section 4.01(b) or Section 4.01(c), (vi) waive or amend Section 6.01, Section 8.13 or Section 10.02(c) or change the definition of the terms “Domestic Subsidiary”, “Foreign Subsidiary”, “Material Domestic Subsidiary” or “Subsidiary”, without the written consent of each Lender, (vii) release any Guarantor (except as set forth in the Guarantee Agreement), release all or substantially all of the collateral (other than as provided in Section 11.10), or reduce the percentage set forth in Section 8.13(a) to less than 80%, without the written consent of each Lender, (viii) change any of the provisions of this Section 12.02(b) or the definition of “Required Lenders” or any other provision hereof specifying the number or percentage of Lenders required to waive, amend or modify any rights hereunder or under any other Loan Documents or make any determination or grant any consent hereunder or any other Loan Documents, without the written consent of each Lender; provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent, any other Agent, or the Issuer hereunder or under any other Loan Document without the prior written consent of the Administrative Agent, such other Agent or such Issuer, as the case may be, (ix) amend or modify the definition of Obligations to delete or exclude any obligation or liability described therein without the written consent of each Lender, or (x) permit the Borrower to assign or transfer any of its rights or obligations under this Agreement or other Loan Documents without the written consent of each Lender. Notwithstanding the foregoing, any supplement to Schedule 7.14 (Subsidiaries) shall be effective simply by delivering to the Administrative Agent a supplemental schedule clearly marked as such, and, upon receipt, the Administrative Agent will promptly deliver a copy thereof to the Lenders.
Section 12.03 Expenses; Indemnity; Damage Waiver.
The Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by the Administrative Agent, Collateral Agent, the Issuer and the Arranger including, without limitation, the reasonable fees, charges and disbursements of counsel and other outside consultants for the Administrative Agent, the Collateral Agent, the Issuer and the Arranger, the reasonable travel, photocopy, mailing, courier, telephone and other similar expenses and, in connection with the syndication of the credit facilities provided for herein, including expenses in connection with Intralinks, the preparation, negotiation, execution, delivery and administration (both before and after the execution hereof and including advice of counsel to the Administrative Agent, the Collateral Agent, the Issuer and the Arranger as to the rights and duties of the Administrative Agent, the Collateral Agent, the Issuer, the Arranger, and the Lenders with respect thereto) of this Agreement and the other Loan Documents and any amendments, modifications or waivers of or consents related to the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (ii) all reasonable out-of-pocket costs, expenses, Taxes, assessments and other charges incurred by any Agent, or any Lender in connection with any filing, registration, recording or perfection of any security interest contemplated by this Agreement or any Security Instrument or any other document referred to therein, (iii) all reasonable out-of-pocket expenses incurred by each Issuer in connection with the amendment of any Letter of Credit issued by such Issuer or any demand for payment thereunder, (iv) all reasonable out-of-pocket expenses incurred by any Agent, Arranger, the Issuer or any Lender, including the fees, charges and disbursements of one primary counsel,
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any local counsel or special counsel for the Administrative Agent, the Collateral Agent, the Arranger, the Issuer and the Lenders, in connection with the enforcement or protection of its rights in connection with this Agreement or any other Loan Document, including its rights under this Section 12.03, or in connection with the Loans made or Letters of Credit issued hereunder, including, without limitation, all such reasonable out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of Credit.
THE BORROWER SHALL INDEMNIFY EACH AGENT, THE ARRANGER, EACH ISSUER AND EACH LENDER, AND THE AFFILIATES, DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS 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, LIABILITIES AND RELATED EXPENSES, INCLUDING THE REASONABLE FEES, AND DISBURSEMENTS OF ANY COUNSEL FOR ANY INDEMNITEE, INCURRED BY OR ASSERTED AGAINST ANY INDEMNITEE ARISING OUT OF, IN CONNECTION WITH, OR AS A RESULT OF (i) THE EXECUTION OR DELIVERY OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT CONTEMPLATED HEREBY, THE PERFORMANCE BY THE PARTIES HERETO OR THE PARTIES TO ANY OTHER LOAN DOCUMENT OF THEIR RESPECTIVE OBLIGATIONS HEREUNDER OR THEREUNDER OR THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY OR BY ANY OTHER LOAN DOCUMENT, (ii) THE FAILURE OF THE BORROWER OR ANY OF ITS SUBSIDIARIES TO COMPLY WITH THE TERMS OF ANY LOAN DOCUMENT, INCLUDING THIS AGREEMENT, OR WITH ANY GOVERNMENTAL REQUIREMENT, (iii) ANY INACCURACY OF ANY REPRESENTATION OR ANY BREACH OF ANY WARRANTY OR COVENANT OF THE BORROWER OR ANY GUARANTOR SET FORTH IN ANY OF THE LOAN DOCUMENTS OR ANY INSTRUMENTS, DOCUMENTS OR CERTIFICATIONS DELIVERED IN CONNECTION THEREWITH, (iv) ANY LOAN OR LETTER OF CREDIT OR THE USE OF THE PROCEEDS THEREFROM, INCLUDING, WITHOUT LIMITATION, ANY REFUSAL BY THE ISSUER TO HONOR A DEMAND FOR PAYMENT UNDER A LETTER OF CREDIT ISSUED BY SUCH ISSUER IF THE DOCUMENTS PRESENTED IN CONNECTION WITH SUCH DEMAND DO NOT STRICTLY COMPLY WITH THE TERMS OF SUCH LETTER OF CREDIT, (v) THE OPERATIONS OF THE BUSINESS OF THE BORROWER AND ITS SUBSIDIARIES BY THE BORROWER AND ITS SUBSIDIARIES, (vi) ANY ASSERTION BY A THIRD PARTY THAT THE LENDERS WERE NOT ENTITLED TO RECEIVE THE PROCEEDS RECEIVED PURSUANT TO THE SECURITY INSTRUMENTS, (vii) THE BREACH OR NON-COMPLIANCE BY THE BORROWER OR ANY OF ITS SUBSIDIARIES WITH ANY ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER OR ANY OF ITS SUBSIDIARIES, (viii) THE PRESENCE, USE, RELEASE, STORAGE, TREATMENT, DISPOSAL, GENERATION, THREATENED RELEASE, TRANSPORT, ARRANGEMENT FOR TRANSPORT OR ARRANGEMENT FOR DISPOSAL OF OIL, OIL AND GAS WASTES, SOLID WASTES OR HAZARDOUS SUBSTANCES ON OR AT ANY OF THE PROPERTIES OWNED OR OPERATED BY THE BORROWER OR ANY OF ITS SUBSIDIARIES IN VIOLATION OF ENVIRONMENTAL LAWS OR ANY ACTUAL OR ALLEGED PRESENCE OR RELEASE OF HAZARDOUS MATERIALS ON OR FROM ANY PROPERTY OWNED OR OPERATED BY THE BORROWER OR ANY OF ITS SUBSIDIARIES IN VIOLATION OF ENVIRONMENTAL LAWS, (ix) ANY
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ENVIRONMENTAL LIABILITY RELATED IN ANY WAY TO THE BORROWER OR ANY OF ITS SUBSIDIARIES, (x) ANY OTHER VIOLATION OF ENVIRONMENTAL LAWS OR LAWS RELATING TO ANY HEALTH OR SAFETY CONDITION IN CONNECTION WITH THE LOAN DOCUMENTS, OR (xi) ANY ACTUAL OR PROSPECTIVE CLAIM, LITIGATION, INVESTIGATION OR PROCEEDING RELATING TO ANY OF THE FOREGOING, WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY AND REGARDLESS OF WHETHER ANY INDEMNITEE IS A PARTY THERETO, AND SUCH INDEMNITY SHALL EXTEND TO EACH INDEMNITEE NOTWITHSTANDING THE SOLE OR CONCURRENT NEGLIGENCE OF EVERY KIND OR CHARACTER WHATSOEVER, WHETHER ACTIVE OR PASSIVE, WHETHER AN AFFIRMATIVE ACT OR AN OMISSION, INCLUDING WITHOUT LIMITATION, ALL TYPES OF NEGLIGENT CONDUCT IDENTIFIED IN THE RESTATEMENT (SECOND) OF TORTS OF ONE OR MORE OF THE INDEMNITEES OR BY REASON OF STRICT LIABILITY IMPOSED WITHOUT FAULT ON ANY ONE OR MORE OF THE INDEMNITEES; PROVIDED THAT SUCH INDEMNITY SHALL NOT, AS TO ANY INDEMNITEE, BE AVAILABLE TO THE EXTENT THAT SUCH LOSSES, CLAIMS, DAMAGES, LIABILITIES OR RELATED EXPENSES ARE (A) 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 (B) IN RESPECT OF ANY PROPERTY FOR ANY OCCURRENCE ARISING FROM THE ACTS OR OMISSIONS OF THE ADMINISTRATIVE AGENT OR ANY LENDER DURING THE PERIOD AFTER WHICH SUCH PERSON, ITS SUCCESSORS OR ASSIGNS HAVE OBTAINED TITLE AND POSSESSION OF SUCH PROPERTY BY FORECLOSURE OR DEED IN LIEU OF FORECLOSURE).
To the extent that the Borrower fails to pay any amount required to be paid by it to such Agent or the Issuer under Section 12.03(a) or (b), each Lender severally agrees to pay to such Agent or such Issuer, as the case may be, such Lender’s Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against such Agent or such Issuer in its capacity as such.
To the extent permitted by Governmental Requirements, the 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 or thereby, the Transactions, any Loan or Letter of Credit or the use of the proceeds thereof.
All amounts due under this Section 12.03 shall be payable within ten (10) Business Days of written demand therefor.
Section 12.04 Successors and Assigns.
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
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(including any Affiliate of the Issuer that issues any Letter of Credit), except that (i) the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by the Borrower without such consent shall be null and void) and (ii) no Lender may assign or otherwise transfer its rights or obligations hereunder except in accordance with this Section 12.04. Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby (including any Affiliate of the Issuer that issues any Letter of Credit), Participants (to the extent provided in Section 12.04(c)) and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent, each Issuer and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.
(i) Subject to the conditions set forth in Section 12.04(b)(ii), any Lender may assign to one or more assignees all or a portion of its rights and obligations under this Agreement to an Eligible Assignee (including all or a portion of its Loan Commitment and the Loans at the time owing to it) with the prior written consent (such consent not to be unreasonably withheld) of:
(1)the Borrower, provided that no consent of the Borrower shall be required for an assignment to a Lender or an Affiliate of a Lender or, if an Event of Default has occurred and is continuing, to any other Eligible Assignee; and
(2)the Administrative Agent, provided that no consent of the Administrative Agent shall be required for an assignment to an assignee that is a Lender or any Affiliate of a Lender, immediately prior to giving effect to such assignment.
(i) Assignments shall be subject to the following additional conditions: |
(1)except in the case of an assignment to an assignee that is a Lender immediately prior to giving effect to such assignment or an Affiliate of a Lender or an assignment of the entire remaining amount of the assigning Lender’s Loan Commitment, the amount of the Loan Commitment of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent) shall not be less than $5,000,000 unless each of the Borrower and the Administrative Agent otherwise consent, provided that no such consent of the Borrower shall be required if an Event of Default has occurred and is continuing;
(2)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;
(3)except in the case of an assignment to an Affiliate of a Lender, the parties to each assignment shall execute and deliver to the
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Administrative Agent an Assignment and Assumption, together with a processing and recordation fee of $3,500; and
(4)the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire.
Subject to Section 12.04(b)(iv) and the acceptance and recording of an Assignment and Assumption, from and after the effective date specified in each Assignment and Assumption, the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Section 5.01, Section 5.02, Section 5.03 and Section 12.03). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this Section 12.04 shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with Section 12.04(c).
The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at one of its offices a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Maximum Credit Amount of, and principal amount of the Loans and Letter of Credit Disbursements owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive, and the Borrower, the Administrative Agent, each Issuer and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower, the Issuer and any Lender, at any reasonable time and from time to time upon reasonable prior notice. In connection with any changes to the Register, if necessary, the Administrative Agent will reflect the revisions on Annex I and forward a copy of such revised Annex I to the Borrower, each Issuer and each Lender.
Upon its receipt of a duly completed Assignment and Assumption executed by an assigning Lender and an assignee, the assignee’s completed Administrative Questionnaire (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in Section 12.04(b) and any written consent to such assignment required by Section 12.04(b), the Administrative Agent shall accept such Assignment and Assumption and record the information contained therein in the Register. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this Section 12.04(b).
Any Lender may, without the consent of the Borrower the Administrative Agent or the Issuer, sell participations to one or more banks or other entities (a
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“Participant”) in all or a portion of such Lender’s rights and obligations under this Agreement (including all or a portion of its Loan Commitment and the Loans owing to it); provided that (A) such Lender’s obligations under this Agreement shall remain unchanged, (B) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (C) the Borrower, the Administrative Agent, each Issuer and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the proviso to Section 12.02 that affects such Participant. In addition such agreement must provide that the Participant be bound by the provisions of Section 12.03. Subject to Section 12.04(c)(ii), the Borrower agrees that each Participant shall be entitled to the benefits of Section 5.01, Section 5.02 and Section 5.03 (in each case, without duplication of any benefits afforded the Lender granting the participation) to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to Section 12.04(b). To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 12.08 as though it were a Lender, provided such Participant agrees to be subject to Section 4.01(c) as though it were a Lender.
A Participant shall not be entitled to receive any greater payment under Section 5.01 or Section 5.03 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower’s prior written consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 5.03 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 5.03(f) and (g) as though it were a Lender.
Each Lender that sells a participation shall, acting solely for this purpose as an agent of the Borrower, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participant’s interest in the Loans or other obligations under the Loan Documents (the “Participant Register”); provided that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant’s interest in any commitments, loans, letters of credit or its other obligations under any Loan Document) to any Person except to the extent that such disclosure is necessary to establish that such commitment, loan, letter of credit or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, the Administrative Agent (in its capacity as Administrative Agent) shall have no responsibility for maintaining a Participant Register.
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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 of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.
Section 12.05 Survival; Revival; Reinstatement.
All covenants, agreements, representations and warranties made by the Borrower herein and in the certificates or other instruments delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of this Agreement and the making of any Loans and issuance of any Letters of Credit, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Administrative Agent, any other Agent, the Issuer or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid or any Letter of Credit is outstanding and so long as the Loan Commitments have not expired or terminated. The provisions of Section 5.01, Section 5.02, Section 5.03 and Section 12.03 and ARTICLE XI shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or termination of the Letters of Credit and the Loan Commitments or the termination of this Agreement, any other Loan Document or any provision hereof or thereof.
To the extent that any payments on the Obligations or proceeds of any collateral are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, debtor in possession, receiver or other Person under any bankruptcy law, common law or equitable cause, then to such extent, the Obligations so satisfied shall be revived and continue as if such payment or proceeds had not been received and the Administrative Agent’s and the Lenders’ Liens, security interests, rights, powers and remedies under this Agreement and each Loan Document shall continue in full force and effect. In such event, each Loan Document shall be automatically reinstated, and the Borrower shall take such action as may be reasonably requested by the Administrative Agent and the Lenders to effect such reinstatement.
Section 12.06 Counterparts; Integration; Effectiveness.
This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract.
This Agreement, the other Loan Documents and any separate letter agreements with respect to fees payable to the Administrative Agent constitute the entire contract among the parties relating to the subject matter hereof and thereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof and thereof. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE
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FINAL AGREEMENT AMONG THE PARTIES HERETO AND THERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Except as provided in Section 6.01, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Delivery of an executed counterpart of a signature page of this Agreement by telecopy or electronic mail in portable document format (pdf) shall be effective as delivery of a manually executed counterpart of this Agreement.
Section 12.07 Severability. Any provision of this Agreement or any other Loan Document held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof or thereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.
Section 12.08 Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other obligations (of whatsoever kind, including, without limitations obligations under Swap Agreements) at any time owing by such Lender or Affiliate to or for the credit or the account of the Borrower or any of its Subsidiaries against any of and all the obligations of the Borrower or any of its Subsidiaries owed to such Lender now or hereafter existing under this Agreement or any other Loan Document, irrespective of whether or not such Lender shall have made any demand under this Agreement or any other Loan Document and although such obligations may be unmatured. The rights of each Lender under this Section 12.08 are in addition to other rights and remedies (including other rights of setoff) which such Lender or its Affiliates may have.
Section 12.09 GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS. THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK EXCEPT TO THE EXTENT THAT UNITED STATES FEDERAL LAW PERMITS ANY LENDER TO CONTRACT FOR, CHARGE, RECEIVE, RESERVE OR TAKE INTEREST AT THE RATE ALLOWED BY THE LAWS OF THE STATE WHERE SUCH LENDER IS LOCATED.
ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THE LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, IN EITHER CASE LOCATED IN NEW YORK COUNTY, NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH PARTY HEREBY
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ACCEPTS FOR ITSELF AND (TO THE EXTENT PERMITTED BY LAW) IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS. THIS SUBMISSION TO JURISDICTION IS NON-EXCLUSIVE AND DOES NOT PRECLUDE A PARTY FROM OBTAINING JURISDICTION OVER ANOTHER PARTY IN ANY COURT OTHERWISE HAVING JURISDICTION.
EACH PARTY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT THE ADDRESS SPECIFIED IN SECTION 12.01 OR SUCH OTHER ADDRESS AS IS SPECIFIED PURSUANT TO SECTION 12.01 (OR ITS ASSIGNMENT AND ASSUMPTION), SUCH SERVICE TO BECOME EFFECTIVE THIRTY (30) DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF A PARTY OR ANY HOLDER OF A NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANOTHER PARTY IN ANY OTHER JURISDICTION.
EACH PARTY HEREBY (i) IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN; (ii) IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES; (iii) CERTIFIES THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT OF COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (iv) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION 12.09.
Section 12.10 Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement.
Section 12.11 Confidentiality. Each of the Agents, each Issuer and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates’ directors, officers, employees and agents, including
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accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory or self-regulatory authority or body, (c) to the extent required by Governmental Requirements or regulations or by any subpoena or similar legal process, (d) to any other party to this Agreement or any other Loan Document, (e) in connection with the exercise of any remedies hereunder or under any other Loan Document or any suit, action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section 12.11, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (ii) any actual or prospective counterparty (or its advisors) to any Swap Agreement relating to the Borrower and their obligations, (g) with the consent of the Borrower, (h) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section 12.11 or (ii) becomes available to the Administrative Agent, the Issuer or any Lender on a nonconfidential basis from a source other than the Borrower or (i) to any credit insurance provider relating to the Borrower and its Obligations so long as any such credit insurance provider is party to a written agreement by which it is subject to the confidentiality provisions of this Section 12.11. For the purposes of this Section 12.11, “Information” means all information received from the Borrower or any of its Subsidiaries relating to the Borrower or any of its Subsidiaries and their businesses, other than any such information that is available to the Administrative Agent, the Issuer or any Lender on a nonconfidential basis prior to disclosure by the Borrower or any of its Subsidiaries; provided that, in the case of information received from the 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 12.11 shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.
Section 12.12 Maximum Interest. It is the intention of the parties hereto to conform strictly to applicable usury laws, and, anything herein to the contrary notwithstanding, the Obligations of the Borrower to each Lender under this Agreement shall be subject to the limitation that payments of interest shall not be required to the extent that receipt thereof would be contrary to provisions of law applicable to such Lender limiting rates of interest that may be charged or collected by such Lender. Accordingly, if the transactions contemplated hereby would be usurious under Governmental Requirements (including the Federal and state laws of the United States of America, or of any other jurisdiction whose laws may be mandatorily applicable) with respect to a Lender, then, in that event, notwithstanding anything to the contrary in this Agreement, it is agreed as follows: (a) the provisions of this Section 12.12 shall govern and control; (b) the aggregate of all consideration that constitutes interest under Governmental Requirements that is contracted for, charged or received under this Agreement, or under any other Loan Document or otherwise in connection with this Agreement by such Lender shall under no circumstances exceed the Highest Lawful Rate, and any excess shall be credited to the Borrower by such Lender (or, if such consideration shall have been paid in full, such excess promptly refunded to the Borrower); (c) all sums paid, or agreed to be paid, to such Lender for the use, forbearance and detention of the indebtedness of the Borrower to such Lender hereunder shall, to the extent permitted by Governmental Requirements, be amortized, prorated, allocated
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and spread throughout the full term of such indebtedness until payment in full so that the actual rate of interest is uniform throughout the full term thereof; and (d) if at any time the interest provided pursuant to Section 3.02, together with any other fees and expenses payable pursuant to this Agreement and the other Loan Documents and deemed interest under Governmental Requirements, exceeds that amount that would have accrued at the Highest Lawful Rate, then the amount of interest and any such fees to accrue to such Lender pursuant to this Agreement shall be limited, notwithstanding anything to the contrary in this Agreement, to that amount that would have accrued at the Highest Lawful Rate, but any subsequent reductions, as applicable, shall not reduce the interest to accrue to such Lender pursuant to this Agreement below the Highest Lawful Rate until the total amount of interest accrued pursuant to this Agreement and such fees deemed to be interest equals the amount of interest that would have accrued to such Lender if a varying rate per annum equal to the interest provided pursuant to Section 3.02 had at all times been in effect, plus the amount of fees that would have been received but for the effect of this Section 12.12.
Section 12.13 EXCULPATION PROVISIONS. EACH OF THE PARTIES HERETO SPECIFICALLY AGREES THAT IT HAS A DUTY TO READ THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND AGREES THAT IT IS CHARGED WITH NOTICE AND KNOWLEDGE OF THE TERMS OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; THAT IT HAS IN FACT READ THIS AGREEMENT AND IS FULLY INFORMED AND HAS FULL NOTICE AND KNOWLEDGE OF THE TERMS, CONDITIONS AND EFFECTS OF THIS AGREEMENT; THAT IT HAS BEEN REPRESENTED BY INDEPENDENT LEGAL COUNSEL OF ITS CHOICE THROUGHOUT THE NEGOTIATIONS PRECEDING ITS EXECUTION OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; AND HAS RECEIVED THE ADVICE OF ITS ATTORNEY IN ENTERING INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; AND THAT IT RECOGNIZES THAT CERTAIN OF THE TERMS OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS RESULT IN ONE PARTY ASSUMING THE LIABILITY INHERENT IN SOME ASPECTS OF THE TRANSACTION AND RELIEVING THE OTHER PARTY OF ITS RESPONSIBILITY FOR SUCH LIABILITY. EACH PARTY HERETO AGREES AND COVENANTS THAT IT WILL NOT CONTEST THE VALIDITY OR ENFORCEABILITY OF ANY EXCULPATORY PROVISION OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS ON THE BASIS THAT THE PARTY HAD NO NOTICE OR KNOWLEDGE OF SUCH PROVISION OR THAT THE PROVISION IS NOT “CONSPICUOUS.”
Section 12.14 Collateral Matters; Swap Agreements. The benefit of the Security Instruments and of the provisions of this Agreement relating to any collateral securing the Obligations shall also extend to and be available to Swap Counterparties to any Swap Agreement with the Borrower or any of its Subsidiaries on a pro rata basis in respect of any obligations of the Borrower or any of its Subsidiaries that arise under any such Swap Agreements; provided that, with respect to any Swap Transaction that remains secured after the Swap Counterparty thereto is no longer a Lender or an Affiliate of a Lender or the outstanding Obligations have been repaid in full and the Commitments have terminated, the provisions of Article XI shall also continue to apply to such counterparty in consideration of its benefits hereunder and each such counterparty shall, if requested by the Administrative Agent, promptly execute and deliver to the Administrative Agent all such other documents, agreements and instruments reasonably
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requested by the Administrative Agent to evidence the continued applicability of the provisions of Article XI. No Swap Counterparty shall have any voting rights or consent under any Loan Document as a result of the existence of obligations owed to it under any such Swap Agreements.
Section 12.15 No Third Party Beneficiaries. This Agreement, the other Loan Documents, and the agreement of the Lenders to make Loans and the Issuer to issue, amend, renew or extend Letters of Credit hereunder are solely for the benefit of the Borrower, and no other Person (including, without limitation, any Subsidiary of the Borrower, any obligor, contractor, subcontractor, supplier or materialsman) shall have any rights, claims, remedies or privileges hereunder or under any other Loan Document against the Administrative Agent, any other Agent, the Issuer or any Lender for any reason whatsoever. There are no third party beneficiaries.
Section 12.16 USA Patriot Act Notice. Each Lender hereby notifies the Borrower that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”), it is required to obtain, verify and record information that identifies the Borrower and each Obligor, which information includes the name and address of the Borrower and each Obligor and other information that will allow such Lender to identify the Borrower and each Obligor in accordance with the Act.
Section 12.17 Amendment and Restatement. The parties hereto agree that on the Closing Date, the following transactions shall be deemed to occur automatically, without further action by any party hereto:
the Existing Credit Agreement shall be deemed to be amended and restated in its entirety in the form of this Agreement;
the Loans shall serve to extend, renew and continue, but not to extinguish or novate, the Existing Loans and the corresponding promissory notes and to amend, restate and supersede, but not to extinguish or cause to be novated the Existing Obligations under, the Existing Credit Agreement;
the Borrower hereby agrees that, upon the effectiveness of this Agreement, the Existing Loans outstanding under the Existing Credit Agreement and all accrued and unpaid interest thereon shall be deemed to be outstanding under and payable by this Agreement;
all Existing Obligations (including any Existing Obligations that have accrued, but are not payable, as of the Closing Date) shall, to the extent not paid on the Closing Date, be deemed to be Obligations outstanding (and in the case of any accrued Existing Obligations that have accrued, but are not payable, as of the Closing Date, such accrued Existing Obligations shall be paid on the date or dates that such Existing Obligations were due under the Existing Agreement);
the Liens in favor of Administrative Agent securing payment of the Existing Obligations shall remain in full force and effect with respect to the Obligations and are hereby reaffirmed in accordance with the Security Documents; and
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the parties acknowledge and agree that this Agreement and the other Loan Documents do not constitute a novation, payment and reborrowing or termination of the Existing Obligations and that all such Existing Obligations are in all respects continued and outstanding as Obligations under this Agreement with only the terms being modified from and after the effective date of this Agreement as provided in this Agreement and the other Loan Documents.
Section 12.18 No General Partner’s Liability for Revolving Facility. It is hereby understood and agreed that the General Partner shall have no personal liability, as general partner or otherwise, for the payment of any amount owing or to be owing hereunder or under any other Loan Document with respect to the Loan Commitments, Loans or Letters of Credit. In furtherance of the foregoing, the Administrative Agent, the Collateral Agent and the Lenders agree for themselves and their respective successors and assigns that no claim arising against the Borrower or any of its Subsidiaries under any Loan Document with respect to the Loan Commitments, Loans or Letters of Credit shall be asserted against the General Partner (in its individual capacity), any claim arising against the Borrower or any of its Subsidiaries under any Loan Document with respect to the Loan Commitments, Loans or Letters of Credit shall be made only against and shall be limited to the assets of the Borrower and its Subsidiaries, and no judgment, order or execution entered in any suit, action or proceeding, whether legal or equitable, on this Agreement or any of the other Loan Documents with respect to the Loan Commitments, Loans or Letters of Credit shall be obtained or enforced against the General Partner (in its individual capacity) or its assets for the purpose of obtaining satisfaction and payment of the Obligations with respect to the Loan Commitments, Loans or Letters of Credit or any claims arising under this Agreement or any other Loan Document with respect to the Loan Commitments, Loans or Letters of Credit, any right to proceed against the General Partner individually or its respective assets being hereby expressly waived by the Administrative Agent, the Collateral Agent and Lenders for themselves and their respective successors and assigns. Nothing in this Section 12.18, however, shall be construed so as to prevent the Administrative Agent, the Collateral Agent or any Lender from commencing any action, suit or proceeding with respect to, or causing legal papers to be served upon, the General Partner for the purpose of (a) obtaining jurisdiction over the Borrower or its Subsidiaries, (b) obtaining judgment, order or execution against the General Partner arising out of any fraud or intentional misrepresentation by the General Partner in connection with the Loan Documents or (c) the recovery of moneys received by the General Partner in violation of this Agreement or any other Loan Document.
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The parties hereto have caused this Agreement to be duly executed as of the day and year first above written.
BORROWER:
SANCHEZ PRODUCTION PARTNERS LP, a
Delaware limited partnership
By:Sanchez Production Partners GP LLC,
its general partner
By:/s/ Charles C. Ward
Name: Charles C. Ward
Title: Chief Financial Officer
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ADMINISTRATIVE AGENT AND
COLLATERAL AGENT:
Royal Bank of Canada,
as Administrative Agent and Collateral Agent
By:/s/ Yvonne Brzier
Name: Yvonne Brazier
Title: Manager, Agency Services
ISSUER AND LENDER:
Royal Bank of Canada,
as Issuer and a Lender
By:/s/ Evans Swann, Jr.
Name: Evans Swann, Jr.
Title: Authorized Signatory
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SOCIÉTÉ GÉNÉRALE, as a Lender
By:
Name:
Title:
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COMPASS BANK, as a Lender
By:
Name:
Title:
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SUNTRUST BANK, as a Lender
By:
Name:
Title:
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ONEWEST BANK N.A.
as a Lender
By:
Name:
Title:
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ANNEX I
LIST OF MAXIMUM CREDIT AMOUNTS
AGGREGATE MAXIMUM CREDIT AMOUNT
NAME OF LENDER |
APPLICABLE |
MAXIMUM CREDIT |
|
|
|
Royal Bank of Canada |
25.00000000% | $ 125,000,000.00
|
Société Générale |
25.00000000% | $ 125,000,000.00
|
Compass Bank |
18.18181818% | $ 90,909,090.91
|
SunTrust Bank |
18.18181818% | $ 90,909,090.91
|
OneWest Bank N.A. |
13.63636364% | $ 68,181,818.18
|
TOTAL |
100.00000000% | $ 500,000,000.00
|
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EXHIBIT A
FORM OF NOTE
$[ ] |
[ ], 2015 |
FOR VALUE RECEIVED, Sanchez Production Partners LP, a Delaware limited partnership (the “Borrower”), hereby promises to pay to [ ] or its registered assigns (the “Lender”), at the principal office of Royal Bank of Canada, as administrative agent (the “Administrative Agent”), the principal sum of [ ] Dollars ($[ ]) (or such lesser amount as shall equal the aggregate unpaid principal amount of the Loans) made by the Lender to the Borrower under the Credit Agreement (defined below), in lawful money of the United States of America and in immediately available funds, on the dates and in the principal amounts provided in the Credit Agreement, and to pay interest on the unpaid principal amount of each such Loan, at such office, in like money and funds, for the period commencing on the date of such Loan until such Loan shall be paid in full, at the rates per annum and on the dates provided in the Credit Agreement.
The date, amount, Type, interest rate, Interest Period and maturity of each Loan made by the Lender to the Borrower, and each payment made on account of the principal thereof, shall be recorded by the Lender on its books and, prior to any transfer of this Note, may be endorsed by the Lender on the schedules attached hereto or any continuation thereof or on any separate record maintained by the Lender. Failure to make any such notation or to attach a schedule shall not affect any Lender’s or the Borrower’s rights or obligations in respect of such Loans or affect the validity of such transfer by any Lender of this Note.
This Note is issued pursuant to, and is subject to the terms and conditions set forth in, that certain Third Amended and Restated Credit Agreement, dated as of March 31, 2015, by and among the Borrower, the Administrative Agent, and certain other lenders parties thereto from time to time (the “Credit Agreement”) and is entitled to the benefits provided for in the Credit Agreement and the other Loan Documents. The Credit Agreement provides for the acceleration of the maturity of this Note upon the occurrence of certain events, for prepayments of Loans upon the terms and conditions specified therein and other provisions relevant to this Note. Capitalized terms used in this Note have the respective meanings assigned to them in the Credit Agreement
This Note is one of the notes that represents an extension, renewal, and replacement of, and is given in substitution and exchange for, certain promissory notes evidencing prior indebtedness of the Borrower in the original aggregate principal amount of up to $350,000,000 executed by the Borrower under the Second Amended and Restated Credit Agreement dated as of May 30, 2013, as such Second Amended and Restated Credit Agreement was or may have been from time to time thereafter amended or modified, and the indebtedness evidenced hereby and thereby is a continuing indebtedness, and nothing herein contained or implied shall be construed to deem such indebtedness or any accrued and unpaid interest thereon paid, satisfied, novated or terminated, or any collateral or security therefore released or terminated.
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THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SANCHEZ PRODUCTION PARTNERS LP, a
Delaware limited partnership
By:Sanchez Production Partners GP LLC,
its general partner
By:
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EXHIBIT B
FORM OF COMPLIANCE CERTIFICATE
The undersigned hereby certifies that he is the Chief Financial Officer of Sanchez Production Partners GP LLC, a Delaware limited liability company (the “General Partner”) and sole general partner of Sanchez Production Partners LP, a Delaware limited partnership (the “Borrower”), and that as such he is authorized to execute this certificate on behalf of the General Partner, as the general partner of the Borrower. With reference to the Third Amended and Restated Credit Agreement dated as of March 31, 2015 (together with all amendments, supplements or restatements thereto being the “Credit Agreement”) among the Borrower, Royal Bank of Canada, as Administrative Agent, and the other agents and lenders (the “Lenders”) which are or become a party thereto, and such Lenders, each of the undersigned represents and warrants as follows (each capitalized term used herein having the same meaning given to it in the Agreement unless otherwise specified):
(a)The representations and warranties of the Borrower contained in Article VII of the Agreement and in the Loan Documents and otherwise made in writing by or on behalf of the Borrower or any other Guarantor pursuant to the Credit Agreement and the Loan Documents were true and correct when made, and are repeated at and as of the time of delivery hereof and are true and correct in all material respects at and as of the time of delivery hereof, except to the extent such representations and warranties are expressly limited to an earlier date or the Required Lenders have expressly consented in writing to the contrary.
(b)Since December 31, 2014, no change has occurred, either in any case or in the aggregate, in the condition, financial or otherwise, of the Borrower or any of its Subsidiaries that could reasonably be expected to have a Material Adverse Effect.
(c)There exists no Default or Event of Default.
(d)There has been no change in the Borrower’s application of GAAP since December 31, 2014.
(e)[Attached hereto as Exhibit A are the detailed computations necessary to determine whether the Borrower is in compliance with [Section 8.13 and] Section 9.01 as of the end of the fiscal quarter ending [ ].][Commencing with fiscal quarter ending June 30, 2015]
(f)Attached hereto as Exhibit B are the Swap Agreements and Swap Transactions of the Borrower and each of its Consolidated Subsidiaries in place as of the end of the fiscal quarter ending [ ], setting forth with respect to (i) all Swap Transactions, calculations evidencing compliance with Section 9.17 of the Credit Agreement and (ii) each Swap Transaction, the maximum aggregate amount (giving effect to any netting agreements) that the Borrower or any such Consolidated Subsidiary would be required to pay if such Swap Transaction were terminated at such time; the information in both (i) and (ii) shall be prepared as of the end of such fiscal quarter based on all transactions outstanding as of the end of such fiscal quarter under any Swap Transactions then in effect, including transactions which are scheduled to commence on a future date.
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EXECUTED AND DELIVERED this [ ] day of [ ].
SANCHEZ PRODUCTION PARTNERS LP, a
Delaware limited partnership
By:Sanchez Production Partners GP LLC,
its general partner
By:
Charles C. Ward, Chief Financial Officer
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Exhibit A to Compliance Certificate
[To be inserted]
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Exhibit B to Compliance Certificate
[To be inserted]
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EXHIBIT C
SECURITY INSTRUMENTS
Security to consist of (1) the Guarantee Agreement executed by all existing Material Domestic Subsidiaries and covenant to cause all future Material Domestic Subsidiaries to execute a supplement to the Guarantee Agreement, (2) the Pledge and Security Agreement executed by the Borrower and all existing Material Domestic Subsidiaries and covenant to cause all future Material Domestic Subsidiaries to execute a supplement to the Pledge and Security Agreement and (3) Mortgages over Mortgaged Property.
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EXHIBIT D
FORM OF ASSIGNMENT AND ASSUMPTION
This Assignment and Assumption (the “Assignment and Assumption”) is dated as of the Effective Date set forth below and is entered into by and between the Assignor identified in item 1 below (the “Assignor”) and the Assignee identified in item 2 below (the “Assignee”). Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement identified below (as amended, the “Credit Agreement”), receipt of a copy of which is hereby acknowledged by the Assignee. The Standard Terms and Conditions set forth in Annex 1 attached hereto are hereby agreed to and incorporated herein by reference and made a part of this Assignment and Assumption as if set forth herein in full.
For an agreed consideration, the Assignor hereby irrevocably sells and assigns to the Assignee, and the Assignee hereby irrevocably purchases and assumes from the Assignor, subject to and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the Effective Date inserted by the Administrative Agent as contemplated below, (i) all of the Assignor’s rights and obligations in its capacity as a Lender under the Credit Agreement and any other documents or instruments delivered pursuant thereto to the extent related to the amount and percentage interest identified below of all of such outstanding rights and obligations of the Assignor under the credit facility that is the subject of the Credit Agreement (including without limitation any letters of credit included in such facility) and (ii) to the extent permitted to be assigned under applicable law, all claims, suits, causes of action and any other right of the Assignor (in its capacity as a Lender) against any Person, whether known or unknown, arising under or in connection with the Credit Agreement, any other documents or instruments delivered pursuant thereto or the loan transactions governed thereby or in any way based on or related to any of the foregoing, including, but not limited to, contract claims, tort claims, malpractice claims, statutory claims and all other claims at law or in equity related to the rights and obligations sold and assigned pursuant to clause (i) above (the rights and obligations sold and assigned by the Assignor to the Assignee pursuant to clauses (i) and (ii) above being referred to herein collectively as the “Assigned Interest”). Such sale and assignment is without recourse to the Assignor and, except as expressly provided in this Assignment and Assumption, without representation or warranty by the Assignor.
|
Assignor: |
________________________________ |
|||||
|
Assignee: |
________________________________, [a Lender/an Affiliate of {identify Lender}/an Approved Fund of {identify Lender}/a Person approved by the Administrative Agent and the Issuer] |
|||||
|
Borrower: |
Sanchez Production Partners LP |
|||||
|
Administrative Agent: |
Royal Bank of Canada, as the Administrative Agent under the Credit Agreement |
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|
Credit Agreement: |
The $500,000,000 Third Amended and Restated Credit Agreement dated as of March 31, 2015 among Sanchez Production Partners LP as Borrower, Royal Bank of Canada as Administrative Agent and the Lenders party hereto. |
|||||
|
Assigned Interest: |
|
|||||
Assignor |
Assignee |
Amount of Loan |
Aggregate Amount of |
Percentage |
CUSIP Number |
||
|
|
$ |
$ |
% |
|
Effective Date: _____________ ___, 201___.
The terms set forth in this Assignment and Assumption are hereby agreed to:
ASSIGNOR
[NAME OF ASSIGNOR]
By:
Name:
Title:
ASSIGNEE
[NAME OF ASSIGNEE]
By:
Name:
Title:
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Consented to:
Royal Bank of Canada,
as Administrative Agent
By:
Name:
Title:
Consented to:
SANCHEZ PRODUCTION PARTNERS LP,
a Delaware limited partnership, as Borrower
By:
SANCHEZ PRODUCTION PARTNERS GP LLC,
its general partner
By:
Name:
Title:
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ANNEX I
STANDARD TERMS AND CONDITIONS FOR
ASSIGNMENT AND ASSUMPTION
Representations and Warranties.
Assignor. The Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is free and clear of any lien, encumbrance or other adverse claim and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Credit Agreement or any other Loan Document, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents or any collateral thereunder, (iii) the financial condition of the Borrower, any of its Subsidiaries or Affiliates or any other Person obligated in respect of any Loan Document or (iv) the performance or observance by the Borrower, any of its Subsidiaries or Affiliates or any other Person of any of their respective obligations under any Loan Document.
Assignee. The Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it meets all the requirements to be an assignee under the Credit Agreement (subject to such consents, if any, as may be required under Section 12.04(b) of the Credit Agreement), (iii) from and after the Effective Date, it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and, to the extent of the Assigned Interest, shall have the obligations of a Lender thereunder, (iv) it is sophisticated with respect to decisions to acquire assets of the type represented by the Assigned Interest and either it, or the person exercising discretion in making its decision to acquire the Assigned Interest, is experienced in acquiring assets of such type, (v) it has received a copy of the Credit Agreement, and has received or has been accorded the opportunity to receive copies of the most recent financial statements delivered pursuant to Section 8.01 thereof, as applicable, and such other documents and information as it deems appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption and to purchase the Assigned Interest, (vi) it has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Assignment and Assumption and to purchase the Assigned Interest, and (vii) if it is a Foreign Lender, attached to this Assignment and Assumption is any documentation required to be delivered by it pursuant to the terms of the Credit Agreement, duly completed and executed by the Assignee; and (b) agrees that (i) it will, independently and without reliance on the Administrative Agent, the Assignor or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender.
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Payments. From and after the Effective Date, the Administrative Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignor for amounts which have accrued to but excluding the Effective Date and to the Assignee for amounts which have accrued from and after the Effective Date.
General Provisions. This Assignment and Assumption shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. This Assignment and Assumption may be executed in any number of counterparts, which together shall constitute one instrument. Delivery of an executed counterpart of a signature page of this Assignment and Assumption by telecopy shall be effective as delivery of a manually executed counterpart of this Assignment and Assumption. This Assignment and Assumption shall be governed by, and construed in accordance with, the law of the State of New York.
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EXHIBIT E
FORM OF BORROWING REQUEST
______________, 201_
Royal Bank of Canada
Agency Services Group
4th Floor, 20 King Street West
Toronto, Ontario, Canada
M5H 1CA
Attention: Manager Agency
Facsimile: (416) 842-4023
Email: RBCAgentNotices@rbccm.com
Royal Bank of Canada
2800 Post Oak Boulevard
Suite 3900
Houston, Texas 77056
Attention: Mark Lumpkin
Facsimile: 713-403-5624
Ladies and Gentlemen:
Reference is made to the Third Amended and Restated Credit Agreement, dated as of March 31, 2015, among Sanchez Production Partners LP, as Borrower, Royal Bank of Canada, as Administrative Agent, and the Lenders party thereto (as in effect on the date hereof, the “Credit Agreement”; capitalized terms used but not otherwise defined herein shall have the meaning ascribed to such terms in the Credit Agreement). The undersigned hereby gives notice pursuant to Section 2.03 of the Credit Agreement of its request to have the following Loans in the aggregate amount of $[_____] (the “Requested Borrowing”) made to it on [insert date of Requested Borrowing]:
Type of Loan |
Amount |
|
|
______________________________________ |
______________ |
|
|
______________________________________ |
______________ |
|
|
______________________________________ |
______________ |
The amount of the currently effective Borrowing Base is $[_____]. The current Revolving Credit Exposure (without regard to the Requested Borrowing) is $[_____]. The pro forma Revolving Credit Exposure (after giving effect to the Requested Borrowing) is $[_____].
Please disburse the proceeds of the Requested Borrowing to [insert bank and account information].
Third Amended and Restated Credit Agreement – EXHIBIT E - Page 1
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The undersigned represents and warrants that (a) the borrowing requested hereby complies with the requirements of the Credit Agreement, (b) each condition contained in Sections 6.02(a) through 6.02(d) of the Credit Agreement has been completed and satisfied in full at and as of the date hereof and (c) the amount of the Requested Borrowing shall not cause the Revolving Credit Exposures to exceed the Total Commitments.
SANCHEZ PRODUCTION PARTNERS LP, a
Delaware limited partnership
By:Sanchez Production Partners GP LLC,
its general partner
By:
Name:
Title:
Third Amended and Restated Credit Agreement – EXHIBIT F - Page 2
715347206 14464587
EXHIBIT F
FORM OF INTEREST ELECTION REQUEST
______________, 201__
Royal Bank of Canada
Agency Services Group
4th Floor, 20 King Street West
Toronto, Ontario, Canada
M5H 1CA
Attention: Manager Agency
Facsimile: (416) 842-4023
Email: RBCAgentNotices@rbccm.com
Royal Bank of Canada
2800 Post Oak Boulevard
Suite 3900
Houston, Texas 77056
Attention: Mark Lumpkin
Facsimile: 713-403-5624
Ladies and Gentlemen:
Reference is made to the Third Amended and Restated Credit Agreement, dated as of March 31, 2015, among Sanchez Production Partners LP, as Borrower, Royal Bank of Canada, as Administrative Agent, and the Lenders party thereto (as in effect on the date hereof, the “Credit Agreement”; capitalized terms used but not otherwise defined herein shall have the meaning ascribed to such terms in the Credit Agreement). The undersigned hereby gives notice pursuant to Section 2.04(b) of the Credit Agreement of its desire to continue the Loans specified below as Loans of the Types and in the amounts specified below on [insert effective date of continuation]:
Loans to be Continued |
Continued Loans |
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Type of Loan |
Last Day of |
Amount |
Type of Loan |
Interest Period |
Amount |
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____________ |
_____________ |
____________ |
___________ |
_________ |
______ |
The undersigned represents and warrants that the continuations requested hereby comply with the requirements of the Credit Agreement.
SANCHEZ PRODUCTION PARTNERS LP, a
Delaware limited partnership
Third Amended and Restated Credit Agreement – EXHIBIT F - Page 1
715347206 14464587
By:
Sanchez Production Partners GP LLC,
Third Amended and Restated Credit Agreement – EXHIBIT F - Page 2
715347206 14464587
EXHIBIT G
FORM OF NOTICE OF LETTER OF CREDIT REQUEST
____________, 201_
Royal Bank of Canada
One Liberty Plaza
3rd Floor
New York, NY 10006-1404
Attention: Manager Trade Products
Telephone: 212-428-6235
Facsimile: 212-428-6332
Royal Bank of Canada
Agency Services Group
4th Floor, 20 King Street West
Toronto, Ontario, Canada
M5H 1CA
Attention: Manager Agency
Facsimile: (416) 842-4023
Email: RBCAgentNotices@rbccm.com
Royal Bank of Canada
2800 Post Oak Boulevard
Suite 3900
Houston, Texas 77056
Attention: Mark Lumpkin
Facsimile: 713-403-5624
Ladies and Gentlemen:
Reference is made to the Third Amended and Restated Credit Agreement, dated as of March 31, 2015, among Sanchez Production Partners LP, as Borrower, Royal Bank of Canada, as Administrative Agent, and the Lenders party thereto (as in effect on the date hereof, the “Credit Agreement”; capitalized terms used but not otherwise defined herein shall have the meaning ascribed to such terms in the Credit Agreement). The undersigned hereby gives notice pursuant to Section 2.08(b) of the Credit Agreement of its request to have the following Letter of Credit [issued/amended/renewed/extended] on [insert requested date of issuance, amendment, renewal or extension]:
Description/Letter of Credit No. |
Beneficiary |
Expiration |
Amount |
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_________________________ |
________ |
___________ |
_____________ |
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_________________________ |
________ |
___________ |
_____________ |
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Third Amended and Restated Credit Agreement – EXHIBIT G - Page 1
715347206 14464587206546413 v4
_________________________ |
________ |
___________ |
_____________ |
[Please amend/renew/extend the above-referenced Letter of Credit as follows:]
The amount of the currently effective Borrowing Base is $[______]. A Borrowing Base Deficiency [does/does not] exist on the date hereof. The current Revolving Credit Exposure (without regard to the requested Letter of Credit or the requested amendment, renewal, or extension of an outstanding Letter of Credit) is $[______]. The pro forma Revolving Credit Exposure (after giving effect to the requested Letter of Credit or the requested amendment, renewal or extension of an outstanding Letter of Credit is $[______].
The undersigned represents and warrants that (a) the [issuance/amendment/ renewal/extension] requested hereby complies with the requirements of the Credit Agreement, (b) each condition contained in Section 6.02(a) through 6.02(d) of the Credit Agreement is true and correct at and as of the date hereof and (c) after giving pro forma effect to the [issuance/amendment/renewal/extension] of the requested Letter of Credit, (i) the Letter of Credit Exposure shall not exceed the Letter of Credit Commitment and (ii) the Revolving Credit Exposures shall not exceed the lesser of the Aggregate Maximum Credit Amount and the currently effective Borrowing Base.
SANCHEZ PRODUCTION PARTNERS LP, a
Delaware limited partnership
By:Sanchez Production Partners GP LLC,
its general partner
By:
Name:
Title:
Third Amended and Restated Credit Agreement – EXHIBIT G - Page 2
715347206 14464587206546413 v4
Third Amended and Restated Credit Agreement – SCHEDULE 7.22 - Page 1
715347206 14464587
206546413 v4
Exhibit 10.2
CLASS A PREFERRED UNIT
PURCHASE AGREEMENT
among
SANCHEZ PRODUCTION PARTNERS LP
and
THE PURCHASERS PARTY HERETO
CLASS A PREFERRED UNIT PURCHASE AGREEMENT
This CLASS A PREFERRED UNIT PURCHASE AGREEMENT, dated as of March 31, 2015 (this “Agreement”), is entered into by and among SANCHEZ PRODUCTION PARTNERS LP, a Delaware limited partnership (“Sanchez”), and the purchasers set forth in Schedule A hereto (the “Purchasers”).
WHEREAS, Sanchez desires to issue and sell to the Purchasers, and the Purchasers desire to purchase from Sanchez, certain of Sanchez’s Class A Preferred Units (as defined below), in accordance with the provisions of this Agreement; and
WHEREAS, Sanchez has agreed to provide the Purchasers with certain registration rights with respect to the Class A Preferred Units and Common Units underlying the Class A Preferred Units acquired pursuant hereto.
NOW THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree as follows:
Section 1.01 Definitions. As used in this Agreement, the following terms have the meanings indicated:
“Acquisition Agreement” means that certain Purchase and Sale Agreement, dated as of March 31, 2015 between the Partnership, SEP Holdings IV, LLC and SEP Holdings III, LLC.
“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, the Person in question. As used herein, the term “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. For the avoidance of doubt, for purposes of this Agreement, the Partnership Entities, on the one hand, and any Purchaser, on the other, shall not be considered Affiliates.
“Agreement” has the meaning set forth in the introductory paragraph of this Agreement.
“Basic Documents” means, collectively, this Agreement, the Registration Rights Agreement, the Partnership Agreement and any and all other agreements or instruments executed and delivered to the Purchasers by the Partnership Entities hereunder or thereunder.
“Business Day” means any day other than a Saturday, Sunday, any federal legal holiday or day on which banking institutions in the State of New York or State of Texas are authorized or required by Law or other governmental action to close.
“Class A Preferred Units” means Sanchez’s Class A Preferred Units.
“Closing” has the meaning specified in Section 2.02.
“Closing Date” has the meaning specified in Section 2.02.
“Code” has the meaning specified in Section 3.10.
“Commission” means the United States Securities and Exchange Commission.
“Common Units” means common units representing limited partner interests in Sanchez.
“Contract” means any contract, agreement, indenture, note, bond, mortgage, deed of trust, loan, instrument, lease, license, commitment or other arrangement, understanding, undertaking, commitment or obligation, whether written or oral.
“Conversion Units” means the Common Units issuable upon conversion of the Purchased Units.
“Delaware LP Act” means the Delaware Revised Uniform Limited Partnership Act.
“Environmental Law” means any Law applicable to the Partnership Entities or the operation of their business in any way relating to the protection of human health and safety (to the extent such health and safety relate to exposure to Hazardous Substances), the environment, natural resources, including the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. § 9601 et seq.), the Hazardous Materials Transportation Act (49 U.S.C. App. § 5101 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. § 6901 et seq.), the Clean Water Act (33 U.S.C. § 1251 et seq.), the Clean Air Act (42 U.S.C. § 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. § 2601 et seq.), the Oil Pollution Act of 1990 (33 U.S.C. § 2701 et seq.), the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. § 136 et seq.), the Occupational Safety and Health Act (29 U.S.C. § 651 et seq.), .
“Environmental Permits” means all approvals, authorizations, consents, licenses, permits, variances, waivers, exemptions, registrations of a Governmental Authority required under any Environmental Laws for the operation of the business of the Partnership Entities.
“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, and the rules and regulations of the Commission promulgated thereunder.
“GAAP” means generally accepted accounting principles in the United States of America as of the date hereof; provided that for the Sanchez Financial Statements prepared as of a certain date, GAAP referenced therein shall be GAAP as of the date of such Sanchez Financial Statements.
“General Partner” means Sanchez Production Partners GP LLC, a Delaware limited liability company and the general partner of Sanchez.
“Governmental Authority” means, with respect to a particular Person, any country, state, county, city and political subdivision in which such Person or such Person’s Property is located or which exercises valid jurisdiction over any such Person or such Person’s Property, and any
court, agency, department, commission, board, bureau or instrumentality of any of them and any monetary authority which exercises valid jurisdiction over any such Person or such Person’s Property. Unless otherwise specified, all references to Governmental Authority herein with respect to Sanchez means a Governmental Authority having jurisdiction over Sanchez, its Subsidiaries or any of their respective Properties.
“Hazardous Substances” means (a) any “hazardous substance” as defined in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, (b) any “hazardous waste” as defined in the Resource Conservation and Recovery Act, as amended, (c) any petroleum, petroleum products, natural gas, oil and gas waste, and oil and any components or derivatives thereof, (d) any polychlorinated biphenyl and (e) any pollutant, contaminant or hazardous or toxic, material, waste or substance regulated under any other Environmental Law.
“Incentive Distribution Rights” has the meaning specified in Section 3.02(a).
“Indemnified Party” has the meaning specified in Section 5.03.
“Indemnifying Party” has the meaning specified in Section 5.03.
“Law” means any federal, state, local or foreign order, writ, injunction, judgment, settlement, award, decree, statute, law (including common law), rule or regulation.
“Lien” means any mortgage, claim, encumbrance, pledge, lien (statutory or otherwise), security agreement, conditional sale or trust receipt or a lease, consignment or bailment, preference or priority, assessment, deed of trust, charge, easement, servitude or other encumbrance upon or with respect to any property of any kind.
“Material Adverse Effect” means any change, event or effect that, individually or together with any other changes, events or effects, has a material adverse effect on (i) the condition (financial or otherwise), business, assets or results of operations of the Partnership Entities, taken as a whole, (ii) the limited partners of Sanchez resulting from any event which subjects them to any material liability or disability, or (iii) the ability of the Partnership Entities to perform their obligations under the Basic Documents; provided, however, that a Material Adverse Effect shall not include any material and adverse effect on the foregoing to the extent such material and adverse effect results from, arises out of, or relates to (x) a general deterioration in the economy or changes in the general state of the industry in which Sanchez operates, except to the extent that Sanchez, taken as a whole, is adversely affected in a disproportionate manner as compared to other industry participants, (y) the outbreak or escalation of hostilities involving the United States, the declaration by the United States of a national emergency or war or the occurrence of any other calamity or crisis, including acts of terrorism, or (z) any change in accounting requirements or principles imposed upon any Partnership Entity or their respective businesses or any change in applicable Law, or the interpretation thereof, other than a change that would result in Sanchez being treated as a corporation for federal Tax purposes.
“NYSE MKT” means the NYSE MKT LLC.
“Partnership Agreement” means the Agreement of Limited Partnership of Sanchez, dated as of March 6, 2015, as amended, restated or otherwise modified from time to time in accordance with the terms thereof.
“Partnership Entities” means Sanchez and its Subsidiaries.
“Permits” means any approvals, authorizations, consents, licenses, permits, variances, waivers, grants, franchises, concessions, exemptions, orders, registrations or certificates of a Governmental Authority.
“Person” means any individual, corporation, company, voluntary association, partnership, joint venture, trust, limited liability company, unincorporated organization, government or any agency, instrumentality or political subdivision thereof or any other form of entity.
“Placement Agent” means SunTrust Robinson Humphrey, Inc., which Sanchez has engaged as its exclusive placement agent for the offering of the Class A Preferred Units on a “best efforts” basis.
“Property” means any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible (including intellectual property rights).
“Purchase Price” means an amount equal to $1.60 per Class A Preferred Unit, multiplied by the number of Purchased Units to be purchased by the Purchasers on the Closing Date.
“Purchased Units” has the meaning specified in Section 2.01.
“Purchaser Related Parties” has the meaning specified in Section 5.01.
“Purchasers” has the meaning set forth in the introductory paragraph of this Agreement.
“Registration Rights Agreement” means the Registration Rights Agreement, dated of even date herewith, between Sanchez and the Purchasers.
“Representatives” means, with respect to a specified Person, the investors, officers, directors, managers, employees, agents, advisors, counsel, accountants, investment bankers and other representatives of such Person.
“Rights-of-Way” has the meaning specified in Section 3.19.
“Sanchez” has the meaning set forth in the introductory paragraph of this Agreement.
“Sanchez Financial Statements” has the meaning specified in Section 3.03.
“Sanchez Related Parties” has the meaning specified in Section 5.02.
“Sanchez SEC Documents” has the meaning specified in Section 3.03.
“Securities Act” means the Securities Act of 1933, as amended from time to time, and the rules and regulations of the Commission promulgated thereunder.
“Short Sales” means, without limitation, all “short sales” as defined in Rule 200 promulgated under Regulation SHO under the Exchange Act, whether or not against the box, and forward sale contracts, options, puts, calls, short sales, “put equivalent positions” (as defined in Rule 16a-1(h) under the Exchange Act) and similar arrangements, and sales and other transactions through non-U.S. broker dealers or foreign regulated brokers.
“Subsidiary” means, as to any Person, any corporation or other entity of which: (i) such Person or a Subsidiary of such Person is a general partner or manager; (ii) at least a majority of the outstanding equity interest having by the terms thereof ordinary voting power to elect a majority of the board of directors or similar governing body of such corporation or other entity (irrespective of whether or not at the time any equity interest of any other class or classes of such corporation or other entity shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by such Person or one or more of its Subsidiaries; or (iii) any corporation or other entity as to which such Person consolidates for accounting purposes.
“Tax Return” has the meaning specified in Section 3.16(b).
“Taxes” has the meaning specified in Section 3.16(b).
“Third Party Claim” has the meaning specified in Section 5.03(b).
Section 1.02 Accounting Procedures and Interpretation. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all determinations with respect to accounting matters hereunder shall be made, and all Sanchez Financial Statements and certificates and reports as to financial matters required to be furnished to the Purchasers hereunder shall be prepared, in accordance with GAAP applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto or, in the case of unaudited statements, as permitted by Form 10-Q promulgated by the Commission) and in compliance as to form in all material respects with applicable accounting requirements and with the published rules and regulations of the Commission with respect thereto.
Section 2.01 Purchase. On the Closing Date, subject to the terms and conditions hereof, each Purchaser hereby agrees to purchase from Sanchez, and Sanchez hereby agrees to issue and sell to each Purchaser, the number of Class A Preferred Units set forth opposite each Purchaser’s name on Schedule A for the Purchase Price per Class A Preferred Unit (collectively, the “Purchased Units”).
Section 2.02 Closing. Subject to the terms and conditions hereof, the consummation of the purchase and sale of the Purchased Units hereunder (the “Closing”) shall take place on the date of this Agreement (the “Closing Date”) at the offices of Andrews Kurth LLP, 600 Travis, Suite 4200, Houston, Texas 77002.
Section 2.03 Deliveries at the Closing.
(a) Deliveries of Sanchez at the Closing. At the Closing, Sanchez shall deliver or cause to be delivered (unless waived by the Purchasers) to the Purchasers: |
(i) An opinion from Andrews Kurth LLP, counsel for the Partnership Entities, in substantially the form attached hereto as Exhibit A, which shall be addressed to the Purchasers and the Placement Agent and dated the date of the Closing; |
(ii) Amendment No. 1 to the Partnership Agreement, and the Partnership Agreement, as so amended, shall be in full force and effect; |
(iii) A “Supplemental Listing Application” approving the Conversion Units for listing by the NYSE MKT; |
(iv) Evidence of issuance of the Purchased Units credited to book-entry accounts maintained by the transfer agent, bearing a restrictive notation meeting the requirements of the Partnership Agreement, free and clear of any Liens, other than transfer restrictions under the Partnership Agreement or the Delaware LP Act and applicable federal and state securities laws; |
(v) A certificate of the Secretary or Assistant Secretary of the General Partner, on behalf of Sanchez, certifying as to and attaching (1) the Partnership Agreement, as amended, (2) board resolutions authorizing the execution and delivery of the Basic Documents and the consummation of the transactions contemplated thereby, including the issuance of the Purchased Units, and (3) the incumbency of the officers authorized to execute the Basic Documents on behalf of Sanchez, setting forth the name and title and bearing the signatures of such officers; |
(vi) A cross-receipt executed by Sanchez and delivered to the Purchasers certifying that it has received from the Purchasers an amount in cash equal to the Purchase Price; and |
(vii) The Registration Rights Agreement, which shall have been duly executed by Sanchez. |
(b) Deliveries of Each Purchaser at the Closing. At the Closing, each Purchaser shall deliver or cause to be delivered (unless waived by Sanchez) to Sanchez: |
(i) The Registration Rights Agreement, which shall have been duly executed by such Purchaser; |
(ii) A cross-receipt executed by such Purchaser and delivered to Sanchez certifying that it has received from Sanchez its Purchased Units; and |
(iii) Payment of such Purchaser’s Purchase Price payable by wire transfer of immediately available funds to an account designated in advance of the Closing Date by Sanchez. |
Section 2.04 Independent Nature of Purchasers’ Obligations and Rights. The obligations of each Purchaser under any Basic Document are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance of the obligations of any other Purchaser under any Basic Document. The failure or waiver of performance under any Basic Document of any Purchaser by Sanchez does not excuse performance by any other Purchaser and the waiver of performance of Sanchez by any Purchaser does not excuse performance by Sanchez with respect to each other Purchaser. Nothing contained herein or in any other Basic Document, and no action taken by any Purchaser pursuant thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Basic Documents. Each Purchaser shall be entitled to independently protect and enforce its rights, including the rights arising out of this Agreement or out of the other Basic Documents, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose.
Section 2.05 Further Assurances. From time to time after the date hereof, without further consideration, Sanchez and each Purchaser shall use their commercially reasonable efforts to take, or cause to be taken, all actions necessary or appropriate to consummate the transactions contemplated by this Agreement.
As of the Closing Date, Sanchez represents and warrants to and covenants with the Purchasers and the Placement Agent as follows:
Section 3.01 Existence.
(b) None of the Partnership Entities is in default in the performance, observance or fulfillment of any provision of, in the case of Sanchez, the Partnership Agreement or its certificate of limited partnership, in the case of the General Partner, any provision of its certification of formation, limited liability company agreement or other similar organizational documents, or, in the case of any Subsidiary of Sanchez, its respective certificate of
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incorporation, certification of formation, certificate of limited partnership, bylaws, limited liability company agreement, partnership agreement or other similar organizational documents. |
Section 3.02 Capitalization and Valid Issuance of Purchased Units. |
(b) The General Partner is the sole general partner of Sanchez with a non-economic general partner interest in Sanchez; such general partner interest has been duly authorized and validly issued in accordance with the Partnership Agreement, and the General Partner owns such interest free and clear of all Liens (except for (A) restrictions on transferability contained in the Partnership Agreement or as disclosed in the Sanchez SEC Documents (B) Liens created, arising under or securing any credit facility to which Sanchez is a party and (C) Liens arising under the Partnership Agreement or the Delaware LP Act). |
(c) The Purchased Units being purchased by the Purchasers hereunder and the limited partner interests represented thereby will be duly authorized by Sanchez pursuant to the Partnership Agreement (as amended by Amendment No. 1 to the Partnership Agreement) prior to the Closing and, when issued and delivered to the Purchasers against payment therefor in accordance with the terms of this Agreement, will be validly issued, fully paid (to the extent required by the Partnership Agreement) and nonassessable (except as such nonassessability may be affected by matters described in Sections 17-303, 17-607 and 17-804 of the Delaware LP Act) and will be free of any and all Liens and restrictions on transfer, other than (i) restrictions on transfer under the Partnership Agreement (as amended by Amendment No. 1 to the Partnership Agreement) or this Agreement and under applicable state and federal securities laws, (ii) such Liens as are created by the Purchasers and (iii) such Liens as arise under the Partnership Agreement (as amended by Amendment No. 1 to the Partnership Agreement) or the Delaware LP Act. Except as disclosed in the Sanchez SEC Documents, there are no persons entitled to
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statutory, preemptive or other similar contractual rights to subscribe for the Purchased Units; and, except for the Purchased Units to be issued pursuant to this Agreement, as disclosed in the Sanchez SEC Documents or pursuant to the Acquisition Agreement, no options, warrants or other rights to purchase, agreements or other obligations to issue, or rights to convert any obligations into or exchange any securities for, partnership securities or ownership interests in Sanchez are outstanding. |
(d) Upon issuance in accordance with this Agreement and the terms of the Class A Preferred Units, the Conversion Units will be duly authorized, validly issued, fully paid (to the extent required by the Partnership Agreement) and nonassessable (except as such nonassessability may be affected by matters described in Sections 17-303, 17-607 and 17-804 of the Delaware LP Act) and will be free of any and all Liens and restrictions on transfer, other than (i) restrictions on transfer under the Basic Documents and under applicable state and federal securities laws, (ii) such Liens as are created by the Purchasers and (iii) such Liens as arise under the Partnership Agreement (as amended by Amendment No. 1 to the Partnership Agreement) or the Delaware LP Act. |
Section 3.03 Sanchez SEC Documents; Sanchez Financial Statements. Except as disclosed in the Sanchez SEC Documents, since January 1, 2014, Sanchez’s forms, registration statements, reports, schedules and statements required to be filed by it under the Exchange Act or the Securities Act (all such documents filed prior to the date hereof, collectively the “Sanchez SEC Documents”) have been filed with the Commission on a timely basis. The Sanchez SEC Documents, including any audited or unaudited financial statements and any notes thereto or schedules included therein (the “Sanchez Financial Statements”), at the time filed (or in the case of registration statements, solely on the dates of effectiveness) (except to the extent corrected by a subsequent Sanchez SEC Document) (a) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made in the case of any prospectus, not misleading, (b) complied as to form in all material respects with the applicable requirements of the Exchange Act and the Securities Act, as the case may be, (c) complied as to form in all material respects with applicable accounting requirements and with the published rules and regulations of the Commission with respect thereto, (d) in the case of the Sanchez Financial Statements, were prepared in accordance with GAAP applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto or, in the case of unaudited statements, as permitted by Form 10‑Q of the Commission), and (e) in the case of the Sanchez Financial Statements, fairly present (subject in the case of unaudited statements to normal and recurring and year-end audit adjustments) in all material respects the consolidated financial position of Sanchez and its consolidated subsidiaries as of the dates thereof and the consolidated results of its operations and cash flows of Sanchez and its Subsidiaries for the periods then ended. The independent auditor of Sanchez as of the date of the most recent balance sheet of Sanchez is an independent registered public accounting firm with respect to Sanchez and has not resigned or been dismissed as independent registered public accountants of Sanchez as a result of or in connection with any disagreement with Sanchez on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures. Since the date of the most recent balance sheet of Sanchez reviewed or audited by such auditor, and the audit committee of the board of directors of the General Partner until the Closing Date, (i) the interactive data in eXtensible Business Reporting Language included or incorporated by
reference in the Sanchez SEC Documents fairly presents the information called for in all material respects and has been prepared in accordance with the Securities and Exchange Commission’s rules and guidelines applicable thereto and (ii) there are no material weaknesses or significant deficiencies in Sanchez’s internal controls.
Section 3.04 No Material Adverse Change. Except as expressly set forth in or contemplated by the Sanchez SEC Documents, since December 31, 2014 through the Closing Date: (a) there has not occurred any adverse change, or any development involving or which may reasonably be expected to involve, individually or in the aggregate, an adverse change, in the condition, financial or otherwise, general affairs, business, operations, prospects, properties, management, partners’ capital, stockholders’ equity, net worth or results of operations of the Partnership Entities, taken as a whole, in each case except as would not, in the aggregate, reasonably be expected to have a Material Adverse Effect; and (b) there is not, to the knowledge of the Partnership Entities, any default or event which, with notice or lapse of time or both, would constitute a default under the any agreement of Sanchez governing material indebtedness for borrowed money, except such events of default and other events as to which requisite waivers or consents have been obtained or which are no longer continuing.
Section 3.05 No Registration Required. Assuming the accuracy of the representations and warranties of each Purchaser contained in Article IV, the issuance and sale of the Purchased Units pursuant to this Agreement is exempt from registration requirements of the Securities Act, and neither Sanchez nor, to the knowledge of Sanchez, any authorized Representative acting on its behalf has taken or will take any action hereafter that would cause the loss of such exemption
Section 3.06 Litigation. Except as set forth in the Sanchez SEC Documents, there are no legal or governmental proceedings pending to which any Partnership Entity is a party or to which any Property or asset of any Partnership Entity is subject that would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect or which challenges the validity of any of the Basic Documents or the right of any Partnership Entity to enter into any of the Basic Documents or to consummate the transactions contemplated hereby and thereby and, to the knowledge of Sanchez, no such proceedings are threatened by Governmental Authorities or others.
Section 3.07 No Conflicts. None of (i) the offering, issuance and sale by Sanchez of the Purchased Units and the application of the proceeds therefrom, (ii) the execution, delivery and performance of the Basic Documents, or (iii) the consummation of the transactions contemplated thereby (1) constitutes or will constitute a violation of the Partnership Agreement, the GP LLC Agreement or the other organizational documents of any of Sanchez, the General Partner or the Subsidiaries, (2) constitutes or will constitute a breach or violation of, or a default (or an event which, with notice or lapse of time or both, would constitute such a default) under, any indenture, mortgage, deed of trust, loan agreement, lease or other agreement or instrument to which any of Sanchez, the General Partner or the Subsidiaries is a party or by which any of them or any of their respective properties may be bound, (3) violates or will violate any statute, Law, Permit or regulation or any order, judgment, decree or injunction of any court or Governmental Authority or body having jurisdiction over of Sanchez, the General Partner or the Subsidiaries or any of their properties in a proceeding to which any of them or their property is or was a party, or
(4) results or will result in the creation or imposition of any Lien upon any property or assets of any of Sanchez, the General Partner or the Subsidiaries, which conflicts, breaches, violations, defaults or liens, in the case of clauses (2), (3) or (4), would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
Section 3.08 Authority; Enforceability. Sanchez has all requisite power and authority to issue, sell and deliver the Purchased Units, in accordance with and upon the terms and conditions set forth in this Agreement and the Partnership Agreement. All partnership or limited liability company action, as the case may be, required to be taken by the General Partner and Sanchez for the authorization, issuance, sale and delivery of the Purchased Units, the execution and delivery of the Basic Documents and the consummation of the transactions contemplated thereby shall have been validly taken. No approval from the holders of outstanding Common Units is required under the Partnership Agreement or the rules of the NYSE MKT in connection with Sanchez’s issuance and sale of the Purchased Units to the Purchasers. Each of the Basic Documents has been duly and validly authorized and has been or, with respect to the Basic Documents to be delivered at the Closing, will be, validly executed and delivered by Sanchez and constitutes, or will constitute, the legal, valid and binding obligations of Sanchez, enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting creditors’ rights and by general principles of equity.
Section 3.09 Approvals. Except as required by the Commission in connection with Sanchez’s obligations under the Registration Rights Agreement or has already been obtained, no authorization, consent, approval, waiver, license, qualification or written exemption from, nor any filing, declaration, qualification or registration with, any Governmental Authority or any other Person is required in connection with the execution, delivery or performance by Sanchez of any of the Basic Documents or Sanchez’s issuance and sale of the Purchased Units, except (i) as may be required under the state securities or “Blue Sky” Laws, (ii) for the filing of a supplemental listing application with the NYSE MKT seeking approval of the Conversion Units for listing by the NYSE MKT or (iii) where the failure to receive such authorization, consent, approval, waiver, license, qualification or written exemption or to make such filing, declaration, qualification or registration would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
Section 3.10 MLP Status. Sanchez has, for each taxable year beginning after December 31, 2007, during which Sanchez was in existence, met the gross income requirements of Section 7704(c)(2) of the Internal Revenue Code of 1986, as amended (the “Code”). Sanchez expects to meet the gross income requirements of Section 7704(c)(2) of the Code for its taxable year ending December 31, 2015.
Section 3.11 Investment Company Status. None of the Partnership Entities is now, and immediately after the sale of the Purchased Units hereunder and the application of the net proceeds from such sale none of the Partnership Entities will be, an “investment company” or a company controlled by an “investment company” within the meaning of the Investment Company Act of 1940, as amended.
Section 3.12 Certain Fees. Except for fees to be paid by Sanchez to the Placement Agent, no fees or commissions are or will be payable by Sanchez to brokers, finders or investment bankers with respect to the sale of any of the Purchased Units or the consummation of the transactions contemplated by this Agreement. Sanchez agrees that it will indemnify and hold harmless the Purchasers from and against any and all claims, demands, or liabilities for broker’s, finder’s, placement, or other similar fees or commissions incurred by Sanchez or alleged to have been incurred by Sanchez in connection with the sale of the Purchased Units or the consummation of the transactions contemplated by this Agreement.
Section 3.13 Insurance. The Partnership Entities maintain or are entitled to the benefits of insurance from reputable insurers covering their properties, operations, personnel and businesses against such losses and risks as are reasonably adequate to protect them and their businesses in a commercially reasonable manner. None of the Partnership Entities (i) has received notice from any insurer or agent of such insurer that substantial capital improvements or other expenditures will have to be made in order to continue such insurance or (ii) has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a Material Adverse Effect, except as described in the Sanchez SEC Documents.
Section 3.14 Books and Records; Sarbanes-Oxley Compliance.
(a) The Partnership Entities maintain systems of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of the Partnership Entities’ financial statements in conformity with GAAP and to maintain accountability for its assets, (iii) access to the Partnership Entities’ assets is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for the Partnership Entities’ assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Sanchez is not aware of any failures of such internal accounting controls that are material or that would be required to be disclosed pursuant to any applicable Law. |
(b) Sanchez has established and maintains disclosure controls and procedures (to the extent required by and as defined in Rules 13a- 15(e) and 15d-15(e) under the Exchange Act), which are designed to provide reasonable assurance that information required to be disclosed by Sanchez in reports that it files or submits under the Exchange Act is recorded, processed, summarized and communicated to Sanchez’s management, including its principal executive officer and principal financial officer, as appropriate, to allow for timely decisions regarding required disclosure. Sanchez has carried out evaluations of the effectiveness of its disclosure controls and procedures and such disclosure controls and procedures are effective in all material respects to perform the functions for which they were established. |
(c) There is and has been no failure on the part of Sanchez and, to Sanchez’s knowledge, the General Partner’s directors or officers, in their capacities as such, to comply in all material respects with all applicable provisions of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated in connection therewith. |
Section 3.15 Listing and Maintenance Requirements. The Common Units are listed on the NYSE MKT, and Sanchez has not received any notice of delisting. The issuance and sale of the Purchased Units and the offer of the Common Units and issuance of such Common Units upon conversion of the Purchased Units does not contravene NYSE MKT rules and regulations.
Section 3.16 Taxes.
(a) Except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, (i) each of the Partnership Entities has prepared and timely filed (taking into account any extension of time within which to file) all Tax Returns required to be filed by any of them and all such filed Tax Returns are complete and accurate, (ii) each of the Partnership Entities has timely paid all Taxes that are required to be paid by any of them, (iii) there are no audits, examinations, investigations, actions, suits, claims or other proceedings in respect of Taxes pending or threatened in writing nor has any deficiency for any Tax been assessed by any Governmental Authority in writing against any Partnership Entity, and (iv) all Taxes required to be withheld by any Partnership Entity have been withheld and paid over to the appropriate Tax authority (except, in the case of this clause (iv) or clause (i) or (ii) above, with respect to matters contested in good faith and for which adequate reserves have been established on Sanchez’s financial statements in accordance with GAAP). None of the Partnership Entities has entered into any transaction that, as of the date of this Agreement has been identified by the Internal Revenue Service in published guidance as a “listed transaction” as defined under Section 1.6011-4(b)(2) of the Treasury Regulations promulgated under the Code. |
Section 3.17 Compliance with Laws; Environment Laws; Permits; and Environmental Permits.
(a) Neither Sanchez nor any of its Subsidiaries is in violation of any Law applicable to Sanchez or its Subsidiaries, except as would not, individually or in the aggregate, have a Material Adverse Effect. Sanchez and its Subsidiaries possess all Permits issued by the appropriate regulatory authorities necessary to conduct their respective businesses, except where the failure to possess such Permits would not, individually or in the aggregate, have a Material Adverse Effect, and neither Sanchez nor any such Subsidiary has received any notice of proceedings relating to the revocation or modification of any such Permit, except where such
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potential revocation or modification would not, individually or in the aggregate, have a Material Adverse Effect. |
b) Each of the Partnership Entities has such Permits as are necessary to own its properties and to conduct its business in the manner described in the Sanchez SEC Documents, subject to such qualifications as may be set forth in the Sanchez SEC Documents and except for such Permits which, if not obtained, would not, individually or in the aggregate, have a Material Adverse Effect; each of the Partnership Entities has fulfilled and performed all of its material obligations with respect to such Permits which are due to have been fulfilled and performed and no event has occurred which allows, or after notice or lapse of time would allow, revocation or termination thereof or results in any impairment of the rights of the holder of any such Permit, except for such revocations, terminations and impairments that would not, individually or in the aggregate, have a Material Adverse Effect, subject in each case to such qualifications as may be set forth in the Sanchez SEC Documents; and, except as described in the Sanchez SEC Documents, none of such Permits contains any restriction that is materially burdensome to the Partnership Entities, taken as a whole. |
Section 3.18 Title to Property. Each of the Partnership Entities has good and indefeasible title to all real property (save and except for Rights-of-Way) and good title to all personal property described in the Sanchez SEC Documents as owned by such Partnership Entity, free and clear of all Liens except such (i) as are described in the Sanchez SEC Documents, (ii) as are created, arise under or secure any credit facility to which Sanchez is a party or (iii) as would not, in the aggregate, reasonably be expected to have a Material Adverse Effect.
Section 3.19 Rights of Way. Each of the Partnership Entities has such consents, easements, rights-of-way or licenses (“Rights-of-Way”) from any person as are necessary to conduct its business in the manner described in the Sanchez SEC Documents, subject to such qualifications as may be set forth in the Sanchez SEC Documents and except for such rights-of-way the failure of which to have obtained would not have, individually or in the aggregate, a Material Adverse Effect.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES AND
COVENANTS OF THE PURCHASERS
Each of the Purchasers, severally but not jointly, represent and warrant and covenant to Sanchez and the Placement Agent as follows:
Section 4.01 Existence. Such Purchaser is duly organized and validly existing and in good standing under the laws of its state of formation, with all necessary power and authority to own properties and to conduct its business as currently conducted.
Section 4.02 Authorization, Enforceability. Such Purchaser has all necessary legal power and authority to enter into, deliver and perform its obligations under the Basic Documents. The execution, delivery and performance of the Basic Documents by such Purchaser and the consummation by it of the transactions contemplated thereby have been duly and validly authorized by all necessary legal action, and no further consent or authorization of such Purchaser is required. The Basic Documents have been duly executed and delivered by such Purchaser and constitute legal, valid and binding obligations of such Purchaser; provided that, the enforceability thereof may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws relating to or affecting creditors’ rights generally and by general principles of equity and except as the rights to indemnification may be limited by applicable law (regardless of whether such enforceability is considered in a proceeding in equity or at law).
Section 4.03 No Breach. The execution, delivery and performance of the Basic Documents by such Purchaser and the consummation by such Purchaser of the transactions contemplated thereby will not (a) conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any material agreement to which such Purchaser is a party or by which such Purchaser is bound or to which any of the property or assets of such Purchaser is subject, (b) conflict with or result in any violation of the provisions of the organizational documents of such Purchaser, or (c) violate any statute, order, rule or regulation of any court or governmental agency or body having jurisdiction over such Purchaser or the property or assets of such Purchaser, except in the case of clauses (a) and (c), for such conflicts, breaches, violations or defaults as would not prevent the consummation of the transactions contemplated by the Basic Documents.
Section 4.04 Certain Fees. No fees or commissions are or will be payable by any Purchaser to brokers, finders or investment bankers with respect to the purchase of any of the Purchased Units or the consummation of the transactions contemplated by this Agreement. Each Purchaser agrees that it will indemnify and hold harmless Sanchez from and against any and all
claims, demands or liabilities for broker’s, finder’s, placement, or other similar fees or commissions incurred by such Purchaser or alleged to have been incurred by such Purchaser in connection with the purchase of the Purchased Units or the consummation of the transactions contemplated by this Agreement.
Section 4.05 Unregistered Securities.
(a) Accredited Investor Status; Sophisticated Purchaser. Such Purchaser is an “accredited investor” within the meaning of Rule 501 under the Securities Act and is able to bear the risk of its investment in Purchased Units and the Conversion Units. Such Purchaser has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the purchase of the Purchased Units and the Conversion Units. |
(b) Information. Such Purchaser and its Representatives have been furnished with all materials relating to the business, finances and operations of Sanchez that have been requested and materials relating to the offer and sale of the Purchased Units and Conversion Units that have been requested by such Purchaser. Such Purchaser and its Representatives have been afforded the opportunity to ask questions of Sanchez. Neither such inquiries nor any other due diligence investigations conducted at any time by such Purchasers and its Representatives shall modify, amend or affect such Purchasers’ right (i) to rely on Sanchez’s representations and warranties contained in Article III above or (ii) to indemnification or any other remedy based on, or with respect to the accuracy or inaccuracy of, or compliance with, the representations, warranties, covenants and agreements in any Basic Document. Such Purchaser understands that its purchase of the Purchased Units involves a high degree of risk. Such Purchaser has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision with respect to its acquisition of the Purchased Units. Such Purchaser understands that the Placement Agent has acted solely as the agent of Sanchez in this placement of the Class A Preferred Units and such Purchaser has not relied on the business or legal advice of the Placement Agent or any of its agents, counsel or affiliates in making its investment decision hereunder, and confirms that none of such persons has made any representations or warranties to such Purchaser in connection with the transactions contemplated by this Agreement. |
(c) Residency. Such Purchaser shall cooperate reasonably with Sanchez to provide any information necessary for any applicable securities filings. |
number of securities as of a particular date that can then be immediately sold, the Conversion Units will bear a restrictive legend as provided in the Partnership Agreement. |
(e) Purchase Representation. Such Purchaser is purchasing the Purchased Units for its own account and not with a view to distribution in violation of any securities laws. Such Purchaser has been advised and understands that neither the Purchased Units nor the Conversion Units have been registered under the Securities Act or under the “blue sky” laws of any jurisdiction and may be resold only if registered pursuant to the provisions of the Securities Act (or if eligible, pursuant to the provisions of Rule 144 promulgated under the Securities Act or pursuant to another available exemption from the registration requirements of the Securities Act). Such Purchaser has been advised and understands that Sanchez, in issuing the Purchased Units, is relying upon, among other things, the representations and warranties of such Purchaser contained in this Article IV in concluding that such issuance is a “private offering” and is exempt from the registration provisions of the Securities Act. |
(f) Rule 144. Such Purchaser understands that there is no public trading market for the Purchased Units, that none is expected to develop and that the Purchased Units must be held indefinitely unless and until Purchased Units or Conversion Units received upon conversion thereof are registered under the Securities Act or an exemption from registration is available. Each Purchaser has been advised of and is aware of the provisions of Rule 144 promulgated under the Securities Act. |
(g) Reliance by Sanchez. Such Purchaser understands that the Purchased Units are being offered and sold in reliance on a transactional exemption from the registration requirements of federal and state securities laws and that Sanchez is relying upon the truth and accuracy of the representations, warranties, agreements, acknowledgments and understandings of such Purchaser set forth herein in order to determine the applicability of such exemptions and the suitability of such Purchaser to acquire the Purchased Units and the Conversion Units issuable upon conversion thereof. |
Section 4.06 Short Selling. No Purchaser has engaged in any Short Sales involving Common Units owned by it between March 1, 2015 and the date of execution of this Agreement.
ARTICLE V
INDEMNIFICATION, COSTS AND EXPENSES
Section 5.01 Indemnification by Sanchez. Sanchez agrees to indemnify each Purchaser and their respective Representatives (collectively, “Purchaser Related Parties”) from costs, losses, liabilities, damages, or expenses of any kind or nature whatsoever, and hold each of them harmless against, any and all actions, suits, proceedings (including any investigations, litigation or inquiries), demands, and causes of action, and, in connection therewith, and promptly upon demand, pay or reimburse each of them for all costs, losses, liabilities, damages, or expenses of any kind or nature whatsoever (including the reasonable fees and disbursements of counsel and all other reasonable expenses incurred in connection with investigating, defending or preparing to defend any such matter that may be incurred by them or asserted against or involve any of them), whether or not involving a third party claim, as a result of, arising out of, or in any way related to (i) the failure of any of the representations or warranties made by Sanchez contained
herein to be true and correct in all material respects as of the date made (except with respect to any provisions including the word “material” or words of similar import, with respect to which such representations and warranties must have been true and correct) or (ii) the breach of any covenants of Sanchez contained herein, provided that, in the case of the immediately preceding clause (i), such claim for indemnification is made prior to the expiration of such representation or warranty; provided, however, that for purposes of determining when an indemnification claim has been made, the date upon which a Purchaser Related Party shall have given notice (stating in reasonable detail the basis of the claim for indemnification) to Sanchez shall constitute the date upon which such claim has been made; provided, further, that the liability of Sanchez shall not be greater in amount than the Purchase Price. No Purchaser Related Party shall be entitled to recover special, consequential or punitive damages under this Section 5.01.
Section 5.02 Indemnification by the Purchasers. Each Purchaser agrees, severally and not jointly, to indemnify Sanchez, the General Partner and their respective Representatives (collectively, “Sanchez Related Parties”) from, costs, losses, liabilities, damages, or expenses of any kind or nature whatsoever, and hold each of them harmless against, any and all actions, suits, proceedings (including any investigations, litigation or inquiries), demands, and causes of action, and, in connection therewith, and promptly upon demand, pay or reimburse each of them for all costs, losses, liabilities, damages, or expenses of any kind or nature whatsoever (including the reasonable fees and disbursements of counsel and all other reasonable expenses incurred in connection with investigating, defending or preparing to defend any such matter that may be incurred by them or asserted against or involve any of them), whether or not involving a third party claim, as a result of, arising out of, or in any way related to (i) the failure of any of the representations or warranties made by such Purchaser contained herein to be true and correct in all material respects as of the date made or (ii) the breach of any of the covenants of such Purchaser contained herein, provided that, in the case of the immediately preceding clause (i), such claim for indemnification relating to a breach of any representation or warranty is made prior to the expiration of such representation or warranty; provided, however, that for purposes of determining when an indemnification claim has been made, the date upon which a Sanchez Related Party shall have given notice (stating in reasonable detail the basis of the claim for indemnification) to such Purchaser shall constitute the date upon which such claim has been made; provided, further, that the liability of such Purchasers shall not be greater in amount than the sum of such Purchaser’s Purchase Price. No Sanchez Related Party shall be entitled to recover special, consequential or punitive damages under this Section 5.02.
Section 5.03 Indemnification Procedure.
(a) A claim for indemnification for any matter not involving a third party claim may be asserted by notice to the party from whom indemnification is sought; provided, however, that failure to so notify the indemnifying party shall not preclude the indemnified party from any indemnification which it may claim in accordance with this Article V, except as otherwise provided in Section 5.01 and Section 5.02. |
Claim”), the Indemnified Party shall give the indemnitor hereunder (the “Indemnifying Party”) written notice of such Third Party Claim, but failure to so notify the Indemnifying Party will not relieve the Indemnifying Party from any liability it may have to such Indemnified Party hereunder except to the extent that the Indemnifying Party is materially prejudiced by such failure. Such notice shall state the nature and the basis of such Third Party Claim to the extent then known. The Indemnifying Party shall have the right to defend and settle, at its own expense and by its own counsel who shall be reasonably acceptable to the Indemnified Party, any such matter as long as the Indemnifying Party pursues the same diligently and in good faith. If the Indemnifying Party undertakes to defend or settle, it shall promptly, and in no event later than ten (10) days, notify the Indemnified Party of its intention to do so, and the Indemnified Party shall cooperate with the Indemnifying Party and its counsel in all commercially reasonable respects in the defense thereof and the settlement thereof. Such cooperation shall include, but shall not be limited to, furnishing the Indemnifying Party with any books, records and other information reasonably requested by the Indemnifying Party and in the Indemnified Party’s possession or control. Such cooperation of the Indemnified Party shall be at the cost of the Indemnifying Party. After the Indemnifying Party has notified the Indemnified Party of its intention to undertake to defend or settle any such asserted liability, and for so long as the Indemnifying Party diligently pursues such defense, the Indemnifying Party shall not be liable for any additional legal expenses incurred by the Indemnified Party in connection with any defense or settlement of such asserted liability; provided, however, that the Indemnified Party shall be entitled (i) at its expense, to participate in the defense of such asserted liability and the negotiations of the settlement thereof and (ii) if (A) the Indemnifying Party has, within ten (10) Business Days of when the Indemnified Party provides written notice of a Third Party Claim, failed (y) to assume the defense or employ counsel reasonably acceptable to the Indemnified Party and (z) notify the Indemnified Party of such assumption or (B) if the defendants in any such action include both the Indemnified Party and the Indemnifying Party and counsel to the Indemnified Party shall have concluded that there may be reasonable defenses available to the Indemnified Party that are different from or in addition to those available to the Indemnifying Party or if the interests of the Indemnified Party reasonably may be deemed to conflict with the interests of the Indemnifying Party, then the Indemnified Party shall have the right to select a separate counsel and to assume such legal defense and otherwise to participate in the defense of such action, with the expenses and fees of such separate counsel and other expenses related to such participation to be reimbursed by the Indemnifying Party as incurred. Notwithstanding any other provision of this Agreement, the Indemnifying Party shall not settle any indemnified claim without the consent of the Indemnified Party, unless the settlement thereof imposes no liability or obligation on, and includes a complete release from liability of, and does not include any admission of wrongdoing or malfeasance by, the Indemnified Party. The remedies provided for in this Section 5.03 are cumulative and are not exclusive of any remedies that may be available to a party at law or in equity or otherwise. |
Section 5.04 Tax Matters. All indemnification payments under this Article V shall be adjustments to the Purchase Price except as otherwise required by applicable Law.
Section 6.01 Expenses. All costs and expenses, including fees and disbursements of counsel, financial advisors and accountants, incurred in connection with the Basic Documents and the transactions contemplated thereby shall be paid by the party incurring such costs and expenses; provided, however, that, upon written request, the Partnership shall reimburse each Purchaser who acquires $5,000,000 or more of Class A Preferred Units for such Purchaser’s out-of-pocket legal fees and expenses incurred in connection with the negotiation and execution of the Basic Documents, provided that such amount for each such Purchaser shall not exceed $7,500.
Section 6.02 Interpretation. Article, Section, Schedule and Exhibit references in this Agreement are references to the corresponding Article, Section, Schedule or Exhibit to this Agreement, unless otherwise specified. All Exhibits and Schedules to this Agreement are hereby incorporated and made a part hereof as if set forth in full herein and are an integral part of this Agreement. 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. The word “including” shall mean “including but not limited to” and shall not be construed to limit any general statement that it follows to the specific or similar items or matters immediately following it. Whenever Sanchez has an obligation under the Basic Documents, the expense of complying with that obligation shall be an expense of Sanchez unless otherwise specified. Any reference in this Agreement to $ shall mean U.S. dollars. Whenever any determination, consent or approval is to be made or given by a Purchaser, such action shall be in such Purchaser’s sole discretion, unless otherwise specified in this Agreement. If any provision in the Basic Documents is held to be illegal, invalid, not binding or unenforceable, (i) such provision shall be fully severable and the Basic Documents shall be construed and enforced as if such illegal, invalid, not binding or unenforceable provision had never comprised a part of the Basic Documents, and the remaining provisions shall remain in full force and effect and (ii) the parties hereto shall negotiate in good faith to modify the Basic Documents 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. When calculating the period of time before which, within which or following which any act is to be done or step taken pursuant to the Basic Documents, the date that is the reference date in calculating such period shall be excluded. If the last day of such period is a non-Business Day, the period in question shall end on the next succeeding Business Day. Any words imparting the singular number only shall include the plural and vice versa. The words such as “herein,” “hereinafter,” “hereof” and “hereunder” refer to this Agreement as a whole and not merely to a subdivision in which such words appear unless the context otherwise requires. The provision of a Table of Contents, the division of this Agreement into Articles, Sections and other subdivisions and the insertion of headings are for convenience of reference only and shall not affect or be utilized in construing or interpreting this Agreement.
Section 6.03 Survival of Provisions. The representations and warranties set forth in Section 3.01(a), Section 3.02, Section 3.04, Section 3.08, Section 3.09, Section 3.11, Section 3.12, Section 4.01, Section 4.02, Section 4.04 and Section 4.05 hereunder shall survive the execution and delivery of this Agreement indefinitely, the representations and warranties set forth in Section 3.16 shall survive for a period of three (3) years following the Closing Date regardless of any investigation made by or on behalf of Sanchez or the Purchasers, and the other
representations and warranties set forth herein shall survive for a period of fifteen (15) months following the Closing Date, regardless of any investigation made by or on behalf of Sanchez or the Purchasers. The covenants made in this Agreement or any other Basic Document shall survive the Closing and remain operative and in full force and effect regardless of acceptance of any of the Purchased Units and payment therefor and repayment, conversion or repurchase thereof. Regardless of any purported general termination of this Agreement, the provisions of Article V and all indemnification rights and obligations of Sanchez and the Purchasers thereunder, and this Article VI shall remain operative and in full force and effect as between Sanchez and each Purchaser, unless Sanchez and the applicable Purchaser execute a writing that expressly (with specific references to the applicable Section or subsection of this Agreement) terminates such rights and obligations as between Sanchez and such Purchaser.
Section 6.04 No Waiver; Modifications in Writing.
(a) Delay. No failure or delay on the part of any party in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The remedies provided for herein are cumulative and are not exclusive of any remedies that may be available to a party at law or in equity or otherwise. |
(b) Specific Waiver. Except as otherwise provided herein, no amendment, waiver, consent, modification or termination of any provision of any Basic Document (except in the case of the Partnership Agreement for amendments adopted pursuant to Article XIII thereof) shall be effective unless signed by each of the parties thereto affected by such amendment, waiver, consent, modification or termination. Any amendment, supplement or modification of or to any provision of any Basic Document, any waiver of any provision of any Basic Document and any consent to any departure by Sanchez from the terms of any provision of any Basic Document shall be effective only in the specific instance and for the specific purpose for which made or given. Except where notice is specifically required by this Agreement, no notice to or demand on Sanchez in any case shall entitle Sanchez to any other or further notice or demand in similar or other circumstances. Any investigation by or on behalf of any party shall not be deemed to constitute a waiver by the party taking such action of compliance with any representation, warranty, covenant or agreement contained herein. |
Section 6.05 Binding Effect. This Agreement shall be binding upon Sanchez, each of the Purchasers and their respective successors and permitted assigns. Except as expressly provided in this Agreement, this Agreement shall not be construed so as to confer any right or benefit upon any Person other than the parties to this Agreement and their respective successors and permitted assigns, except that the Placement Agent is an intended third party beneficiary of Article III and Article IV hereof.
Section 6.06 Non-Disclosure.
(a) For one year after the Closing Date, no Purchaser shall, directly or indirectly, disclose to any person any information received from Sanchez, in any form, whether acquired prior to or after the Closing Date, relating to the business and operations of the Partnership Entities; provided, however, that information shall not be deemed confidential information for
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purposes of this Section 6.06, where such information (i) was already known to such Purchaser (or its Representatives) at the time of disclosure, (ii) later becomes known to such Purchaser by having been disclosed to such Purchaser (or its Representatives) by a third party to such Purchaser’s knowledge not subject to any legally binding obligation to keep such information confidential or otherwise prohibited from transmitting such information, (iii) is or becomes publicly known through no wrongful act of such Purchaser (or its Representatives), or (iv) is independently developed by such Purchaser (or its Representatives) without reference to any confidential information disclosed to such Purchaser under this Agreement. Notwithstanding the foregoing, a Purchaser may disclose any information relating to the business and operations of the Partnership Entities (i) to its Representatives, Affiliates, and funding sources and limited partners, investors, and potential investors of such Purchaser and its Affiliates, to whom such disclosure is necessary or convenient and who in each case either (1) acknowledge that they are bound by the confidentiality provisions of this Agreement or (2) are bound by confidentiality obligations to the Purchaser or its Affiliates that are at least as stringent as the confidentiality provisions of this Agreement, and in each case the Purchasers shall use reasonable best efforts to cause such Representatives, Affiliates, and funding sources and limited partners, investors, and potential investors of such Purchaser and its Affiliates to keep any such information confidential; (ii) to any transferee or proposed transferee of the Purchased Units permitted under the Partnership Agreement; (iii) as required by applicable Law or any securities exchange or market rule; (iv) as may be requested or required by any Governmental Authority (provided that such Purchaser first notifies Sanchez and gives Sanchez the opportunity to contest such request or requirement, in each case as permitted by applicable Law (except no such opportunity shall be afforded in the case of a routine audit or examination by, or a blanket document request from, a governmental or regulatory entity that does not reference the Partnership)); or (v) except with prior notice of such request for disclosure to, and consent of, Sanchez (which consent may be withheld in Sanchez’s sole discretion). |
(b) Other than filings made by Sanchez with the Commission, the Partnership Entities and any of their respective Representatives shall disclose the identity of, or any other information concerning the Purchasers or any of their respective Affiliates only after providing the Purchasers a reasonable opportunity to review and comment on such disclosure (with such comments being incorporated or reflected, to the extent reasonable, in any such disclosure); provided, however, that nothing in this Section 6.06 shall delay any required filing or other disclosure with the Commission, NYSE MKT or any Governmental Authority or otherwise hinder the Partnership Entities’ or their Representatives’ ability to timely comply with all laws or rules and regulations of the Commission, NYSE MKT or other Governmental Authority.
(a) Notwithstanding anything to the contrary in this Section 6.06, Sanchez agrees that the Purchasers may (i) publicize their ownership in Sanchez, as well as the identity of Sanchez, the size of the investment and its pricing terms with respect to the Class A Preferred Units on its internet site or in marketing materials, press releases, published “tombstone” announcements or any other print or electronic medium and (ii) display Sanchez’s logo in conjunction with any such reference. |
(b) By 9:00 a.m., New York City time, on the trading day immediately following the date of this Agreement, Sanchez shall issue a press release (the “Press Release”) reasonably acceptable to the Placement Agent disclosing all material terms of the transactions contemplated
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hereby. Sanchez shall not publicly disclose the name of any Purchaser or an affiliate of any Purchaser, or include the name of any Purchaser or an affiliate of any Purchaser in any press release or filing with the Commission (other than the registration statement to be filed pursuant to the Registration Rights Agreement) or any regulatory agency or trading market, without the prior written consent of such Purchaser, except (i) as required by federal securities law in connection with (A) the registration statement contemplated by the Registration Rights Agreement and (B) the filing of final transaction documents (including signature pages thereto) with the Commission and (ii) to the extent such disclosure is required by law, request of the Commission or trading market regulations, in which case Sanchez shall provide the Purchasers with prior written notice of such disclosure permitted under this subclause (ii). |
Section 6.07 Communications. All notices and demands provided for hereunder shall be in writing and shall be given by registered or certified mail, return receipt requested, telecopy, air courier guaranteeing overnight delivery or personal delivery to the following addresses
(a) If to a Purchaser, to the address specified on such Purchaser’s signature page hereto. |
(b) If to Sanchez: |
Sanchez Production Partners LP
1000 Main Street, Suite 3000
Houston, TX 77002
Attention: Charles C. Ward
Email: cward@sanchezpp.com;
with a copy to (which shall not constitute notice):
Andrews Kurth LLP
600 Travis Street, Suite 4200
Houston TX 77002
Attention: Scott Olson
Facsimile: 713-238-7410
Email: solson@andrewskurth.com
or to such other address as Sanchez or the Purchasers may designate in writing. All notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; upon actual receipt if sent by certified or registered mail, return receipt requested, or regular mail, if mailed; upon actual receipt of the overnight courier copy, if sent via facsimile; and upon actual receipt when delivered to an air courier guaranteeing overnight delivery.
Section 6.08 Removal of Legend. In connection with a sale of the Purchased Units by a Purchaser in reliance on Rule 144, the applicable Purchaser or its broker shall deliver to the transfer agent and Sanchez a broker representation letter providing to the transfer agent and Sanchez any information Sanchez deems necessary to determine that the sale of the Purchased Units is made in compliance with Rule 144, including, as may be appropriate, a certification that
the Purchaser is not an Affiliate of Sanchez and regarding the length of time the Purchased Units have been held. Upon receipt of such representation letter, Sanchez shall promptly direct its transfer agent to remove the notation of a restrictive legend in such Purchaser’s or the book-entry account maintained by the transfer agent, including the legend referred to in Section 4.05, and Sanchez shall bear all costs associated therewith. After a registration statement under the Securities Act permitting the public resale of the Purchased Units has become effective or any Purchaser or its permitted assigns have held the Purchased Units for one year, if the book-entry account of such Purchased Units still bears the notation of the restrictive legend referred to in Section 4.05, Sanchez agrees, upon request of the Purchaser or permitted assignee, to take all steps necessary to promptly effect the removal of the legend described in Section 4.05 from the Purchased Units, and Sanchez shall bear all costs associated therewith, regardless of whether the request is made in connection with a sale or otherwise, so long as such Purchaser or its permitted assigns provide to Sanchez any information Sanchez deems reasonably necessary to determine that the legend is no longer required under the Securities Act or applicable state laws, including (if there is no such registration statement) a certification that the holder is not an Affiliate of Sanchez and regarding the length of time the Purchased Units have been held. Sanchez shall cooperate with each Purchaser to effect the removal of the legend referred to in Section 4.05 at any time such legend is no longer appropriate.
Section 6.09 Entire Agreement. This Agreement, the other Basic Documents and the other agreements and documents referred to herein are intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein and therein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein or the other Basic Documents with respect to the rights granted by Sanchez or any of its Affiliates or the Purchasers or any of their respective Affiliates set forth herein or therein. This Agreement, the other Basic Documents and the other agreements and documents referred to herein or therein supersede all prior agreements and understandings between the parties with respect to such subject matter.
Section 6.10 Governing Law/ Submission to Jurisdiction. This Agreement, and all claims or causes of action (whether in contract or tort) that may be based upon, arise out of or relate to this Agreement or the negotiation, execution or performance of this Agreement (including any claim or cause of action based upon, arising out of or related to any representation or warranty made in or in connection with this Agreement), will be construed in accordance with and governed by the laws of the State of Delaware without regard to principles of conflicts of laws. Any action against any party relating to the foregoing shall be brought in any federal or state court of competent jurisdiction located within the State of Delaware, and the parties hereto hereby irrevocably submit to the non-exclusive jurisdiction of any federal or state court located within the State of Delaware over any such action. The parties hereby irrevocably waive, to the fullest extent permitted by applicable Law, any objection which they may now or hereafter have to the laying of venue of any such dispute brought in such court or any defense of inconvenient forum for the maintenance of such dispute. Each of the parties hereto agrees that a judgment in any such dispute may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law.
Section 6.11 Waiver of Jury Trial. THE PARTIES TO THIS AGREEMENT EACH HEREBY WAIVES, AND AGREES TO CAUSE ITS AFFILIATES TO WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS AGREEMENT OR (ii) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS RELATED HERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. THE PARTIES TO THIS AGREEMENT EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT THE PARTIES TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
Section 6.12 Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same agreement.
[Remainder of Page Left Intentionally Blank]
IN WITNESS WHEREOF, the parties hereto execute this Agreement, effective as of the date first above written.
SANCHEZ PRODUCTION PARTNERS LP
By: Sanchez Production Partners GP LLC,
its general partner
By: /s/ Charles C. Ward
Name: Charles C. Ward
Title: Chief Financial Officer
HITE HEDGE LP
By: __/s/ James Jampel__________________________
Name: James Jampel
Title: President of HITE Hedge Capital LP, the General Partner of HITE Hedge LP, and President of HITE Hedge Asset Management LLC, its Investment Manager
300 Washington Street, Suite 308, Newton, MA 02465
Fax: 617 431 4361
Email: jjampel@hitehedge.com
HITE MLP LP
By: __/s/ James Jampel__________________________
Name: James Jampel
Title: President of HITE Hedge Capital LP, the General Partner of HITE MLP LP, and President of HITE Hedge Asset Management LLC, its Investment Manager
300 Washington Street, Suite 308, Newton, MA 02465
Fax: 617 431 4361
Email: jjampel@hitehedge.com
HITE hedge qp LP
By: __/s/ James Jampel__________________________
Name: James Jampel
Title: President of HITE Hedge Capital LP, the General Partner of HITE Hedge QP LP, and President of HITE Hedge Asset Management LLC, its Investment Manager
300 Washington Street, Suite 308, Newton, MA 02465
Fax: 617 431 4361
Email: jjampel@hitehedge.com
HITE MLP ADVANTAGE LP
By: __/s/ James Jampel__________________________
Name: James Jampel
Title: President of HITE Hedge Capital LP, the General Partner of HITE MLP Advantage LP, and President of HITE Hedge Asset Management LLC, its Investment Manager
300 Washington Street, Suite 308, Newton, MA 02465
Fax: 617 431 4361
Email: jjampel@hitehedge.com
Michael Brewster
By: /s/ Michael Brewster
Address: 269 W. Lake Blvd.
Mahopac, NY 10541
Fax: 212-322-1471
Email: Michael.Brewster@credit-suisse.com
News Release
General Inquiries: (877) 847-0008
www.sanchezpp.com
Investor Contact: Charles C. Ward
(877) 847-0009
Sanchez Production Partners Acquires
Eagle Ford Shale Assets from Sanchez Energy Corp.;
Raises Preferred Equity and Refinances Credit Facility
HOUSTON--(BUSINESS WIRE)--March 31, 2015--Sanchez Production Partners LP (NYSE MKT: SPP) today announced that it has executed and closed an agreement with Sanchez Energy Corp. (NYSE: SN) (“Sanchez Energy”) to acquire wellbore interests in certain producing oil and natural gas wells in the Eagle Ford Shale for aggregate consideration of $85.0 million, subject to normal and customary closing adjustments (the “Eagle Ford Acquisition”). The transaction has an effective date of January 1, 2015 and was financed by SPP with a combination of preferred equity raised in a private placement, common units, borrowings under an amended and restated credit facility, and available cash.
Key characteristics of the Eagle Ford Acquisition include:
· |
Producing assets: 59 wellbores in the Palmetto Field in Gonzales County, Texas. |
· |
Escalating working interest: Average working interest of 18.2% in 2015 increases to 26.1% on January 1, 2016; 33.5% on January 1, 2017; 40.6% on January 1, 2018; and 47.5% on January 1, 2019 for the remaining life of the wellbores. |
· |
Production: As a result of the escalating working interest transaction structure, average production of approximately 1,000 BOE/D net to SPP’s interest is expected from the wellbores over the period 2015 through 2019, with production following declines characteristic of MLP assets thereafter. |
· |
Reserves & Asset Mix: Based on estimates using the forward strip as of January 9, 2015, reserves total approximately 5.2 MMBOE, all of which are proved developed producing, with production expected to be approximately 84% oil and liquids and 16% natural gas. |
· |
Hedges: Hedges covering approximately 95% of 2015 natural gas and crude production, 90% of 2016 natural gas and crude production, 85% of 2017 and 2018 natural gas and crude production, and 80% of 2019 natural
|
gas and crude production were executed by Sanchez Energy in conjunction with the transaction and were novated to SPP at closing. The hedges are summarized in the table that follows: |
Balance |
|||||
Product |
2015* |
2016 |
2017 |
2018 |
2019 |
Natural Gas Swaps |
|||||
$/MMbtu |
2.81 | 3.21 | 3.52 | 3.58 | 3.62 |
MMbtu |
261,100 | 313,524 | 296,048 | 295,683 | 277,888 |
Crude Swaps |
|||||
$/Bbl |
56.85 | 62.60 | 64.80 | 65.40 | 65.65 |
Bbl |
190,040 | 226,269 | 213,003 | 212,555 | 199,768 |
* For the period March 1, 2015 through December 31, 2015.
Based on the above-referenced reserve report, the transaction is expected to increase the size of SPP’s total proved reserves by approximately 32%. On a pro forma basis, SPP anticipates the transaction will increase its proved oil and liquids reserves from 10% of total proved reserves to 28% of total proved reserves and increase SPP’s proved reserves-to-production ratio from 9.8 years to 10.6 years.
“Having completed the conversion from a limited liability company to a limited partnership earlier this month, we are very pleased to announce our first transaction that leverages the operational platform and service relationships of our sponsor, Sanchez Oil & Gas Corporation (“SOG”),” said Charles C. Ward, Chief Financial Officer of the general partner of SPP. “The Eagle Ford Acquisition initiates our business development relationship with Sanchez Energy, a company that has a substantial inventory of producing assets with characteristics favorable to the MLP model. The assets involved are central to SOG’s service relationships in the Eagle Ford Shale, which is attractive to SPP as we look to further align our asset base with our sponsor’s platform. The transaction structure should allow SPP to achieve flat production over the first five years of the asset's production life cycle, which minimizes maintenance capital requirements and creates a framework for SPP's growth. Importantly, we believe today's announcement sets the stage for other similar and potentially larger transactions in 2015 and beyond, which we believe will be key to recapitalizing SPP and resuming distributions to unitholders.”
Acquisition Financing
After closing adjustments of $1.4 million, consideration paid by SPP to close the Eagle Ford Acquisition consisted of $81.6 million cash and 1,052,632 common units issued to Sanchez Energy, which represents approximately 3.3% of SPP’s total common units outstanding after closing the transaction. The common units were issued at SPP’s closing price on March 31, 2015, resulting in approximately $2.0 million in consideration paid to Sanchez Energy at closing.
Related to its funding of the cash portion of the Eagle Ford Acquisition, SPP issued 10,625,000 of newly created Class A Preferred Units in a private placement. The Class A Preferred Units were issued for a cash purchase price of
$1.60 per unit, resulting in gross proceeds to SPP of $17.0 million. SunTrust Robinson Humphrey acted as sole placement agent in connection with the private placement.
SPP also entered into an amended and restated, $500 million reserve-based credit facility with a syndicate of five lenders. The credit facility has an initial borrowing base of $110.0 million, an increase of $40.0 million over SPP’s previous credit facility. The borrowing base is subject to semi-annual redetermination, with the next redetermination scheduled to occur in the fourth quarter 2015. As of March 31, 2015, SPP had $106.0 million in debt outstanding under the credit facility, which matures in March 2020.
Other Information
The Eagle Ford Acquisition and financing was reviewed and approved by the Conflicts Committee of the board of directors of the general partner of SPP. Stifel provided a fairness opinion to the Conflicts Committee.
Additional information on the Eagle Ford Acquisition and financing can be found in SPP’s filings with the Securities Exchange Commission (www.sec.gov), which are also available on SPP’s website (www.sanchezpp.com).
About the Company
Sanchez Production Partners LP (NYSE MKT: SPP) is a publicly-traded limited partnership focused on the acquisition, development and production of oil and natural gas properties and other integrated assets. The partnership’s proved reserves are currently located in the Cherokee Basin in Oklahoma and Kansas, the Woodford Shale in the Arkoma Basin in Oklahoma, the Central Kansas Uplift in Kansas, and along the Gulf Coast in Texas and Louisiana.
Forward-Looking Statements
We make statements in this news release that are considered forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. These forward-looking statements are largely based on our expectations, which reflect estimates and assumptions made by the management of our general partner. These estimates and assumptions reflect our best judgment based on currently known market conditions and other factors. Although we believe such estimates and assumptions to be reasonable, they are inherently uncertain and involve a number of risks and uncertainties that are beyond our control. In addition, management's assumptions about future events may prove to be inaccurate. Management cautions all readers that the forward-looking statements contained in this news release are not guarantees of future performance, and we cannot assure you that such statements will be realized or the forward-looking events and circumstances will occur. Actual results may differ materially from those anticipated or implied in the forward-looking statements due to factors listed in the “Risk Factors” section in our SEC filings and elsewhere in those filings. All forward-looking statements speak only as of the date of this news release. We do not intend to publicly update or revise any forward-looking statements as a result of new information, future events or otherwise. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf.
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