8-K

 

 

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): May 6, 2019 (May 5, 2019)

 

 

AMPLIFY ENERGY CORP.

(Exact Name of Registrant as Specified in Charter)

 

 

 

Delaware   001-35364   82-1326219
(State or other jurisdiction   (Commission   (I.R.S. Employer
of Incorporation or Organization)   File Number)   Identification No.)

 

500 Dallas Street, Suite 1700

Houston, Texas

  77002
(Address of Principal Executive Offices)   (Zip Code)

Registrant’s telephone number, including area code: (713) 490-8900

Not Applicable

(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 (see General Instruction A.2. below):

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Securities registered pursuant to Section 12(b):

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange

on which registered

None   None   None

 

 

 


Item 1.01. Entry into a Material Definitive Agreement.

Merger Agreement

On May 5, 2019, Amplify Energy Corp., a Delaware corporation (the “Company” or “Amplify”), Midstates Petroleum Company, Inc., a Delaware corporation (“Midstates”), and Midstates Holdings, Inc., a Delaware corporation and a direct, wholly owned subsidiary of Midstates (“Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) pursuant to which the Company will merge with and into Merger Sub, with the Company surviving the Merger as a wholly owned subsidiary of Midstates (the “Merger”).

Subject to the terms and conditions of the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each outstanding share of capital stock of Amplify (other than shares held by Midstates and shares held by any holder who properly exercises and perfects appraisal rights in respect of such shares) will automatically be converted into the right to receive 0.933 shares of Midstates common stock (the “Exchange Ratio”). Following the closing of the Merger, current Amplify and Midstates stockholders will each own 50% of the outstanding stock of the combined company.

The Amplify board of directors has (i) determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are advisable, fair to, and in the best interests of Amplify and its stockholders, (ii) approved and declared advisable the Merger Agreement and the transactions contemplated thereby, including the Merger, (iii) approved the execution and delivery by Amplify of the Merger Agreement, the performance by Amplify of its covenants and agreements contained therein and the consummation of the transactions contemplated thereby, including the Merger, upon the terms and subject to the conditions contained therein, (iv) directed that the Merger Agreement be submitted to the holders of Amplify common stock at a stockholders’ meeting to approve its adoption and (v) resolved to recommend that the holders of Amplify common stock approve the adoption of the Merger Agreement.

Amplify and Midstates intend that, for U.S. federal (and applicable state and local) income tax purposes, the Merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”), and the Merger Agreement is intended to constitute and is adopted as a “plan of reorganization” for purposes of Sections 354 and 361 of the Code and within the meaning of Treasury Regulations Sections 1.368-2(g) and 1.368-3(a).

Following completion of the Merger, the combined company will be renamed Amplify Energy Corp. and will be headquartered in Houston, Texas. It will trade on the New York Stock Exchange under the symbol “AMPY.”

Treatment of Amplify Equity Awards

The Merger Agreement provides that: (i) all outstanding Amplify stock options, whether vested or unvested, will automatically by converted into Midstates stock options, at an exercise price adjusted after taking into effect the Exchange Ratio, (ii) all outstanding Amplify time-vesting restricted stock units (“RSUs”) will become fully vested at the Effective Time and be converted into Midstates RSUs and (iii) all Amplify performance-vesting RSUs (“PSUs”) will become fully vested at the Effective Time with performance vesting conditions to be determined based on the closing price of Amplify common stock on the trading date prior to the closing of the Merger, with each award to be converted into awards on a number of shares of Midstates common stock calculated based on the Exchange Ratio. Notwithstanding the foregoing, Amplify has sought and received waivers from certain directors and members of Amplify senior management, waiving the acceleration of vesting of Amplify TSUs and PSUs in connection with the Merger and may seek additional waivers from all holders of Amplify TSUs and PSUs prior to the closing of the Merger. For more information, see “Waiver of Accelerated Vesting of Restricted Stock Units” under Item 5.02 below.

Treatment of Midstates Equity Awards

The Merger Agreement provides that the Merger will be deemed to constitute a change in control for the purposes of the Midstates equity-based incentive plans. Furthermore, the Merger Agreement provides that: (i) all outstanding Midstates restricted stock units held by Midstates directors will become fully vested at the Effective Time; and (ii) all outstanding Midstates restricted stock units and stock options held by Midstates employees would become fully vested upon a termination without “cause” as defined in the Midstates 2016 Long Term Incentive Plan and individual award agreements (with performance-vesting determined in accordance with the applicable award agreements).

Governance

Upon the closing of the Merger, the board of directors of the combined company will consist of the following eight members: David M. Dunn, Christopher W. Hamm, Scott L. Hoffman, Randal T. Klein, Evan S. Lederman, Kenneth Mariani (chief executive officer), David H. Proman and Todd R. Snyder.

 

1


Conditions to the Merger

The completion of the Merger is subject to various customary closing conditions, including, among other things, (i) the receipt of approval of the issuance of shares of Midstates common stock to Amplify stockholders by the affirmative vote of at least a majority of the votes cast in person or represented by proxy at the Midstates stockholders’ meeting by the holders of Midstates common stock entitled to vote thereon, (ii) the receipt of approval of the adoption of the Merger Agreement by the affirmative vote of holders of at least a majority of the issued and outstanding shares of Amplify Common stock at the Amplify stockholders’ meeting, (iii) the effectiveness of a registration statement on Form S-4 that Midstates is obligated to file with the Securities and Exchange Commission (the “SEC”) in connection with the issuance of shares of Midstates common stock in the Merger, (iv) the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended and (v) the authorization for listing of shares of Midstates common stock to be issued in the Merger on the New York Stock Exchange.

No Solicitation

The Merger Agreement provides that, during the period from the date of the Merger Agreement until the Effective Time, each of Amplify and Midstates will be subject to certain restrictions on its ability to solicit alternative business combination proposals from third parties, to provide non-public information to third parties and to engage in discussions with third parties regarding alternative business combination proposals, subject to customary exceptions.

Termination Rights

The Merger Agreement provides each of Amplify and Midstates with certain termination rights including, among other things: (i) by Midstates or Amplify, if Amplify fails to obtain the requisite approval and adoption by its stockholders of the Merger Agreement or if Midstates fails to obtain the requisite approval of its stockholders for the issuance of shares of Midstates common stock to Amplify stockholders; (ii) by Amplify or Midstates, if the other party breaches or fails to perform any of its representations, warranties or covenants in the Merger Agreement and such breach cannot be or is not timely cured in accordance with the terms of the Merger Agreement and such breach or failure to perform would cause the applicable closing condition not to be satisfied; (iii) by Amplify, in the event the Midstates board of directors effects a Parent Change in Recommendation (as defined in the Merger Agreement) or if Midstates is in violation of the covenant to not solicit alternative business combination proposals from third parties; (iv) by Midstates, in the event the Amplify board of directors effects a Company Change in Recommendation (as defined in the Merger Agreement) or if Amplify is in violation of the covenant to not solicit alternative business combination proposals from third parties; or (v) by Amplify, if any Parent Designated Stockholder (as defined in the Merger Agreement) fails to deliver its voting and support agreement within one day of the signing of the Merger Agreement or by Midstates, if any Company Designated Stockholder (as defined in the Merger Agreement) fails to deliver its voting and support agreement within one business day of the signing of the Merger Agreement.

In the event that a Company Alternative Proposal (as defined in the Merger Agreement) is publicly announced or submitted to the Amplify board of directors, the Merger Agreement is terminated by Midstates in accordance with clause (i) or clause (ii) above, the Merger Agreement is terminated by either party as a result of the failure to close the Merger on or before November 5, 2019 (the “Outside Date”) or Amplify fails to obtain the requisite stockholder approval and Amplify enters into a definitive agreement with respect to, or consummates, a Company Alternative Proposal within 12 months after the date the Merger Agreement is terminated, Amplify will be required to pay Midstates a termination fee of $4,500,000. In the event that a Parent Alternative Proposal (as defined in the Merger Agreement) is publicly announced or submitted to the Midstates board of directors, the Merger Agreement is terminated by Amplify in accordance with clause (i) or clause (ii) above, the Merger Agreement is terminated by either party as a result of a failure to close the Merger on or before the Outside Date or Midstates fails to obtain the requisite stockholder approval and Midstates enters into a definitive agreement with respect to, or consummates, a Parent Alternative Proposal within 12 months after the date the Merger Agreement is terminated, Midstates will be required to pay Amplify a termination fee of $4,500,000. If the Merger Agreement in terminated by either party in accordance with clause (i) or clause (ii) above and the termination fee is not otherwise payable in accordance with the preceding sentence, then the non-terminating party will be required to reimburse the terminating party’s expenses incurred. In addition, if the Merger Agreement is terminated by either party in accordance with clause (iii) or clause (iv) above, the non-terminating party will be required to pay the termination fee. In addition to the foregoing termination rights, either party may terminate the Merger Agreement if the Merger has not been consummated on or prior to the Outside Date or if a governmental entity issues a final, non-appealable order or decree permanently restraining, enjoining or prohibiting the transactions contemplated by the Merger Agreement. The parties may also mutually agree to terminate the Merger Agreement.

If Amplify’s board of directors effects a Company Change in Recommendation, Amplify will, unless Midstates terminates the Merger Agreement, be required to submit the adoption of the Merger Agreement to a vote of Amplify stockholders at the Amplify stockholders’ meeting notwithstanding the Company Change in Recommendation. Similarly, if Midstates’ board of directors effects a Parent Change in Recommendation, Midstates will, unless Amplify terminates the Merger Agreement, be required to submit the issuance of Midstates common stock in connection with the Merger to a vote of Midstates stockholders at the Midstates stockholders’ meeting notwithstanding the Parent Change in Recommendation. Neither party is able to terminate the Merger Agreement in order to accept an alternative business combination proposal.

 

2


Other Terms of the Merger Agreement

The Merger Agreement contains customary representations, warranties and covenants for a transaction of this nature. The Merger Agreement also contains customary pre-closing covenants, including the obligations of Amplify and Midstates to conduct their respective businesses in the ordinary course of practice consistent with past practice and to refrain from taking certain specified actions without the consent of the other party.

The Merger Agreement contains representations and warranties that Midstates and Merger Sub, on the one hand, and Amplify, on the other hand, have made to one another as of specific dates. The representations and warranties contained in the Merger Agreement are qualified and subject to important limitations that were negotiated and agreed to by the parties to the Merger Agreement. Such representations and warranties were made solely for the benefit of another party or parties to the Merger Agreement and may have been negotiated with the principal purpose of allocating risk between the parties to the Merger Agreement, rather than as statements of fact. In addition, the representations and warranties contained in the Merger Agreement are qualified by information exchanged by the parties to the Merger Agreement in confidential disclosure schedules. Accordingly, the foregoing description of the material provisions of the Merger Agreement or the representations and warranties contained in the Merger Agreement should not be relied on as statements of fact regarding the parties to the Merger Agreement. The Merger Agreement should not be read alone, but should instead be read in conjunction with other information regarding the Company or Midstates that is or will be contained in, or incorporated by reference into, the registration statement on Form S-4 that will include a joint proxy statement of Amplify and Midstates, as well as the Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and other documents that the Company or Midstates files or furnishes with the SEC.

Voting Agreements

Concurrently with the execution of the Merger Agreement, Amplify entered into voting and support agreements (the “Voting Agreements”) with affiliates of Fir Tree Capital Management, LP (“Fir Tree”) and Avenue Energy Opportunities Partners, LLC (“Avenue”). Pursuant to the Voting Agreements, Fir Tree and Avenue have agreed to vote all of their shares of Midstates common stock in favor of the issuance of Midstates common stock in connection with the Merger and any other matter necessary or desirable for the consummation of the transactions contemplated by the Merger Agreement, including the Merger. The Voting Agreements will terminate upon the earliest of (a) the effective time of the Merger, (b) the termination of the Merger Agreement in accordance with its terms, (c) the occurrence of any material amendment to the Merger Agreement or any amendment to the Outside Date (as defined below) and (d) the mutual written agreement of the parties to the applicable Voting Agreement to terminate the applicable Voting Agreement. The foregoing summary of the Voting Agreements does not purport to be complete and is qualified in its entirety by the terms and conditions of the Voting Agreements, which are attached hereto as Exhibits 10.2 and 10.3.

First Amendment to Credit Agreement

On May 5, 2019, Amplify Energy Operating LLC (the “Borrower”), a wholly owned subsidiary of Amplify, entered into the First Amendment to Credit Agreement, among the Borrower, Amplify Acquisitionco Inc., Amplify, the guarantors party thereto, the lenders party thereto and Bank of Montreal, as administrative agent (the “First Amendment”).

The First Amendment amends the parties’ existing Credit Agreement, dated as of November 2, 2018 (the “New Revolving Credit Facility”) to, among other things: (i) modify certain defined terms in connection with the completion of the transactions contemplated by the Merger Agreement, including the Merger; (ii) allow certain structural changes for tax planning activities; and (iii) modify certain covenants in the New Revolving Credit Facility that restrict Amplify’s ability to take certain actions or engage in certain business such that, once the First Amendment is effective, the occurrence of such actions or business in connection with the Merger Agreement or completion of the transactions contemplated thereby, including the Merger, will not be so restricted.

Certain of the modifications to the New Revolving Credit Facility, including those permitting pre-Merger tax restrictions, became effective upon the signing of the First Amendment. The remaining modifications become effective concurrently with the consummation of the Merger, subject to certain closing conditions.

The First Amendment also contains customary representations, warranties and agreements of the Borrower and the guarantors. All other material terms and conditions of the New Revolving Credit Facility were unchanged by the First Amendment.

 

3


The foregoing description of the Merger, the Merger Agreement, the First Amendment and the Voting Agreements does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Merger Agreement, the First Amendment and the Voting Agreements, copies of which are attached hereto as Exhibit 2.1, 10.1, 10.2 and 10.3, respectively, and are incorporated into this report by reference in their entirety.

Item 5.02. Departure of Directors or Certain Officers: Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

Waiver of Accelerated Vesting of Restricted Stock Units

Under the Amplify Energy Corp. Management Incentive Plan (the “MIP”) and the Amplify Energy Corp. 2017 Non-Employee Directors Compensation Plan (the “DCP”), the consummation of the Merger may constitute a change of control that would accelerate the vesting of certain time-vesting and performance-vesting RSUs granted under the MIP and the DCP.

On May 5, 2019, Amplify entered into a Waiver of Accelerated Vesting of RSUs (the “Waivers”) with each of Kenneth Mariani, Martyn Willsher, Polly Schott, Richard P. Smiley, Eric M. Willis, David M. Dunn and Christopher W. Hamm, pursuant to which Messrs. Mariani, Willsher, Smiley, Willis, Dunn and Hamm and Ms. Schott waived the acceleration of vesting of their TSUs and PSUs. The Company may enter into Waivers with all other holders of Amplify TSUs and PSUs prior to the closing of the Merger.

The foregoing description of the Waivers does not purport to be complete and is qualified in its entirety by reference to the Form of Waiver of Accelerated Vesting of RSUs, which will be filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ending June 30, 2019.

Item 7.01. Regulation FD Disclosure.

On May 6, 2019, Amplify and Midstates issued a joint press release (the “Press Release”) announcing the execution of the Merger Agreement and the entry into the foregoing transactions. A copy of the Press Release is attached hereto as Exhibit 99.1 and incorporated into this Item 7.01 by reference.

On May 6, 2019, Amplify and Midstates provided supplemental information regarding the Merger in connection with a presentation to investors. A copy of the investor presentation is attached hereto as Exhibit 99.2 and incorporated into this Item 7.01 by reference.

On May 6, 2019, Amplify and Midstates hosted a conference call with Amplify’s and Midstates’ investors. The transcript of the call is included as Exhibit 99.3 hereto.

In accordance with General Instruction B.2 of Form 8-K, the information set forth in this Item 7.01 and the attached Exhibit 99.1, Exhibit 99.2 and Exhibit 99.3 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

 

4


Cautionary Note Regarding Forward-Looking Statements

This Current Report on Form 8-K, including the exhibits hereto, include “forward-looking statements.” All statements, other than statements of historical fact, included in this Current Report on Form 8-K that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. Terminology such as “may,” “will,” “could,” “should,” “expect,” “plan,” “project,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “pursue,” “target,” “outlook,” “continue,” the negative of such terms or other comparable terminology are intended to identify forward-looking statements. These statements include, but are not limited to, statements about the Company’s expectations of plans, goals, strategies (including measures to implement strategies), objectives and anticipated results with respect thereto. These statements address activities, events or developments that we expect or anticipate will or may occur in the future, including things such as projections of results of operations, plans for growth, goals, future capital expenditures, competitive strengths, references to future intentions and other such references. These forward-looking statements involve risks and uncertainties and other factors that could cause the Company’s actual results or financial condition to differ materially from those expressed or implied by forward-looking statements. These include risks and uncertainties relating to, among other things: the Company’s results of evaluation and implementation of strategic alternatives; the Company’s efforts to reduce leverage; the Company’s level of indebtedness, including its ability to satisfy its debt obligations; the Company’s need to make accretive acquisitions or substantial capital expenditures to maintain its declining asset base, including the ability to make acquisitions on favorable terms or to integrate acquired properties; the Company’s ability to complete the Merger with Midstates; continued low or further declining commodity prices and demand for oil, natural gas and natural gas liquids; the Company’s ability to access funds on acceptable terms, if at all, because of the terms and conditions governing the Company’s indebtedness or otherwise; general political and economic conditions, globally and in the jurisdictions in which we operate, including the impact of legislation and governmental regulations, including those related to climate change and hydraulic fracturing; and changes in commodity prices and hedge positions and the risk that the Company’s hedging strategy may be ineffective or may reduce its income. Please read the Company’s filings with the Securities and Exchange Commission (the “SEC”), including “Risk Factors” in the Company’s Annual Report on Form 10-K, and if applicable, the Company’s Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, which are available on the Company’s Investor Relations website at http://investor.amplifyenergy.com/ or on the SEC’s website at http://www.sec.gov, for a discussion of risks and uncertainties that could cause actual results to differ from those in such forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Current Report on Form 8-K. All forward-looking statements in this Current Report on Form 8-K are qualified in their entirety by these cautionary statements. Except as required by law, the Company undertakes no obligation and does not intend to update or revise any forward-looking statements, whether as a result of new information, future results or otherwise.

Important Additional Information Regarding the Transaction Will Be Filed With the SEC

In connection with the proposed transaction, Midstates will file a registration statement on Form S-4 that will include a joint proxy statement/prospectus of Amplify and Midstates. The definitive joint proxy statement/prospectus will be sent to the stockholders of the Company and Midstates. Midstates and the Company may also file other documents with the SEC regarding the proposed transaction. INVESTORS AND SECURITY HOLDERS OF THE COMPANY ARE ADVISED TO CAREFULLY READ THE JOINT PROXY STATEMENT AND ANY REGISTRATION STATEMENT/PROSPECTUS (INCLUDING ALL AMENDMENTS AND SUPPLEMENTS THERETO) WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE TRANSACTION, THE PARTIES TO THE TRANSACTION AND THE RISKS ASSOCIATED WITH THE TRANSACTION. A definitive joint proxy statement and any registration statement/prospectus, as applicable, will be sent to security holders of the Company. Investors and security holders may obtain a free copy of the joint proxy statement (when available), any registration statement/prospectus, and other relevant documents filed by the Company with the SEC from the SEC’s website at www.sec.gov. Security holders and other interested parties will also be able to obtain, without charge, a copy of the joint proxy statement, any registration statement/prospectus, and other relevant documents (when available) by (1) directing your written request to: 500 Dallas Street, Suite 1700, Houston, Texas 77002 or (2) contacting our Investor Relations department by telephone at (713) 588-8346. Copies of the documents filed by the Company with the SEC will be available free of charge on the Company’s website at http://www.amplifyenergy.com.

Participants in the Solicitation

The Company and its directors, executive officers and certain other members of management may be deemed to be participants in the solicitation of proxies from its security holders with respect to the transaction. Information about these persons is set forth in the Company’s proxy statement relating to its 2019 Annual Meeting of Stockholders, as filed with the SEC on April 5, 2019 and subsequent statements of changes in beneficial ownership on file with the

 

5


SEC. Security holders and investors may obtain additional information regarding the interests of such persons, which may be different than those of the Company’s security holders generally, by reading the joint proxy statement, any registration statement and other relevant documents regarding the transaction, which will be filed with the SEC.

No Offer or Solicitation

This document is not intended to and does not constitute an offer to sell or the solicitation of an offer to subscribe for or buy or an invitation to purchase or subscribe for any securities or the solicitation of any vote in any jurisdiction pursuant to the proposed transaction or otherwise, nor shall there be any sale, issuance or transfer of securities in any jurisdiction in contravention of applicable law. Subject to certain exceptions to be approved by the relevant regulators or certain facts to be ascertained, the public offer will not be made directly or indirectly, in or into any jurisdiction where to do so would constitute a violation of the laws of such jurisdiction, or by use of the mails or by any means or instrumentality (including without limitation, facsimile transmission, telephone and the internet) of interstate or foreign commerce, or any facility of a national securities exchange, of any such jurisdiction.

Item 9.01. Financial Statements and Exhibits.

 

(d)

Exhibits.

 

Exhibit

Number

  

Description

2.1    Agreement and Plan of Merger, dated May 5, 2019, by and among Amplify Energy Corp., Midstates Petroleum Company, Inc. and Midstates Holdings, Inc.*
10.1    First Amendment to Credit Agreement, dated May 5, 2019, by and among Amplify Energy Operating LLC, Amplify Acquisitionco Inc., Amplify Energy Corp., the guarantors party thereto, lenders party thereto and Bank of Montreal, as administrative agent
10.2    Voting and Support Agreement, dated May 5, 2019, by and among Amplify Energy Corp., FT SOF IV Holdings, LLC, FT SOF V Holdings, LLC and Fir Tree E&P Holdings III, LLC
10.3    Voting and Support Agreement, dated May 5, 2019, by and between Amplify Energy Corp. and Avenue Energy Opportunities Fund, L.P.
99.1    Press Release dated May 6, 2019
99.2    Investor Presentation, dated May 6, 2019
99.3    Transcript of Investor Call held on May 6, 2019

 

*

All schedules to the Merger Agreement have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished to the SEC upon request.

 

6


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.

 

Dated: May 6, 2019   AMPLIFY ENERGY CORP.
  By:  

/s/ Martyn Willsher

    Name:   Martyn Willsher
    Title:   Senior Vice President and Chief Financial Officer
EX-2.1

Exhibit 2.1

Execution Version

AGREEMENT AND PLAN OF MERGER

BY AND AMONG

MIDSTATES PETROLEUM COMPANY, INC.,

MIDSTATES HOLDINGS, INC.

AND

AMPLIFY ENERGY CORP.

DATED AS OF MAY 5, 2019

 


TABLE OF CONTENTS

 

         Page  

ARTICLE I CERTAIN DEFINITIONS

     2  

1.1

  Certain Definitions      2  

1.2

  Interpretation      21  

ARTICLE II THE MERGER; EFFECTS OF THE MERGER

     22  

2.1

  The Merger      22  

2.2

  Closing      22  

2.3

  Effect of the Merger      22  

2.4

  Organizational Documents      23  

2.5

  Directors and Officers of the Surviving Entity      23  

2.6

  Governance      23  

2.7

  Post-Closing Merger      23  

2.8

  Principal Offices; Name; Trading Symbol      24  

ARTICLE III MERGER CONSIDERATION; EXCHANGE PROCEDURES

     24  

3.1

  Effect of the Merger on Capital Stock      24  

3.2

  Treatment of Equity Compensation Awards      25  

3.3

  Payment for Securities; Exchange      26  

3.4

  Appraisal Rights      30  

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY

     30  

4.1

  Organization, General Authority and Standing      30  

4.2

  Capital Structure      31  

4.3

  Company Subsidiaries; Equity Interests      32  

4.4

  Authority; Execution and Delivery; Enforceability      33  

4.5

  No Conflicts; Consents      33  

4.6

  SEC Documents; Undisclosed Liabilities      34  

4.7

  Information Supplied      35  

4.8

  Absence of Certain Changes or Events      36  

4.9

  Taxes      36  

4.10

  Labor Relations      38  

4.11

  Employee Benefits      38  

4.12

  Title to Properties; Oil and Gas Properties      39  

4.13

  Reserve Report      40  

4.14

  Material Contracts      40  

4.15

  Litigation      42  

4.16

  Compliance with Laws      42  

4.17

  Environmental Matters      43  

4.18

  Indebtedness      44  

4.19

  Material Customers and Material Suppliers      44  

 

- i -


4.20

  Intellectual Property      44  

4.21

  Insurance      45  

4.22

  Regulatory Matters      45  

4.23

  Brokers and Other Advisors      45  

4.24

  Opinion of Financial Advisor      45  

4.25

  Related Party Transactions      45  

4.26

  Company Credit Agreement Amendment      46  

4.27

  No Other Representations or Warranties      46  

ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

     46  

5.1

  Organization, General Authority and Standing      47  

5.2

  Capital Structure      47  

5.3

  Parent Subsidiaries; Equity Interests      48  

5.4

  Capitalization of Merger Sub; Business Conduct      49  

5.5

  Authority; Execution and Delivery; Enforceability      49  

5.6

  No Conflicts; Consents      50  

5.7

  SEC Documents; Undisclosed Liabilities      51  

5.8

  Information Supplied      52  

5.9

  Absence of Certain Changes or Events      52  

5.10

  Taxes      52  

5.11

  Labor Relations      54  

5.12

  Employee Benefits      54  

5.13

  Title to Properties; Oil and Gas Properties      56  

5.14

  Reserve Report      57  

5.15

  Material Contracts      57  

5.16

  Litigation      59  

5.17

  Compliance with Laws      59  

5.18

  Environmental Matters      59  

5.19

  Indebtedness      60  

5.20

  Material Customers and Material Suppliers      60  

5.21

  Intellectual Property      60  

5.22

  Insurance      61  

5.23

  Regulatory Matters      61  

5.24

  Brokers and Other Advisors      61  

5.25

  Opinion of Financial Advisor      61  

5.26

  Related Party Transactions      62  

5.27

  No Other Representations or Warranties      62  

ARTICLE VI COVENANTS

     62  

6.1

  Conduct of Business by the Company      63  

6.2

  Conduct of Business by Parent      65  

6.3

  Consummation of the Merger      68  

6.4

  No Solicitation by Company and Company Change in Recommendation      69  

6.5

  No Solicitation by Parent and Parent Change in Recommendation      74  

 

- ii -


6.6

  Access to Information: Confidentiality      78  

6.7

  Public Statements      79  

6.8

  Takeover Laws      80  

6.9

  Obligations of Merger Sub      80  

6.10

  Indebtedness      80  

6.11

  Indemnification; Directors’ and Officers’ Insurance      81  

6.12

  Section 16 Matters      83  

6.13

  Employee Matters      83  

6.14

  Transaction Litigation      86  

6.15

  Cessation of Quotation      86  

6.16

  Preparation of Form S-4 and Joint Proxy Statement/Prospectus      86  

6.17

  Company Stockholders Meeting; Parent Stockholders Meeting; Other Approvals      88  

6.18

  Intended Tax Treatment      90  

6.19

  Treatment of Company Warrants      91  

6.20

  Treatment of Company Registration Rights Agreement      91  

6.21

  Waiver of Company Change in Control Payments      92  

ARTICLE VII CONDITIONS TO CONSUMMATION OF THE MERGER

     92  

7.1

  Mutual Closing Conditions      92  

7.2

  Conditions to Parent’s and Merger Sub’s Obligations to Effect the Merger      92  

7.3

  Conditions to the Company’s Obligations to Effect the Merger      93  

7.4

  Frustration of Closing Conditions      95  

ARTICLE VIII TERMINATION

     95  

8.1

  Termination of Agreement      95  

8.2

  Procedure Upon Termination      96  

8.3

  Effect of Termination      96  

8.4

  Fees and Expense Reimbursement      97  

ARTICLE IX MISCELLANEOUS

     99  

9.1

  Amendment or Supplement      99  

9.2

  Counterparts      99  

9.3

  Notices      99  

9.4

  Assignment      100  

9.5

  Entire Understanding: No Third-Party Beneficiaries      100  

9.6

  Severability      100  

9.7

  Governing Law; Venue; Waiver of Jury Trial      101  

9.8

  No Recourse      101  

9.9

  Affiliate Liability      101  

9.10

  Specific Performance      102  

9.11

  Transfer Taxes      102  

 

 

- iii -


AGREEMENT AND PLAN OF MERGER

This AGREEMENT AND PLAN OF MERGER, dated as of May 5, 2019 (this “Agreement), is entered into by and among Midstates Petroleum Company, Inc., a Delaware corporation (“Parent”), Midstates Holdings, Inc., a Delaware corporation and wholly owned Subsidiary of Parent (“Merger Sub”), and Amplify Energy Corp., a Delaware corporation (the “Company” and collectively with Parent and Merger Sub, the “Parties”).

RECITALS

WHEREAS, Parent owns (a) all of the issued and outstanding capital stock of Merger Sub and (b) all of the issued and outstanding membership interests and other equity interests, if any, of Alpha Mike Holdings, LLC, a Delaware limited liability company (“LLC Sub”);

WHEREAS, the Parties wish to effect the acquisition of the Company by Parent through the merger of Merger Sub with and into the Company in accordance with the General Corporation Law of the State of Delaware (the “DGCL”), with the Company being the surviving entity and a direct, wholly owned Parent Subsidiary (such merger, the “Merger”);

WHEREAS, in connection with the Merger, at the Effective Time each share of Company Common Stock issued and outstanding immediately prior to the Effective Time (other than any Appraisal Shares, or Cancelled Shares) shall be automatically converted into the right to receive the Merger Consideration upon the terms and subject to the conditions set forth in this Agreement;

WHEREAS, the Board of Directors of the Company (the “Company Board”), at a meeting duly called and held, has (a) determined that this Agreement and the transactions contemplated hereby, including the Merger, are advisable, fair to, and in the best interests of, the Company and its stockholders, (b) approved and declared advisable this Agreement and the transactions contemplated hereby, including the Merger, (c) approved the execution and delivery by the Company of this Agreement, the performance by the Company of its covenants and agreements contained herein and the consummation of the transactions contemplated hereby, including the Merger, upon the terms and subject to the conditions contained herein, (d) directed that this Agreement be submitted to the holders of Company Common Stock at the Company Stockholders Meeting to approve its adoption, and (e) resolved to recommend that the holders of Company Common Stock approve the adoption of this Agreement (the “Company Board Recommendation”);

WHEREAS, the Board of Directors of Parent (the “Parent Board”), at a meeting duly called and held, has (a) determined that this Agreement and the transactions contemplated hereby, including the Merger and the issuance of Parent Common Stock pursuant to this Agreement (the “Parent Stock Issuance”), are advisable, fair to, and in the best interests of, Parent and its stockholders, (b) approved and declared advisable this Agreement and the transactions contemplated hereby, including the Merger and the Parent Stock Issuance, (c) approved the execution and delivery by Parent of this Agreement, the performance by Parent of its covenants and agreements contained herein and the consummation of the transactions contemplated hereby, including the Merger and the Parent Stock Issuance, upon the terms and subject to the conditions contained herein, (d) directed that this Agreement be submitted to the holders of Parent Common Stock at the Parent Stockholders Meeting to approve the Parent Stock Issuance, and (e) resolved to recommend that the holders of Parent Common Stock approve the Parent Stock Issuance (the “Parent Board Recommendation”);

 

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WHEREAS, the Board of Directors of Merger Sub (the “Merger Sub Board”), at a meeting duly called and held, has (a) determined that this Agreement and the transactions contemplated hereby, including the Merger, are advisable, fair to, and in the best interests of, Merger Sub and its sole stockholder, (b) approved the execution and delivery by Merger Sub of this Agreement, the performance by Merger Sub of its covenants and agreements contained herein and the consummation of the transactions contemplated hereby, including the Merger, upon the terms and subject to the conditions contained herein, and (c) submitted this Agreement to Parent, as sole stockholder of Merger Sub, for adoption thereby and recommended that Parent approve and adopt this Agreement and the transactions contemplated hereby, including the Merger (and Parent, as sole stockholder of Merger Sub, has executed and delivered a unanimous written consent of the sole stockholder of Merger Sub adopting this Agreement and approving the transactions contemplated hereby in accordance with the DGCL (as defined herein), which consent shall become effective immediately following the execution and delivery of this Agreement and shall be irrevocable);

WHEREAS, as an inducement to Parent and the Company to enter into this Agreement, concurrently with the execution and delivery of the Agreement, certain stockholders of the Company (the “Company Designated Stockholders”) and Parent (the “Parent Designated Stockholders” and together with the Company Designated Stockholders, the “Designated Stockholders”) set forth on Schedule 1.1(a) of the Company Disclosure Letter and Parent Disclosure Letter, respectively, have entered into voting and support agreements (the “Designated Stockholder Voting Agreements”);

WHEREAS, immediately following the effectiveness of the Merger, the Surviving Entity shall be merged with and into LLC Sub (the “LLC Sub Merger”), with LLC Sub continuing as the surviving entity in the LLC Sub Merger as a direct, wholly owned subsidiary of Parent; and

WHEREAS, each of the Parties hereto intends that the Merger and the LLC Sub Merger (together, the “Integrated Mergers”) will qualify as a “reorganization” within the meaning of Section 368(a) of the Code (the “Intended Tax Treatment”), and this Agreement is intended to constitute and is adopted as a “plan of reorganization” for purposes of Sections 354 and 361 of the Code and within the meaning of Treasury Regulations Sections 1.368-2(g) and 1.368-3(a).

NOW, THEREFORE, in consideration of the foregoing and the representations, warranties, covenants and agreements contained in this Agreement, and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

 

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ARTICLE I

CERTAIN DEFINITIONS

1.1 Certain Definitions. As used in this Agreement, the following terms have the meanings set forth below:

Affiliate” means, with respect to a specified Person, any other Person, whether now in existence or hereafter created, directly or indirectly controlling, controlled by or under direct or indirect common control with such specified Person. For purposes of this definition and the definition of Subsidiary, “control” (including, with correlative meanings, “controlling,” “controlled by” and “under common control with”) means, with respect to a Person, the power to direct or cause the direction of the management and policies of such Person, directly or indirectly, whether through the ownership of equity interests, including, but not limited to, voting securities, by contract or agency or otherwise. For purposes of this Agreement: (i) Parent and the Parent Subsidiaries shall not be considered Affiliates of the Company and the Company Subsidiaries and (ii) the Company and the Company Subsidiaries shall not be considered Affiliates of Parent and the Parent Subsidiaries.

Agreement” has the meaning set forth in the Preamble.

Appraisal Shares” has the meaning set forth in Section 3.4.

Benefit Plan” means (a) any “employee benefit plan” (within the meaning of Section 3(3) of ERISA, regardless of whether such plan is subject to ERISA), and (b) any bonus, incentive, deferred compensation, termination, hospitalization or other medical, dental, vision, accident, disability, life insurance, vacation, paid time off or other material fringe benefit plan, program, policy, agreement or arrangement, or any employment, change in control, retention or severance, profit sharing, stock purchase, stock option, stock appreciation, phantom stock, restricted stock, restricted stock unit or other equity or equity-based compensation plan, program, policy, agreement or arrangement.

Book-Entry Shares” has the meaning set forth in Section 3.3(b)(i).

Business Day” means any day other than Saturday, Sunday or a day on which the SEC or commercial banks in New York, New York are authorized or required by Law to close.

Cancelled Shares” has the meaning set forth in Section 3.1(b)(iii).

Certificate of Merger” has the meaning set forth in Section 2.2(b).

Certificates” has the meaning set forth in Section 3.3(b)(i).

Closing” has the meaning set forth in Section 2.2(a).

Closing Date” has the meaning set forth in Section 2.2(a).

COBRA” means Part 6 of Subtitle B of Title I of ERISA, Section 4980B of the Code and any similar state Law.

Code” means the Internal Revenue Code of 1986, as amended.

Company” has the meaning set forth in the Preamble.

 

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Company Acceptable Confidentiality Agreement” has the meaning set forth in Section 6.4(e)(ii).

Company Alternative Proposal” means any contract, proposal, offer or indication of interest relating to any transaction or series of related transactions (other than transactions with Parent or any of the Parent Subsidiaries) involving: (A) any direct or indirect acquisition (by asset purchase, stock purchase, merger, or otherwise) by any Person or group of any business or assets of the Company or any Company Subsidiary (including capital stock of or ownership interest in any Subsidiary) that generated 15% or more of the Company’s and the Company Subsidiaries’ net revenue or earnings before interest, Taxes, depreciation and amortization for the preceding twelve months, or any license, lease or long-term supply agreement having a similar economic effect, (B) any direct or indirect acquisition of beneficial ownership by any Person or group of 15% or more of the outstanding shares of Company Common Stock or any tender or exchange offer that if consummated would result in any Person or group beneficially owning 15% or more of the outstanding shares of Company Common Stock or (C) merger, consolidation, share exchange, business combination, recapitalization, liquidation, dissolution or similar transaction involving the Company that is structured to permit any Person or group to acquire beneficial ownership of 15% or more of the Company’s and the Company Subsidiaries’ assets or equity interests.

Company Balance Sheet” has the meaning set forth in Section 4.6(c).

Company Benefit Plan” means a Benefit Plan maintained, sponsored or contributed to (or required to be contributed to) by the Company or any Company Subsidiary, or otherwise with respect to which the Company or any Company Subsidiary has any current or contingent liability.

Company Board” has the meaning set forth in the Recitals.

Company Board Recommendation” has the meaning set forth in Section 4.4(b).

Company Board RSU” means each restricted stock unit of the Company issued to the members of the Company Board subject to service-based vesting conditions, whether granted pursuant to the Company Stock Plans or otherwise, that is outstanding immediately prior to the Effective Time.

Company Borrowing Base Amendment” means an amendment to the Company Credit Agreement to increase the borrowing base thereunder so that the total borrowing base thereunder after giving effect to such amendment is an amount sufficient for the combined company’s liquidity needs.

Company CIC Payments” has the meaning set forth in Section 6.21.

Company Change in Recommendation” has the meaning set forth in Section 6.4(c).

Company Common Stock” has the meaning set forth in Section 4.2(a).

 

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Company Credit Agreement” means that certain Credit Agreement, dated as of November 2, 2018, by and among Amplify Energy Operating LLC, as borrower, Amplify Acquisitionco, Inc., as parent, Bank of Montreal, as administrative agent, and the financial institutions party thereto as lenders (as amended, restated, supplemented or otherwise modified from time to time).

Company Credit Agreement Amendment” means an amendment to the Company Credit Agreement pursuant to which the required lenders thereunder consent to the consummation of the Merger and the other transactions contemplated by this Agreement to the extent required by the Company Credit Agreement.

Company Designated Stockholders” has the meaning set forth in the Recitals.

Company Disclosure Letter” has the meaning set forth in Article IV.

Company Expenses” means all reasonable and documented out-of-pocket fees and expenses (including all fees and expenses of counsel, accountants, financial advisors, and investment bankers of the Company and its Affiliates) incurred by the Company or on its behalf in connection with or related to the authorization, preparation, negotiation, execution, and performance of this Agreement and any transactions and ancillary documents related thereto, any litigation with respect thereto, the preparation, printing, filing, and mailing of the Joint Proxy Statement/Prospectus, the filing of any required notices under any antitrust Laws, or in connection with other regulatory approvals, and all other matters related to the Merger and the other transactions contemplated by this Agreement.

Company Intellectual Property” has the meaning set forth in Section 4.20.

Company Intervening Event” means any material event, fact, circumstance, development or occurrence that is not known by the Company Board as of the date of this Agreement (or if known, the magnitude or material consequences of which were not known by the Company Board as of the date of this Agreement), which event, fact, circumstance, development or occurrence becomes known (or the magnitude or material consequences thereof become known) to or by the Company Board prior to the Company Stockholder Approval; provided, however, that in no event shall the following events, facts, circumstances, developments or occurrences constitute a Company Intervening Event: (A) any event, fact, circumstance, development or occurrence resulting from any action taken or omitted by the Company or any Company Subsidiary that is required to be taken or omitted by the Company or any Company Subsidiary pursuant to this Agreement (other than with respect to any obligation of the Company and the Company Subsidiaries in accordance with Section 6.1), (B) the receipt, existence or terms of a Company Alternative Proposal or any inquiry, proposal, offer, request for information or expression of interest that may reasonably be expected to lead to, or result in, a Company Alternative Proposal, (C) any event, fact, circumstance, development or occurrence relating to Parent or any Parent Subsidiary that does not amount to a Parent Material Adverse Effect, (D) changes in the market price or trading volume of Company Common Stock, Parent Common Stock or any other securities of the Company, Parent or their respective Subsidiaries, or any change in the credit rating thereof or the fact that the Company meets or exceeds (or that Parent fails to meet or exceed) internal or published estimates, projections, forecasts or predictions for any period (it being understood that

 

5


the underlying cause thereof or the underlying facts giving rise or contributing to such event, fact, circumstance, development or occurrence may be taken into account for purposes of determining whether a Company Intervening Event has occurred if such cause or facts are not otherwise excluded under this definition), (E) changes after the date hereof in general economic or business conditions (including, without limitation, the price of oil, natural gas or other commodities) in the United States or elsewhere in the world or (F) changes after the date hereof in the credit, debt, financial or capital markets or in interest or exchange rates, in each case, in the United States or elsewhere in the world.

Company Material Adverse Effect” means any change, event, effect or occurrence that (a) has a material adverse effect on the business, assets, financial condition or results of operations of the Company and the Company Subsidiaries, taken as a whole, or (b) prevents the consummation of the Merger, provided that in the case of clause (a), none of the following shall be deemed either alone or in combination to constitute, and none of the following shall be taken into account in determining whether there has been a Company Material Adverse Effect: any change, event, effect or occurrence that results from or arises in connection with (A) (I) the oil and gas exploration and production industry generally; (II) the natural gas gathering, compressing, treating, processing and transportation industry generally; (III) the natural gas liquids fractionating and transportation industry generally; (IV) the crude oil and condensate logistics and marketing industry generally; and (V) the natural gas marketing and trading industry generally (including in each case changes in the Laws affecting such industries), (B) general U.S. or global economic or regulatory, legislative or political conditions (or changes therein) or securities, credit, financial or other capital markets conditions (including changes generally in prevailing interest rates, currency exchange rates, commodity prices, credit markets and price levels or trading volumes), (C) any change or prospective change in applicable Law or GAAP (or interpretation or enforcement thereof), (D) geopolitical conditions, the outbreak or escalation of hostilities, any acts of war (whether or not declared), sabotage, terrorism or any epidemics, or any escalation or worsening of any such acts of war (whether or not declared), sabotage or terrorism or any epidemics, (E) any hurricane, tornado, flood, volcano, earthquake or other natural or man-made disaster or any other national or international calamity or crises, (F) the failure, in and of itself, of the Company or the Company Subsidiaries to meet any internal or published projections, forecasts, estimates or predictions in respect of revenues, earnings or other financial or operating metrics before, on or after the date of this Agreement, or changes or prospective changes in the market price or trading volume of any securities or indebtedness of the Company or any Company Subsidiaries or the credit rating of the Company (it being understood that the underlying facts giving rise or contributing to such failure or change may be taken into account in determining whether there has been a Company Material Adverse Effect if such facts are not otherwise excluded under this definition), (G) the announcement, pendency and consummation of any of the transactions contemplated hereby, including the Merger, or any Proceeding in respect of this Agreement or any of the transactions contemplated hereby, (H) the compliance with the covenants contained in this Agreement (other than with respect to any obligation of the Company or any Company Subsidiary in accordance with Section 6.1) and any loss of or change in relationship with any customer, supplier, vendor or other business partner, or departure of any employee or officer, of the Company or of any Company Subsidiary, (I) (1) any action taken by the Company or any Company Subsidiary at Parent’s written request or with Parent’s written consent or (2) the failure to take any action by the Company or any Company Subsidiary if that action is prohibited by this Agreement to the extent that Parent fails to give its written consent after receipt of a request therefor and (J)

 

6


the identity of, or any facts or circumstances relating to, Parent, Merger Sub or their respective Affiliates, provided that the exceptions set forth in clauses (A), (B), (C), (D) and (E) shall not be excluded to the extent such effect has disproportionately affected the Company or any Company Subsidiary when compared to other Persons operating in the same industries.

Company Material Customers” has the meaning set forth in Section 4.19(a).

Company Material Suppliers” has the meaning set forth in Section 4.19(b).

Company Permitted Liens” means, collectively:

(a) to the extent waived prior to the Effective Time, preferential purchase rights, rights of first refusal, purchase options and similar rights granted pursuant to any contracts, including joint operating agreements, joint ownership agreements, stockholders agreements, organic documents and other similar agreements and documents;

(b) contractual or statutory mechanic’s, materialman’s, warehouseman’s, journeyman’s and carrier’s Liens and other similar Liens arising in the ordinary course of business for amounts not yet delinquent and Liens for Taxes or assessments that are not yet delinquent or that are being contested in good faith by appropriate proceedings and for which adequate reserves have been established in the consolidated financial statements of the Company in accordance with GAAP;

(c) lease burdens payable to third parties that are deducted in the calculation of discounted present value in the Company Reserve Report, including any royalty, overriding royalty, net profits interest, production payment, carried interest or reversionary working interest;

(d) (A) contractual or statutory Liens securing obligations for labor, services, materials and supplies furnished to mineral interests, or (B) Liens on pipeline or pipeline facilities that arise out of operation of Law, or (C) Liens arising in the ordinary course of business under operating agreements, joint venture agreements, partnership agreements, oil and gas leases, farm-out agreements, division orders, contracts for the sale, purchase, transportation, processing or exchange of oil, gas or other Hydrocarbons, unitization and pooling declarations and agreements, area of mutual interest agreements, development agreements, joint ownership arrangements and other agreements that are customary in the oil and gas business;

(e) Liens incurred in the ordinary course of business on cash or securities pledged in connection with workmen’s compensation, unemployment insurance or other forms of governmental insurance or benefits, or to secure performance of tenders, statutory obligations, leases and contracts entered into in the ordinary course of business (including lessee and operator obligations under statute, governmental regulations or instruments related to the ownership, exploration and production of oil, gas and minerals on state, federal or foreign lands or waters) or to secure obligations on surety or appeal bonds;

 

7


(f) pre-judgment Liens and judgment Liens in existence less than fifteen (15) days after the entry thereof or with respect to which execution has been stayed or the payment of which is covered in full (subject to a customary deductible) by insurance;

(g) rights reserved to or vested in any Governmental Entity to control or regulate any of the Company’s or the Company Subsidiaries’ properties or assets in any manner;

(h) Liens existing on the date of this Agreement securing any Indebtedness;

(i) all easements, zoning restrictions, rights-of-way, servitudes, permits, surface leases and other similar rights in respect of surface operations, and easements for pipelines, streets, alleys, highways, telephone lines, power lines, railways and other easements and rights-of-way, on, over or in respect of any of the properties of the Company or of any Company Subsidiary that are customarily granted in the oil and gas industry and do not (i) materially interfere with the operation, value or use of the property or asset affected or (ii) increase the burdens payable to third parties that are deducted in the calculation of discounted present value in the Company Reserve Report, including any royalty, overriding royalty, net profits interest, production payment, carried interest or reversionary working interest;

(j) such title defects as Parent (in the case of title defects with respect to properties or assets of the Company or the Company Subsidiaries) has expressly waived in writing; and

(k) all other Liens, defects and irregularities not arising in connection with Indebtedness, and any encroachments, overlapping improvements, and other state of facts as would be shown on an accurate survey of any real property, that are not such as to materially interfere with the operation, value or use of the property or asset affected.

Company Permits” has the meaning set forth in Section 4.16(b).

Company Preferred Stock” has the meaning set forth in Section 4.2(a).

Company PSU” means each restricted stock unit of the Company subject to performance- and service-based vesting conditions, whether granted pursuant to the Company Stock Plans or otherwise, that is outstanding immediately prior to the Effective Time.

Company Refinancing Facility” means any bank debt financing for the purposes of financing any repayment or refinancing of debt under the Company Credit Agreement, provided that such bank financing shall (x) permit the consummation of the Merger and the other transactions contemplated by this Agreement, (y) provide that the total borrowing base thereunder is an amount sufficient for the combined company’s liquidity needs and (z) otherwise be on terms and conditions no less favorable to the Company and the Company Subsidiaries than the Company Credit Agreement.

Company Registration Rights Agreement” has the meaning set forth in Section 6.20.

 

8


Company Reserve Report” has the meaning set forth in Section 4.13.

Company Specified Contract” has the meaning set forth in Section 4.14(a).

Company Stockholder Approval” has the meaning set forth in Section 4.4(c).

Company Stockholders Meeting” means the special meeting of the holders of Company Common Stock to approve the adoption of this Agreement and other related matters (including any postponement, adjournment or recess thereof).

Company Stock Option” means each stock option to acquire shares of Company Common Stock from the Company, whether granted pursuant to the Company Stock Plan or otherwise, that is outstanding immediately prior to the Effective Time.

Company Stock Plan” means the Amplify Management Incentive Plan and the Amplify 2017 Non-Employee Directors Compensation Plan.

Company Subsidiary” means each Subsidiary of the Company.

Company Superior Proposal” means a bona fide written proposal by any Person or group (other than Parent or any of its Affiliates) to acquire, directly or indirectly, (a) businesses or assets of the Company or any Company Subsidiary that generated 50% or more of the Company’s and the Company Subsidiaries’ net revenue or earnings before interest, Taxes, depreciation and amortization for the preceding twelve months, respectively, or (b) more than 50% of the outstanding shares of Company Common Stock, in each case whether by way of merger, amalgamation, share exchange, tender offer, exchange offer, recapitalization, consolidation, sale of assets or otherwise, that in the good faith business judgment of the Company Board or any committee thereof, after consultation with its advisors and, would, if consummated in accordance with its terms, result in a transaction more favorable, in the opinion of the Company Board or any committee thereof in the exercise of its good faith business judgment, from a financial point of view to the Company’s stockholders than the transactions contemplated by this Agreement (taking into account the time likely to be required to consummate such proposal and any adjustments or revisions to the terms and conditions of the Merger and/or this Agreement offered by Parent in response to such proposal or otherwise).

Company Tax Opinion” has the meaning set forth in Section 7.3(e).

Company Termination Fee has the meaning set forth in Section 8.4(i).

Company TSU” means each restricted stock unit or similar right of the Company (other than a Company PSU) payable in shares of Company Common Stock or whose value is determined with reference to the value of shares of Company Common Stock, granted pursuant to the Company Stock Plan, that is outstanding immediately prior to the Effective Time.

Company Warrant Agreement” means that certain Warrant Agreement dated as of May 4, 2017 by and between the Company and American Stock Transfer & Trust Company, LLC.

 

9


Company Warrants” means outstanding warrants issued pursuant to the Company Warrant Agreements.

Confidentiality Agreement” has the meaning set forth in Section 6.6(c).

Consent” has the meaning set forth in Section 4.5(b).

Continuation Period” has the meaning set forth in Section 6.13(a).

Continuing Employee” has the meaning set forth in Section 6.13(a).

Contract” has the meaning set forth in Section 4.5(a).

Derivative Transaction” means any forward, future, hedge, swap, collar, put, call, floor, cap, option or other Contract that is intended to benefit from, relate to or reduce or eliminate the risk of fluctuations in interest rates, basis risk or the price of commodities, including Hydrocarbons and produced Hydrocarbons, that binds a Person or any of its assets.

Designated Stockholders” has the meaning set forth in the Recitals.

Designated Stockholder Voting Agreements” has the meaning set forth in the Recitals.

DGCL” has the meaning set forth in the Recitals.

Effective Time” has the meaning set forth in Section 2.2(b).

Environmental Law” means any Law enacted and in effect on or prior to the Closing Date that relates to pollution, protection of human health and safety (with respect to exposure to Hazardous Materials) or protection of the environment or natural resources.

Environmental Permit means any permit, license, consent, certification, registration, variance, exemption, approval or other authorization required under any Environmental Law.

ERISA means the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq., as amended.

Exchange Act means the Securities Exchange Act of 1934, 15 U.S.C. § 78a et seq., as amended, and the rules and regulations promulgated thereunder.

Exchange Agent” has the meaning set forth in Section 3.3(a).

Exchange Fund has the meaning set forth in Section 3.3(a).

Exchange Ratio” has the meaning set forth in Section 3.1(b)(i).

Filed Company SEC Documents” has the meaning set forth in Article IV.

 

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Filed Parent SEC Documents” has the meaning set forth in Article V.

Form S-4” means the registration statement on Form S-4 to be filed with the SEC by Parent, pursuant to which Parent Common Stock issuable under this Agreement will be registered with the SEC (including any amendments or supplements thereto).

GAAP” has the meaning set forth in Section 4.6(b).

Governmental Entity” has the meaning set forth in Section 4.5(b).

Hazardous Material” means any substance, material or waste that is listed, defined, designated, classified or otherwise regulated as “hazardous,” “toxic,” a “pollutant” or a “contaminant,” or words of similar meaning and regulatory effect, pursuant to any Environmental Law, including Hydrocarbons and any other petroleum and petroleum byproducts, naturally occurring radioactive minerals and asbestos.

HSR Act means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, 15 U.S.C. § 18a et seq., as amended, and the rules and regulations promulgated thereunder.

Hydrocarbons” means crude oil, natural gas, condensate, drip gas and natural gas liquids (including coalbed gas) and other liquids or gaseous hydrocarbons or any combination thereof produced or associated therewith.

Immaterial Inaccuracies” means any inaccuracies in the representations and warranties of the Company in Section 4.2(a) or of Parent in Section 5.2(a) that individually or in the aggregate are immaterial relative to the total fully diluted equity capitalization of the Company or Parent, as applicable.

Indebtedness” of any Person means, without duplication: (a) indebtedness of such Person for borrowed money; (b) obligations of such Person to pay the deferred purchase or acquisition price for any property of such Person; (c) reimbursement obligations of such Person in respect of drawn letters of credit or similar instruments issued or accepted by banks and other financial institutions for the account of such Person; (d) obligations of such Person under a lease to the extent such obligations are required to be classified and accounted for as a capital lease on a balance sheet of such Person under GAAP; and (e) indebtedness of others as described in clauses (a) through (d) above guaranteed by such Person; provided, however, that Indebtedness does not include accounts payable to trade creditors, or accrued expenses arising in the ordinary course of business consistent with past practice, in each case, that are not yet due and payable, or are being disputed in good faith, and the endorsement of negotiable instruments for collection in the ordinary course of business.

Indemnification Expenses” has the meaning set forth in Section 6.11(a).

Indemnified Parties” has the meaning set forth in Section 6.11(a).

Integrated Mergers” has the meaning set forth in the Recitals.

 

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Intellectual Property means all intellectual property rights in the following: (a) trademarks, service marks, trade dress, logos, slogans, domain names, trade names and corporate names, all applications and registrations for the foregoing, including all renewals of the same, and together with the goodwill associated therewith, (b) patents and patent applications, including divisions, continuations, continuations-in-part and renewal applications, and including renewals, extensions, reexaminations and reissues, (c) confidential information, trade secrets and know-how and (d) copyrightable works of authorship, copyrights, industrial designs and other design rights, and registrations and applications therefor, and all renewals, extensions, restorations and reversions thereof.

Intended Tax Treatment” has the meaning set forth in the Recitals.

Joint Proxy Statement/Prospectus” has the meaning set forth in Section 6.16.

Judgment” means any judgment, order, award, injunction or decree of a Governmental Entity or arbitrator.

Knowledge” means the actual knowledge, after reasonable inquiry, of, in the case of the Company and the Company Subsidiaries, the individuals listed in Section 1.1 of the Company Disclosure Letter and, in the case of Parent and the Merger Sub, the individuals listed on Section 1.1 of the Parent Disclosure Letter.

Law” means any law, rule, regulation, ordinance, code, Judgment, order, treaty, convention, governmental directive or other legally enforceable requirement, U.S. or non-U.S., of any Governmental Entity, including common law.

Letter of Transmittal has the meaning set forth in Section 3.3(b)(i).

Lien” means any mortgage, lien, charge, restriction (including restrictions on transfer), pledge, security interest, option, right of first offer or refusal, preemptive right, lease or sublease, claim, right of any third party, covenant, right of way, easement, encroachment or encumbrance, provided that “Lien” shall not include any license or any option or other covenant with respect to any Intellectual Property.

LLC Sub” has the meaning set forth in the Recitals.

LLC Sub Merger” has the meaning set forth in the Recitals.

LLC Sub Merger Agreement” has the meaning set forth in Section 2.7.

Maximum Amount” has the meaning set forth in Section 6.11(d).

Measurement Date” has the meaning set forth in Section 4.2(a).

Merger” has the meaning set forth in the Recitals.

Merger Consideration” has the meaning set forth in Section 3.1(b)(i).

 

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Merger Sub” has the meaning set forth in the Preamble.

Merger Sub Board” has the meaning set forth in the Recitals.

NYSE” means the New York Stock Exchange.

Oil and Gas Leases” means all Hydrocarbon and mineral leases and subleases, royalties, overriding royalties, net profits interests, mineral fee interests, carried interests and other rights to Hydrocarbons in place, and mineral servitudes, and all leases, subleases, licenses or other occupancy or similar agreements under which a Person acquires or obtains operating rights in and to Hydrocarbons or any other real property which is material to the operation of such Person’s business.

Oil and Gas Properties” means (a) all interests in and rights with respect to Hydrocarbons and similar properties of any kind and nature, including Oil and Gas Leases, mineral interests and operating rights, and the interests in lands covered thereby or pooled, communitized or unitized therewith and royalties, overriding royalties, production payments, net profit interests and other non-working interests and non-operating interests and the interests in lands covered thereby or pooled, communitized or unitized therewith (including all Oil and Gas Leases, operating agreements, pooling, communitization or unitization agreements and orders, division orders, transfer orders, mineral deeds, royalty deeds, and in each case, interests thereunder), surface interests, fee interests, reversionary interests, reservations, and concessions, (b) easements, rights-of-way, licenses, permits, surface use agreements and other surface interests used in connection with the ownership or operation of any other Oil and Gas Properties or the production, gathering, processing, storage, disposition, transportation or sale of Hydrocarbons therefrom and (c) interests in machinery, equipment (including wells, well equipment and machinery), facilities, rigs, pumps, plants and other personal property used in connection with the ownership or operation of any other Oil and Gas Properties or the production, gathering, processing, storage, disposition, transportation or sale of Hydrocarbons therefrom.

Organizational Documents” means (a) with respect to a corporation, the charter, articles or certificate of incorporation, as applicable, and bylaws thereof, (b) with respect to a limited liability company, the certificate of formation or organization, as applicable, and the operating or limited liability company agreement thereof, (c) with respect to a partnership (general or limited), the certificate of formation or partnership and the partnership agreement, and (d) with respect to any other Person the organizational, constituent and/or governing documents and/or instruments of such Person.

OTCQX” means the over-the-counter stock market operated by OTC Markets Group Inc.

Other Party” means, (a) with respect to Parent and the Parent Subsidiaries, the Company, and (b) with respect to the Company and the Company Subsidiaries, Parent and Merger Sub.

Outside Date” has the meaning set forth in Section 8.1(f).

Parent” has the meaning set forth in the Preamble.

 

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Parent 401(k) Plan” has the meaning set forth in Section 6.13(d).

Parent Acceptable Confidentiality Agreement” has the meaning set forth in Section 6.5(e)(ii).

Parent Alternative Proposal” means any contract, proposal, offer or indication of interest relating to any transaction or series of related transactions (other than transactions with Parent or any of the Parent Subsidiaries) involving: (A) any direct or indirect acquisition (by asset purchase, stock purchase, merger, or otherwise) by any Person or group of any business or assets of Parent or any Parent Subsidiary (including capital stock of or ownership interest in any Subsidiary) that generated 15% or more of Parent’s and the Parent Subsidiaries’ net revenue or earnings before interest, Taxes, depreciation and amortization for the preceding twelve months, or any license, lease or long-term supply agreement having a similar economic effect, (B) any direct or indirect acquisition of beneficial ownership by any Person or group of 15% or more of the outstanding shares of Parent Common Stock or any tender or exchange offer that if consummated would result in any Person or group beneficially owning 15% or more of the outstanding shares of Parent Common Stock or (C) merger, consolidation, share exchange, business combination, recapitalization, liquidation, dissolution or similar transaction involving Parent that is structured to permit any Person or group to acquire beneficial ownership of 15% or more of Parent’s and the Parent Subsidiaries’ assets or equity interests.

Parent Balance Sheet” has the meaning set forth in Section 5.7(c).

Parent Benefit Plan” means a Benefit Plan maintained, sponsored or contributed to (or required to be contributed to) by Parent or any Parent Subsidiary, or otherwise with respect to which Parent or any Parent Subsidiary has any current or contingent liability.

Parent Board” has the meaning set forth in the Recitals.

Parent Board Recommendation” has the meaning set forth in the Recitals.

Parent Change in Recommendation” has the meaning set forth in Section 6.5(c).

Parent Common Stock” has the meaning set forth in Section 5.2(a).

Parent Designated Directors” has the meaning set forth in Section 2.6(a).

Parent Designated Stockholders” has the meaning set forth in the Recitals.

Parent Disclosure Letter” has the meaning set forth in Article V.

Parent Expenses” means all reasonable and documented out-of-pocket fees and expenses (including all fees and expenses of counsel, accountants, financial advisors, and investment bankers of Parent and its Affiliates) incurred by Parent or Merger Sub or on their behalf in connection with or related to the authorization, preparation, negotiation, execution, and performance of this Agreement and any transactions and ancillary documents related thereto, any litigation with respect thereto, the preparation, printing, filing, and mailing of the Form S-4 and Joint Proxy Statement/Prospectus, the filing of any required notices under any antitrust Laws, or in connection with other regulatory approvals, and all other matters related to the Merger and the other transactions contemplated by this Agreement.

 

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Parent Intellectual Property” has the meaning set forth in Section 5.21.

Parent Intervening Event” means any material event, fact, circumstance, development or occurrence that is not known by the Parent Board as of the date of this Agreement (or if known, the magnitude or material consequences of which were not known by the Parent Board as of the date of this Agreement), which event, fact, circumstance, development or occurrence becomes known (or the magnitude or material consequences thereof become known) to or by the Parent Board prior to the Parent Stockholder Approval; provided, however, that in no event shall the following events, facts, circumstances, developments or occurrences constitute an Parent Intervening Event: (A) any event, fact, circumstance, development or occurrence resulting from any action taken or omitted by Parent or any Parent Subsidiary that is required to be taken or omitted by Parent or any Parent Subsidiary pursuant to this Agreement (other than with respect to any obligation of Parent and the Parent Subsidiaries in accordance with Section 6.2), (B) the receipt, existence or terms of a Parent Alternative Proposal or any inquiry, proposal, offer, request for information or expression of interest that may reasonably be expected to lead to, or result in, a Parent Alternative Proposal, (C) any event, fact, circumstance, development or occurrence relating to the Company or any Company Subsidiary that does not amount to a Company Material Adverse Effect, (D) changes in the market price or trading volume of Parent Common Stock, Company Common Stock or any other securities of Parent, the Company or their respective Subsidiaries, or any change in the credit rating thereof or the fact that Parent meets or exceeds (or that the Company fails to meet or exceed) internal or published estimates, projections, forecasts or predictions for any period (it being understood that the underlying cause thereof or the underlying facts giving rise or contributing to such event, fact, circumstance, development or occurrence may be taken into account for purposes of determining whether a Parent Intervening Event has occurred if such cause or facts are not otherwise excluded under this definition), (E) changes after the date hereof in general economic or business conditions (including, without limitation, the price of oil, natural gas or other commodities) in the United States or elsewhere in the world or (F) changes after the date hereof in the credit, debt, financial or capital markets or in interest or exchange rates, in each case, in the United States or elsewhere in the world.

Parent Material Adverse Effect” means any change, event, effect or occurrence that (a) has a material adverse effect on the business, assets, financial condition or results of operations of Parent and the Parent Subsidiaries, taken as a whole, or (b) prevents the consummation of the Merger, provided that in the case of clause (a), none of the following shall be deemed either alone or in combination to constitute, and none of the following shall be taken into account in determining whether there has been a Parent Material Adverse Effect: any change, event, effect or occurrence that results from or arises in connection with (A) (I) the oil and gas exploration and production industry generally; (II) the natural gas gathering, compressing, treating, processing and transportation industry generally; (III) the natural gas liquids fractionating and transportation industry generally; (IV) the crude oil and condensate logistics and marketing industry generally; and (V) the natural gas marketing and trading industry generally (including in each case changes in the Laws affecting such industries), (B) general U.S. or global economic or regulatory, legislative or political conditions (or changes therein) or securities, credit, financial or other capital markets conditions (including changes generally in prevailing interest rates, currency

 

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exchange rates, commodity prices, credit markets and price levels or trading volumes), (C) any change or prospective change in applicable Law or GAAP (or interpretation or enforcement thereof), (D) geopolitical conditions, the outbreak or escalation of hostilities, any acts of war (whether or not declared), sabotage, terrorism or any epidemics, or any escalation or worsening of any such acts of war (whether or not declared), sabotage or terrorism or any epidemics, (E) any hurricane, tornado, flood, volcano, earthquake or other natural or man-made disaster or any other national or international calamity or crises, (F) the failure, in and of itself, of Parent or the Parent Subsidiaries to meet any internal or published projections, forecasts, estimates or predictions in respect of revenues, earnings or other financial or operating metrics before, on or after the date of this Agreement, or changes or prospective changes in the market price or trading volume of any securities or indebtedness of Parent or any Parent Subsidiaries or the credit rating of Parent (it being understood that the underlying facts giving rise or contributing to such failure or change may be taken into account in determining whether there has been a Parent Material Adverse Effect if such facts are not otherwise excluded under this definition), (G) the announcement, pendency and consummation of any of the transactions contemplated hereby, including the Merger, or any Proceeding in respect of this Agreement or any of the transactions contemplated hereby, (H) the compliance with the covenants contained in this Agreement (other than with respect to any obligation of Parent or any Parent Subsidiary in accordance with Section 6.2) and any loss of or change in relationship with any customer, supplier, vendor or other business partner, or departure of any employee or officer, of Parent or of any Parent Subsidiary, (I) (1) any action taken by Parent or any Company Subsidiary at the Company’s written request or with the Company’s written consent or (2) the failure to take any action by Parent or any Parent Subsidiary if that action is prohibited by this Agreement to the extent that the Company fails to give its written consent after receipt of a request therefor and (J) the identity of, or any facts or circumstances relating to, the Company or its Affiliates, provided that the exceptions set forth in clauses (A), (B), (C), (D) and (E) shall not be excluded to the extent such effect has disproportionately affected Parent or any Parent Subsidiary when compared to other Persons operating in the same industries.

Parent Material Customers” has the meaning set forth in Section 5.20(a).

Parent Material Suppliers” has the meaning set forth in Section 5.20(b).

Parent Permitted Liens” means, collectively:

(a) to the extent waived prior to the Effective Time, preferential purchase rights, rights of first refusal, purchase options and similar rights granted pursuant to any contracts, including joint operating agreements, joint ownership agreements, stockholders agreements, organic documents and other similar agreements and documents;

(b) contractual or statutory mechanic’s, materialman’s, warehouseman’s, journeyman’s and carrier’s Liens and other similar Liens arising in the ordinary course of business for amounts not yet delinquent and Liens for Taxes or assessments that are not yet delinquent or that are being contested in good faith by appropriate proceedings and for which adequate reserves have been established in the consolidated financial statements of Parent in accordance with GAAP;

 

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(c) lease burdens payable to third parties that are deducted in the calculation of discounted present value in the Parent Reserve Report, including any royalty, overriding royalty, net profits interest, production payment, carried interest or reversionary working interest;

(d) (A) contractual or statutory Liens securing obligations for labor, services, materials and supplies furnished to mineral interests, or (B) Liens on pipeline or pipeline facilities that arise out of operation of Law, or (C) Liens arising in the ordinary course of business under operating agreements, joint venture agreements, partnership agreements, oil and gas leases, farm-out agreements, division orders, contracts for the sale, purchase, transportation, processing or exchange of oil, gas or other Hydrocarbons, unitization and pooling declarations and agreements, area of mutual interest agreements, development agreements, joint ownership arrangements and other agreements that are customary in the oil and gas business;

(e) Liens incurred in the ordinary course of business on cash or securities pledged in connection with workmen’s compensation, unemployment insurance or other forms of governmental insurance or benefits, or to secure performance of tenders, statutory obligations, leases and contracts entered into in the ordinary course of business (including lessee and operator obligations under statute, governmental regulations or instruments related to the ownership, exploration and production of oil, gas and minerals on state, federal or foreign lands or waters) or to secure obligations on surety or appeal bonds;

(f) pre-judgment Liens and judgment Liens in existence less than fifteen (15) days after the entry thereof or with respect to which execution has been stayed or the payment of which is covered in full (subject to a customary deductible) by insurance;

(g) rights reserved to or vested in any Governmental Entity to control or regulate any of Parent’s or the Parent Subsidiaries’ properties or assets in any manner;

(h) Liens existing on the date of this Agreement securing any Indebtedness;

(i) all easements, zoning restrictions, rights-of-way, servitudes, permits, surface leases and other similar rights in respect of surface operations, and easements for pipelines, streets, alleys, highways, telephone lines, power lines, railways and other easements and rights-of-way, on, over or in respect of any of the properties of Parent or of any Parent Subsidiary that are customarily granted in the oil and gas industry and do not (i) materially interfere with the operation, value or use of the property or asset affected or (ii) increase the burdens payable to third parties that are deducted in the calculation of discounted present value in the Parent Reserve Report, including any royalty, overriding royalty, net profits interest, production payment, carried interest or reversionary working interest;

(j) such title defects as the Company (in the case of title defects with respect to properties or assets of Parent or the Parent Subsidiaries) has expressly waived in writing; and

 

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(k) all other Liens, defects and irregularities not arising in connection with Indebtedness, and any encroachments, overlapping improvements, and other state of facts as would be shown on an accurate survey of any real property, that are not such as to materially interfere with the operation, value or use of the property or asset affected.

Parent Permits” has the meaning set forth in Section 5.17(b).

Parent Preferred Stock” has the meaning set forth in Section 5.2(a).

Parent PSU” means a restricted stock unit of Parent that is subject to the achievement of any performance- or market-based vesting conditions, whether granted pursuant to the Parent Stock Plans or otherwise.

Parent Reserve Report” has the meaning set forth in Section 5.14.

Parent RSU” means each restricted stock unit or similar right of Parent (other than a Parent PSU) payable in shares of Parent Common Stock or whose value is determined with reference to the value of shares of Parent Common Stock, whether granted pursuant to the Parent Stock Plans or otherwise.

Parent Severance Plan” means the Midstates Severance Benefit Plan for Non-Officers as in effect on the date hereof.

Parent Specified Contract” has the meaning set forth in Section 5.15(a).

Parent Stockholder Approval” has the meaning set forth in Section 5.5(c).

Parent Stockholders Meeting” means the special meeting of the holders of Parent Common Stock to approve the adoption of this Agreement and other related matters (including any postponement, adjournment or recess thereof).

Parent Stock Issuance” has the meaning set forth in the Recitals.

Parent Stock Option” means each stock option to acquire shares of Parent Common Stock from Parent, whether granted pursuant to the Parent Stock Plans or otherwise, that is outstanding immediately prior to the Effective Time.

Parent Stock Plans” means the Midstates 2016 Long Term Incentive Plan and the Midstates Directors Deferred Compensation Plan.

Parent Subsidiary” means each Subsidiary of Parent.

Parent Superior Proposal” means a bona fide written proposal by any Person or group (other than the Company or any of its Affiliates) to acquire, directly or indirectly, (a) businesses or assets of Parent or any Parent Subsidiary that generated 50% or more of Parent’s and the Parent Subsidiaries’ net revenue or earnings before interest, Taxes, depreciation and amortization for the preceding twelve months, respectively, or (b) more than 50% of the outstanding shares of Parent Common Stock, in each case whether by way of merger,

 

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amalgamation, share exchange, tender offer, exchange offer, recapitalization, consolidation, sale of assets or otherwise, that in the good faith business judgment of the Parent Board or any committee thereof, after consultation with its advisors and, would, if consummated in accordance with its terms, result in a transaction more favorable, in the opinion of the Parent Board or any committee thereof in the exercise of its good faith business judgment, from a financial point of view to the Parent’s stockholders than the transactions contemplated by this Agreement (taking into account the time likely to be required to consummate such proposal and any adjustments or revisions to the terms and conditions of the Merger and/or this Agreement offered by the Company in response to such proposal or otherwise).

Parent Tax Opinion” has the meaning set forth in Section 7.2(d).

Parent Termination Fee” has the meaning set forth in Section 8.4(i).

Parent Warrant Agreements” means those certain Warrant Agreements dated as of October 21, 2016 by and between Parent and American Stock Transfer & Trust Company, LLC.

Party means a party to this Agreement.

Payoff Indebtedness” means all Indebtedness of Parent and the Parent Subsidiaries other than Indebtedness set forth on Section 6.10 of the Parent Disclosure Letter.

Payoff Letters” has the meaning set forth in Section 7.2(c).

Person” means any individual, corporation, limited liability company, limited or general partnership, limited liability partnership, joint venture, association, joint stock company, trust, unincorporated organization, Governmental Entity, or any group composed of two or more of the foregoing.

PPACA” means the Patient Protection and Affordable Care Act, including the Health Care and Education Reconciliation Act of 2010, as amended and including any guidance issued thereunder.

Proceeding” has the meaning set forth in Section 4.15.

Release” means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping or disposing into the environment.

Replacement Plans has the meaning set forth in Section 6.13(b).

Representatives” means with respect to a Person, its directors, officers, employees, agents and representatives, including any investment banker, financial advisor, attorney, accountant or other advisor, agent or representative.

Rights” means, with respect to any Person, (a) options, warrants, preemptive rights, subscriptions, calls or other rights, convertible securities, exchangeable securities, agreements or commitments of any character obligating such person to issue, transfer or sell any equity interest of such person or any of its Subsidiaries or any securities convertible into or

 

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exchangeable for such equity interests, or (b) contractual obligations of such person (or the general partner of such person) to repurchase, redeem or otherwise acquire any equity interest in such person or any of its Subsidiaries or any such securities or agreements listed in clause (a) of this definition.

SEC” means the Securities and Exchange Commission.

Securities Act means the Securities Act of 1933, 15 U.S.C. § 77a et seq., as amended, and the rules and regulations promulgated thereunder.

Subsidiary means, with respect to a Person, any Person, whether incorporated or unincorporated, of which (a) at least 50% of the securities or ownership interests having by their terms ordinary voting power to elect a majority of the board of directors or other Persons performing similar functions, (b) a general partner interest or (c) a managing member interest, is directly or indirectly owned or controlled by such Person or by one or more of its respective Subsidiaries.

Surviving Entity” has the meaning set forth in Section 2.1.

Takeover Law means any “fair price,” “moratorium,” “control share acquisition,” “supermajority”, “affiliate transactions” or “business combination statute or regulation” or any other anti-takeover statute or similar statute enacted under state or federal law.

Tax Return means any return, report or similar filing (including any attached schedules, supplements and additional or supporting material) filed or required to be filed with any Governmental Entity with respect to Taxes, including any information return, claim for refund, amended return or declaration of estimated Taxes (and including any amendments with respect thereto).

Taxes means (i) any net income, gross income, gross receipts, sales, use, ad valorem, goods and services, capital, transfer, franchise, profits, license, withholding, payroll, employment, employer health, excise, estimated, severance, stamp, occupation, property or other taxes, escheat or unclaimed property obligations, custom duties, or other similar assessments, fees, levies or charges in the nature of a tax, together with any interest, penalties, additions to tax or additional amounts imposed by any Governmental Entity in connection with any of the foregoing and (ii) any liabilities in respect of an item described in clause (i) payable by reason of contract, assumption, transferee or successor liability, operation of Law, Treasury Regulations Section 1.1502-6 (or any analogous or similar provision of Law) or otherwise.

Termination Fee has the meaning set forth in Section 8.4(i).

Treasury Regulations” means the regulations promulgated under the Code, as such regulations may be amended from time to time.

Voting Company Debt” has the meaning set forth in Section 4.2(c).

Voting Parent Debt” has the meaning set forth in Section 5.2(c).

 

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Willful Breach has the meaning set forth in Section 8.3.

1.2 Interpretation. Unless expressly provided for elsewhere in this Agreement, this Agreement will be interpreted in accordance with the following provisions:

(a) the words “this Agreement,” “herein,” “hereby,” “hereunder,” “hereof,” and other equivalent words refer to this Agreement as an entirety and not solely to the particular portion, article, section, subsection or other subdivision of this Agreement in which any such word is used;

(b) examples are not to be construed to limit, expressly or by implication, the matter they illustrate;

(c) the word “including” and its derivatives means “including without limitation” and is a term of illustration and not of limitation;

(d) all definitions set forth herein are deemed applicable whether the words defined are used herein in the singular or in the plural and correlative forms of defined terms have corresponding meanings;

(e) a defined term has its defined meaning throughout this Agreement and each exhibit and schedule to this Agreement, regardless of whether it appears before or after the place where it is defined;

(f) all references to prices, values or monetary amounts refer to United States dollars;

(g) wherever used herein, any pronoun or pronouns will be deemed to include both the singular and plural and to cover all genders;

(h) this Agreement has been jointly prepared by the Parties, and this Agreement will not be construed against any Person as the principal draftsperson hereof or thereof and no consideration may be given to any fact or presumption that any Party had a greater or lesser hand in drafting this Agreement;

(i) the captions of the articles, sections or subsections appearing in this Agreement are inserted only as a matter of convenience and in no way define, limit, construe or describe the scope or extent of such section, or in any way affect this Agreement;

(j) any references herein to a particular Section, Article, Annex or Schedule means a Section or Article of, or an Annex or Schedule to, this Agreement unless otherwise expressly stated herein;

(k) the Annexes and Schedules attached to this Agreement are incorporated herein by reference and will be considered part of this Agreement;

 

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(l) unless otherwise specified herein, all accounting terms used herein will be interpreted, and all determinations with respect to accounting matters hereunder will be made, in accordance with GAAP, applied on a consistent basis;

(m) all references to days mean calendar days unless otherwise provided; and

(n) all references to time mean Houston, Texas time.

ARTICLE II

THE MERGER; EFFECTS OF THE MERGER

2.1 The Merger. Upon the terms and subject to the conditions of this Agreement, at the Effective Time, Merger Sub will be merged with and into the Company in accordance with the provisions of the DGCL. As a result of the Merger, the separate existence of Merger Sub shall cease and the Company shall continue its existence under the laws of the State of Delaware as the surviving entity and a direct, wholly owned subsidiary of Parent (in such capacity, the Company is sometimes referred to herein as the “Surviving Entity”).

2.2 Closing.

(a) The closing of the Merger (the “Closing”), shall take place by the exchange of documents by facsimile, PDF or other electronic means at 8:00 a.m., Houston, Texas time, on a date that is no later than the third (3rd) Business Day after the satisfaction or (to the extent permitted by applicable Law) waiver in accordance with this Agreement of the last of the conditions set forth in Article VII (other than any such conditions which by their nature cannot be satisfied until the Closing Date, which shall be required to be so satisfied or (to the extent permitted by applicable Law) waived in accordance with this Agreement on the Closing Date), unless another date and/or place is agreed to in writing by the authorized officers of the Company and Parent. The date on which the Closing actually takes place is referred to as the “Closing Date.”

(b) As soon as practicable on the Closing Date after the Closing, a certificate of merger prepared and executed in accordance with the relevant provisions of the DGCL (the “Certificate of Merger”) shall be filed with the Office of the Secretary of State of the State of Delaware. The Merger shall become effective upon the due filing of the Certificate of Merger with the Office of the Secretary of State of the State of Delaware, or at such later time as shall be agreed upon in writing by Parent and the Company and specified in the Certificate of Merger in accordance with the DGCL (such date and time being hereinafter referred to as the “Effective Time”).

2.3 Effect of the Merger. At the Effective Time, the Merger shall have the effects set forth in this Agreement, the Certificate of Merger and the applicable provisions of the DGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all of the property, rights, privileges, immunities, powers and franchises of each of the Company and Merger Sub shall vest in the Surviving Entity, and all debts, liabilities, obligations, restrictions, disabilities and duties of each of the Company and Merger Sub shall become the debts, liabilities, obligations, restrictions, disabilities and duties of the Surviving Entity, in each case, as provided under the DGCL and other applicable Law.

 

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2.4 Organizational Documents. At the Effective Time, (i) the certificate of incorporation of the Company as in effect immediately prior to the Effective Time shall be amended and restated to read in its entirety as set forth on Exhibit A hereto and, as so amended and restated, shall be the certificate of incorporation of the Surviving Entity, until thereafter amended in accordance with its terms, the terms of this Agreement and applicable Law, and (ii) the bylaws of the Company as in effect immediately prior to the Effective Time shall be the bylaws of the Surviving Entity, until thereafter amended in accordance with the terms of the certificate of incorporation of the Surviving Entity, such bylaws, the terms of this Agreement and applicable Law.

2.5 Directors and Officers of the Surviving Entity. The Parties shall take all necessary action such that from and after the Effective Time, the directors and officers of the Surviving Entity shall be those set forth on Schedule 2.5, and such directors and officers shall serve until their successors have been duly elected or appointed and qualified or until their death, resignation or removal in accordance with the Organizational Documents of the Surviving Entity. All current directors and officers of the Company shall be removed and/or terminated, as applicable, from their respective positions effective immediately upon the Closing.

2.6 Governance.

(a) Unless otherwise agreed to by Parent and the Company prior to the Closing, Parent shall take such action as may be necessary so that, immediately after the Effective Time, three members of the Parent Board, listed on Section 2.6(a) of the Parent Disclosure Letter and mutually agreed upon by Parent and the Company prior to the mailing of the Joint Proxy Statement/Prospectus, shall remain members of the Parent Board immediately following the Closing (the “Parent Designated Directors”). From the Closing until at least six (6) months following the Closing, Parent shall take such action as may be necessary to cause the Parent Designated Directors, or individuals designated by the Parent Designated Directors, to remain members of the Parent Board.

(b) Unless otherwise agreed to by Parent and the Company prior to the Closing, the Parent Board, immediately upon the Closing, shall consist of eight (8) members comprised of the persons set forth on Section 2.6(a) of the Parent Disclosure Letter. Parent shall cause each Person who is a member of the Parent Board prior to the Effective Time and is not listed on Section 2.6(a) of the Parent Disclosure Letter to execute and deliver a letter effectuating his or her resignation as a member of the Parent Board to be effective as of the Effective Time. Each Person who is an officer of Parent prior to the Effective Time and is listed on Section 2.6(b) of the Parent Disclosure letter shall be deemed to be terminated without cause effective as of the Effective Time. From the Closing until at least six (6) months following the Closing, Parent shall not take any action to increase the size of the Parent Board.

2.7 Post-Closing Merger. Immediately following the Effective Time, the Surviving Entity shall merge with and into LLC Sub, with LLC Sub continuing as the surviving entity in such merger as a direct, wholly owned subsidiary of Parent, pursuant to a merger agreement substantially in the form attached hereto as Exhibit B (the “LLC Sub Merger Agreement”). At the time of and immediately after the LLC Sub Merger, Parent shall own all of the issued and outstanding membership interests and other equity interests, if any, in LLC Sub and shall be the sole member of LLC Sub, and LLC Sub shall be treated as an entity disregarded as separate from Parent for U.S. federal income Tax purposes.

 

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2.8 Principal Offices; Name; Trading Symbol. Immediately following the Closing, the principal offices of Parent and its Subsidiaries (including the Surviving Entity) shall be located in Houston, Texas. Parent shall cause (i) the name of the combined company to be changed to “Amplify Energy Corp.” as of the Effective Time and (ii) the NYSE ticker symbol of the combined company to be changed to “AMPY” as of the Effective Time.

ARTICLE III

MERGER CONSIDERATION; EXCHANGE PROCEDURES

3.1 Effect of the Merger on Capital Stock. At the Effective Time, by virtue of the Merger and without any action on the part of Parent, Merger Sub, the Company or any holder of any securities of Parent, Merger Sub, or the Company:

(a) Capital Stock of Merger Sub. Each whole share of capital stock of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and shall represent one (1) validly issued, fully paid and nonassessable share of common stock, par value $0.01 per share, of the Surviving Entity, so that, after the Effective Time, Parent shall be the holder of all of the issued and outstanding shares of the Surviving Entity’s common stock.

(b) Capital Stock of the Company.

 

  (i)

Subject to the other provisions of this Article III, each share of Company Common Stock issued and outstanding immediately prior to the Effective Time (excluding any Appraisal Shares and any shares of Company Common Stock described in clause (iii) of this Section 3.1(b)), shall be converted automatically at the Effective Time into the right to receive 0.933 validly issued, fully paid and nonassessable shares of Parent Common Stock (the “Exchange Ratio”), and the shares of Parent Common Stock issuable per share of Company Common Stock pursuant to this Section 3.1(b), the “Merger Consideration”), subject to the provisions of this Article III.

 

  (ii)

All such shares of Company Common Stock, when so converted, shall cease to be outstanding and shall automatically be cancelled and cease to exist. Each holder of any such share of Company Common Stock that was outstanding immediately prior to the Effective Time shall cease to have any rights with respect thereto, except the right to receive the Merger Consideration upon the surrender of such shares of Company Common Stock in accordance with Section 3.3, including any amounts payable pursuant to Section 3.3(g).

 

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  (iii)

All shares of Company Common Stock issued and outstanding immediately prior to the Effective Time and held by the Company as treasury shares, by Parent or by any direct or indirect Subsidiary of the Company or Parent shall automatically be cancelled and cease to exist as of the Effective Time, and no consideration shall be delivered or deliverable in exchange therefor and no payment or distribution shall be made with respect thereto (collectively, the “Cancelled Shares”).

(c) Impact of Stock Splits, Etc. In the event of any change in the number of shares of Company Common Stock or Parent Common Stock, or securities convertible or exchangeable into or exercisable for shares of Company Common Stock or Parent Common Stock (including options to purchase Company Common Stock or Parent Common Stock or any dividend or distribution of securities convertible into shares of Company Common Stock or Parent Common Stock), issued and outstanding after the date of this Agreement and prior the Effective Time by reason of any stock split, reverse stock split, stock dividend, subdivision, reclassification, recapitalization, combination, exchange of shares or the like, the Exchange Ratio shall be equitably adjusted to provide to the holders of Company Common Stock the same economic effect as contemplated by this Agreement prior to such event and, as so adjusted, shall from and after the date of such event, be used to determine the Merger Consideration, subject to further adjustment in accordance with this Section 3.1(c). Nothing in this Section 3.1(c) shall be construed to permit any party to take any action that is otherwise prohibited or restricted by any other provision of this Agreement.

3.2 Treatment of Equity Compensation Awards.

(a) As soon as practicable following the date of this Agreement, the Company Board (or, if appropriate, any committee thereof administering the Company Stock Plan) shall adopt such resolutions and take all such other actions as may be required to effect the following:

 

  (i)

each Company Stock Option, whether vested or unvested, outstanding immediately prior to the Effective Time shall, at the Effective Time, automatically and without any action on the part of the holders thereof, be converted into a Parent Stock Option, subject to the same terms and conditions as were applicable under such Company Stock Option, to acquire the number of shares of Parent Common Stock (rounded down to the nearest whole share), determined by multiplying the number of shares of Company Common Stock subject to such Company Stock Option immediately prior to the Effective Time by the Exchange Ratio, at an exercise price per share of Parent Common Stock (rounded up to the nearest whole cent) equal to (A) the exercise price per share of such Company Stock Option divided by (B) the Exchange Ratio;

 

  (ii)

each Company TSU and Company Board RSU outstanding immediately prior to the Effective Time shall, at the Effective Time, become fully vested and be converted into a Parent RSU, subject to the same terms and conditions as were applicable under such

 

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  Company TSU or Company Board RSU immediately prior to the Effective Time, with respect to a number of shares of Parent Common Stock subject to such award determined by multiplying the number of shares subject to such Company TSU or Company Board RSU immediately prior to the Effective Time by the Exchange Ratio, rounded up to the nearest whole share; and

 

  (iii)

each Company PSU outstanding immediately prior to the Effective Time shall, at the Effective Time, become fully vested and be converted into a number of shares of Parent Common Stock, with performance-vesting conditions determined such that Company PSUs to be earned based on the Company stock price level attained over a performance period shall be considered earned at the level corresponding to the price measured based on the Company’s closing stock price on the last trading day prior to the Closing Date, in accordance with the terms and conditions of the applicable award agreement pursuant to which such Company PSU was granted, and by multiplying such number of shares of Company Common Stock subject to such Company PSU immediately prior to the Effective Time by the Exchange Ratio, rounded up to the nearest whole share.

(b) Company Actions. Prior to the Effective Time, the Company Board or a committee thereof with necessary authority shall take such actions (including adopting resolutions) as may be necessary or desirable to provide for or give effect to the transactions contemplated by this Section 3.2. Prior to any such adoption, the Company shall provide Parent with drafts of, and a reasonable opportunity to comment upon, all such resolutions.

(c) Parent Actions. Parent shall take such actions as are necessary for the grant of the Parent Stock Options, Parent RSUs and Parent PSUs pursuant to this Section 3.2, including the reservation, issuance and listing of Parent Common Stock as is necessary to effectuate the transactions contemplated by this Section 3.2. As soon as reasonably practicable following the Effective Time, Parent shall prepare and file with the SEC a registration statement on an appropriate form, or a post-effective amendment to a registration statement previously filed under the Securities Act, with respect to the shares of Parent Common Stock subject to such Parent Stock Options, Parent RSUs and Parent PSUs.

3.3 Payment for Securities; Exchange.

(a) Exchange Agent; Exchange Fund. Prior to the Effective Time, Parent and Merger Sub shall enter into an agreement with an entity reasonably acceptable to the Company to act as agent for the holders of Company Common Stock in connection with the Merger (the “Exchange Agent”) and to receive the Merger Consideration and all cash payable pursuant to this Article III. On the Closing Date and prior to the filing of the Certificate of Merger, Parent shall deposit, or cause to be deposited, with the Exchange Agent, for the sole benefit of the holders of shares of Company Common Stock issued and outstanding immediately prior to the Effective Time (other than holders of Cancelled Shares or Appraisal Shares, for exchange in accordance with this Article III through the Exchange Agent, (i) evidence of shares of Parent Common Stock issuable

 

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pursuant to Section 3.1(b) in book entry form equal to the aggregate Merger Consideration and (ii) cash in immediately available funds in an amount sufficient to pay any dividends or other distributions under Section 3.3(g), if applicable (such evidence of book-entry shares of Parent Common Stock and cash amounts, together with any dividends or other distributions with respect thereto, the “Exchange Fund”), provided that no such deposits shall be required to be made with respect to any Cancelled Shares or Appraisal Shares. The Exchange Agent shall, pursuant to irrevocable instructions from Parent, deliver the Merger Consideration contemplated to be issued in exchange for shares of Company Common Stock pursuant to this Agreement, together with any amounts payable pursuant to Section 3.3(g), if applicable, out of the Exchange Fund in accordance with this Agreement. Except as contemplated by this Section 3.3(a), the Exchange Fund shall not be used for any other purpose. The Surviving Entity shall pay all charges and expenses, including those of the Exchange Agent, in connection with the exchange of shares of Company Common Stock for the Merger Consideration. Any interest or other income resulting from investment of the Exchange Fund shall become part of the Exchange Fund.

(b) Payment Procedures.

 

  (i)

As soon as reasonably practicable after the Effective Time, but in no event more than three (3) Business Days after the Closing Date, Parent shall cause the Exchange Agent to deliver to each record holder (other than record holders of Cancelled Shares or Appraisal Shares), as of immediately prior to the Effective Time, of (A) an outstanding certificate or certificates that immediately prior to the Effective Time represented shares of Company Common Stock (the “Certificates”) or (B) shares of Company Common Stock that were represented by book-entry (“Book-Entry Shares”) a letter of transmittal (“Letter of Transmittal”) (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon proper delivery of the Certificates to the Exchange Agent or, in the case of Book-Entry Shares, upon adherence to the procedures set forth in the Letter of Transmittal, and which shall be in a customary form and agreed to by Parent and the Company prior to the Closing) and instructions for use in effecting the surrender of the Certificates or, in the case of Book-Entry Shares, the surrender of such shares, for payment of the Merger Consideration, together with any amounts payable pursuant to Section 3.3(g), if applicable.

 

  (ii)

Upon surrender to the Exchange Agent of a Certificate or Book-Entry Shares, delivery of a duly completed and validly executed Letter of Transmittal, and such other customary documents as may be reasonably required by the Exchange Agent, the holder of such Certificate or Book-Entry Shares shall be entitled to promptly receive in exchange therefor the Merger Consideration that such holder has the right to receive pursuant to this Article III, together with any amounts payable pursuant to Section 3.3(g), if applicable, for each share of Company Common Stock formerly represented by

 

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  such Certificate or Book-Entry Share, and all Certificates so surrendered shall be forthwith cancelled. No interest shall be paid or accrued for the benefit of holders of the Certificates or Book-Entry Shares on the Merger Consideration payable in respect of the Certificates or Book-Entry Shares. If payment of the Merger Consideration is to be made to a Person other than the record holder of such shares of Company Common Stock, it shall be a condition of payment that shares so surrendered shall be properly endorsed or shall be otherwise in proper form for transfer and that the Person requesting such payment shall have paid any transfer and other Taxes required by reason of the payment of the Merger Consideration to a Person other than the registered holder of such shares surrendered or shall have established to the satisfaction of the Surviving Entity that such Taxes either have been paid or are not applicable. Until surrendered as contemplated by this Section 3.3(b)(ii), each Certificate and each Book-Entry Share shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender the Merger Consideration payable in respect of such shares of Company Common Stock, together with any amounts payable to such holder pursuant to Section 3.3(g), if applicable.

(c) Termination Rights. All Merger Consideration, together with any amounts payable pursuant to Section 3.3(g), if applicable, paid upon the surrender of and in exchange for shares of Company Common Stock in accordance with the terms hereof shall be deemed to have been paid in full satisfaction of all rights pertaining to such Company Common Stock. At the Effective Time, the stock transfer books of the Surviving Entity shall be closed immediately, and there shall be no further registration of transfers on the stock transfer books of the Surviving Entity of the shares of Company Common Stock that were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates or Book-Entry Shares are presented to the Surviving Entity for any reason, they shall be canceled and exchanged for the Merger Consideration payable in respect of the shares of Company Common Stock previously represented by such Certificates or Book-Entry Shares (other than Certificates or Book-Entry Shares evidencing shares of Company Common Stock described in clause (iii) of Section 3.1(b)) without any interest thereon.

(d) Termination of Exchange Fund. Any portion of the Exchange Fund that remains undistributed to the former stockholders of the Company on the date that is 12 months after the Closing Date shall be delivered to Parent, upon Parent’s demand, and any former common stockholders of the Company who have not received the Merger Consideration, together with any amounts payable pursuant to Section 3.3(g), if applicable, in each case without interest thereon prior to such delivery, shall thereafter look only to Parent for payment of their claim for such amounts.

(e) No Liability. None of the Surviving Entity, Parent, Merger Sub or the Exchange Agent shall be liable to any holder of Company Common Stock for any amount of Merger Consideration properly delivered to a public official pursuant to any applicable abandoned property law, escheat law or similar Law. If any Certificate or Book-Entry Share has not been

 

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surrendered prior to the time that is immediately prior to the time at which Merger Consideration in respect of such Certificate or Book-Entry Share would otherwise escheat to or become the property of any Governmental Entity, any such shares, cash, dividends or distributions in respect of such Certificate or Book-Entry Share shall, to the extent permitted by applicable Law, become the property of Parent, free and clear of all claims or interest of any Person previously entitled thereto.

(f) Lost, Stolen, or Destroyed Certificates. If any Certificate (other than a Certificate evidencing shares of Company Common Stock described in clause (iii) of Section 3.1(b)) shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if reasonably required by Parent or the Surviving Entity, the posting by such Person of a bond in such reasonable amount as Parent or the Surviving Entity may direct as indemnity against any claim that may be made against it with respect to such Certificate, the Exchange Agent shall issue in exchange for such lost, stolen or destroyed Certificate the Merger Consideration payable in respect of the shares of Company Common Stock formerly represented by such Certificate, together with any amounts payable pursuant to Section 3.3(g), if applicable.

(g) Distributions with Respect to Parent Common Stock. No dividends or other distributions declared or made with respect to shares of Parent Common Stock with a record date after the Effective Time shall be paid to the holder of any unsurrendered Certificate or Book-Entry Share with respect to the whole shares of Parent Common Stock that such holder would be entitled to receive upon surrender of such Certificates or Book-Entry Shares until such holder shall surrender such Certificates or Book-Entry Shares in accordance with this Section 3.3. Following surrender of any such Certificates or Book-Entry Shares, there shall be paid to such holder of whole shares of Parent Common Stock issuable in exchange therefor, without interest, (i) promptly after the time of such surrender, the amount of dividends or other distributions with a record date after the Effective Time theretofore paid with respect to such whole shares of Parent Common Stock and (ii) at the appropriate payment date, the amount of dividends or other distributions with a record date after the Effective Time but prior to such surrender and a payment date subsequent to such surrender payable with respect to such whole shares of Parent Common Stock. For purposes of dividends or other distributions in respect of shares of Parent Common Stock, all whole shares of Parent Common Stock to be issued pursuant to the Merger shall be entitled to dividends pursuant to the immediately preceding sentence as if such whole shares of Parent Common Stock were issued and outstanding as of the Effective Time.

(h) Withholding. Notwithstanding anything in this Agreement to the contrary, Parent, Merger Sub, LLC Sub, the Company, the Surviving Entity and the Exchange Agent and each of their respective Affiliates shall be entitled to deduct or withhold (or cause to be deducted or withheld) from any amounts or securities otherwise payable pursuant to this Agreement such amounts or securities as are required to be deducted or withheld with respect to the making of such payments under applicable Law. To the extent that any such amounts or securities are so deducted or withheld and timely paid over to the appropriate Governmental Entity, such deducted or withheld amounts or securities shall be treated for all purposes of this Agreement as having been paid to the Person in respect of which such deduction or withholding was made.

 

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(i) Fractional Shares. No certificate or scrip or shares representing fractional Parent Common Stock shall be issued upon the surrender for exchange of Certificates or Book-Entry Shares, and such fractional share interests shall not entitle the owner thereof to vote or to any other rights of a shareholder of Parent. Notwithstanding any other provision of this Agreement, all fractional shares of Parent Common Stock that a holder of shares of Company Common Stock converted pursuant to the Merger would otherwise be entitled to receive as Merger Consideration (after taking into account all Certificates (or effective affidavits of loss in lieu thereof) and Book-Entry Shares) will be aggregated and then, if a fractional share of Parent Common Stock results from that aggregation, be rounded up to the nearest share of Parent Common Stock, as applicable.

3.4 Appraisal Rights. Notwithstanding anything in this Agreement to the contrary, shares of Company Common Stock issued and outstanding immediately prior to the Effective Time that are held by any holder who has not voted in favor of the Merger or consented thereto and properly exercises and perfects appraisal rights in respect of such shares pursuant to, and in accordance with, the provisions of Section 262 of the DGCL (the “Appraisal Shares”) shall not be converted into the right to receive the Merger Consideration payable pursuant to Section 3.1(b)(i), but instead at the Effective Time shall be entitled to only those rights as are granted by Section 262 of the DGCL, and at the Effective Time all Appraisal Shares shall no longer be outstanding and shall automatically be cancelled and cease to exist. If any such holder shall fail to perfect or otherwise shall waive, withdraw or lose the right to appraisal under Section 262 of the DGCL or a court of competent jurisdiction shall determine that such holder is not entitled to the relief provided by Section 262 of the DGCL, then such shares of Company Common Stock shall thereupon cease to constitute Appraisal Shares and shall thereafter be deemed to have been converted into and to have become, as of the Effective Time, the right to receive, without interest thereon, the Merger Consideration. The Company shall deliver prompt notice to Parent of any demands for appraisal of any shares of Company Common Stock and the Company shall provide Parent with the opportunity to participate in all negotiations and proceedings with respect to demands for appraisal under the DGCL.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Except as disclosed in the reports, schedules, forms, statements and other documents filed by the Company with or furnished by the Company to the SEC on or after December 31, 2017 (excluding any disclosures set forth in any such Filed Company SEC Documents in any risk factor section, any forward-looking disclosure, any quantitative or qualitative disclosures about market risk or any other statements that are non-specific, predictive or primarily cautionary in nature other than historical facts included therein) and publicly available one (1) Business Day prior to the date of this Agreement (the “Filed Company SEC Documents”) or as set forth in the disclosure letter delivered by the Company to Parent (the “Company Disclosure Letter”), the Company represents and warrants to Parent and Merger Sub as follows:

4.1 Organization, General Authority and Standing. Each of the Company and the Company Subsidiaries is duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is organized (in the case of good standing, to the extent the concept is recognized by such jurisdiction), except in the case of any Company Subsidiary where any such

 

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failure would not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect. Each of the Company and the Company Subsidiaries (a) has full power and authority necessary to enable it to conduct its business as presently conducted and (b) is duly qualified or licensed to do business in each jurisdiction where the nature of its business makes such qualification or licensing necessary, except where the failure to have such power and authority or to be so qualified or licensed would not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect. The Company is not in violation of its Organizational Documents in any material respect. True and complete copies of the Organizational Documents of the Company, as amended to the date of this Agreement, are included in the Filed Company SEC Documents.

4.2 Capital Structure.

(a) The authorized capital stock of the Company consists of 300,000,000 shares of Company Common Stock, par value $0.0001 per share (the “Company Common Stock”) and 45,000,000 shares of preferred stock, par value $0.0001 per share (the “Company Preferred Stock”). At the close of business on May 3, 2019 (the “Measurement Date”), (i) 22,212,290 shares of Company Common Stock were issued and outstanding, (ii) 356,155 shares of Company Common Stock were subject to the Company Stock Options, 567,039 shares of Company Common Stock were subject to Company TSUs, 384,250 shares of Company Common Stock were subject to the Company PSUs and 71,728 shares of Company Common Stock were subject to the Company Board RSUs, (iii) no shares of Company Common Stock were held by the Company in its treasury, (iv) 2,173,913 shares of Company Common Stock were subject to outstanding rights under the Company Warrant Agreement, (v) 1,499,387 additional shares of Company Common Stock were reserved for issuance pursuant to the Company Stock Plans, and (vi) no shares of the Company Preferred Stock were issued and outstanding. Except as set forth above, at the close of business on the Measurement Date, no shares of capital stock of the Company were issued, reserved for issuance or outstanding. From the Measurement Date to the date of this Agreement, there have been no issuances by the Company of shares of capital stock of the Company or options, warrants, convertible or exchangeable securities, stock-based performance units or other rights to acquire shares of capital stock of the Company or other rights that give the holder thereof any economic interest of a nature accruing to the holders of Company Common Stock, other than the rights under the Company Warrant Agreement or rights under the Company Stock Plans.

(b) All outstanding shares of Company Common Stock are, and all such shares that may be issued prior to the Effective Time will be when issued, duly authorized, validly issued, fully paid and nonassessable and not subject to preemptive rights.

(c) As of the date of this Agreement, there are no bonds, debentures, notes or other indebtedness of the Company having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which holders of Company Common Stock may vote (“Voting Company Debt”).

 

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(d) Except as set forth above and in the Company Warrant Agreement and the applicable Designated Stockholder Voting Agreements, as of the date of this Agreement, there are no options, warrants, convertible or exchangeable securities, stock-based performance units or other rights or Contracts to which the Company is a party or by which the Company is bound (i) obligating the Company to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock of, or any security convertible or exchangeable for any shares of capital stock of, the Company or any Voting Company Debt, (ii) obligating the Company to issue, grant or enter into any such option, warrant, security, unit, right or Contract or (iii) that give any Person the right to receive any economic interest of any nature accruing to the holders of Company Common Stock. As of the date of this Agreement, there are no outstanding contractual obligations of the Company to repurchase, redeem or otherwise acquire any shares of capital stock of the Company or options, warrants, convertible or exchangeable securities, stock-based performance units or other rights to acquire shares of capital stock of the Company, except for (A) the withholding of shares of Company Common Stock to satisfy Tax obligations with respect to awards granted pursuant to the Company Stock Plan and (B) the acquisition by the Company of Company Stock Options, Company TSUs, Company PSUs and Company Board RSUs in connection with the forfeiture of awards.

(e) All Company Stock Options, Company TSUs, Company PSUs and Company Board RSUs are evidenced by written award agreements, in each case substantially in the forms that have been made available to Parent, except that such agreements may differ from such forms with respect to the number of Company Stock Options, Company TSUs, Company PSUs and Company Board RSUs or shares of Company Common Stock covered thereby, the exercise price (if applicable), the vesting schedule, the expiration date applicable thereto and other similar terms.

4.3 Company Subsidiaries; Equity Interests.

(a) Section 4.3(a) of the Company Disclosure Letter sets forth, as of the date of this Agreement, the name and jurisdiction of each (i) Company Subsidiary and (ii) entity (other than the Company Subsidiaries) in which the Company or any Company Subsidiary owns any interest other than non-material interests. All of the outstanding interests of each Company Subsidiary have been validly issued, fully paid and nonassessable and, except as set forth on Section 4.3(a) of the Company Disclosure Letter, are owned by the Company, free and clear of all pledges, liens, charges, mortgages, encumbrances and security interests of any kind or nature whatsoever (collectively, “Liens”), other than Company Permitted Liens. As of the date of this Agreement, there are no options, warrants, rights, convertible or exchangeable securities, stock-based performance units or Contracts to which any Company Subsidiary is a party or by which any Company Subsidiary is bound obligating any Company Subsidiary to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock of, or any security convertible or exchangeable for any shares of capital stock of, any Company Subsidiary.

(b) Except as set forth on Section 4.3(a) of the Company Disclosure Letter, the Company does not own, directly or indirectly, any capital stock, membership interest, partnership interest, joint venture interest or other equity interest in any Person.

(c) The Company Subsidiaries are not in violation of their respective Organizational Documents in any material respect.

 

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4.4 Authority; Execution and Delivery; Enforceability.

(a) The execution and delivery by the Company of this Agreement and the consummation by the Company of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Company. The Company has duly executed and delivered this Agreement, and, assuming due authorization, execution and delivery by Parent and Merger Sub, this Agreement constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms (except insofar as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other Laws of general applicability relating to or affecting creditors’ rights, or by principles governing the availability of equitable remedies, whether considered in a Proceeding at law or in equity).

(b) The Company Board, at a meeting duly called and held, has (i) determined that this Agreement and the transactions contemplated hereby, including the Merger, are advisable, fair to, and in the best interests of, the Company and its stockholders, (ii) approved and declared advisable this Agreement and the transactions contemplated hereby, including the Merger, (iii) approved the execution and delivery by the Company of this Agreement, the performance by the Company of its covenants and agreements contained herein and the consummation of the transactions contemplated hereby, including the Merger, upon the terms and subject to the conditions contained herein, (iv) directed that this Agreement be submitted to the holders of Company Common Stock at the Company Stockholders Meeting to approve its adoption, and (v) resolved to make the Company Board Recommendation. None of the foregoing actions by the Company Board have been rescinded or modified in any way (unless such rescission or modification has been effected after the date hereof in accordance with the terms of Section 6.4).

(c) The only vote of holders of any class or series of capital stock of the Company necessary to approve this Agreement and to consummate the transactions contemplated hereby, including the Merger, is the adoption of this Agreement by the affirmative vote of the holders of at least a majority of the issued and outstanding shares of Company Common Stock entitled to vote thereon (the “Company Stockholder Approval”).

4.5 No Conflicts; Consents.

(a) The execution and delivery by the Company of this Agreement do not, and the consummation of the Merger and the other transactions contemplated hereby and compliance with the terms hereof will not, conflict with, or result in any violation or breach of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancelation or acceleration of any material obligation or to loss of a material benefit under, or result in the creation of any Lien upon any of the properties or assets of the Company or the Company Subsidiaries under, any provision of (i) the Company’s Organizational Documents or the comparable Organizational Documents of the Company Subsidiaries, (ii) any contract, lease, license, indenture, note, bond, agreement, concession, franchise or other binding instrument (other than Oil and Gas Leases) (a “Contract”) to which the Company or any Company Subsidiary is a party or by which any of their respective properties or assets is bound or (iii) subject to the filings and other matters referred to in Section 4.5(b), any Law applicable to the Company or the Company Subsidiaries or their respective properties or assets, other than, in the case of clauses (ii) and (iii) above, any such items that would not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect (it being agreed that for purposes of this Section 4.5(a), clause (G) of the definition of the term “Company Material Adverse Effect” shall not be excluded in determining whether a Company Material Adverse Effect has occurred or would reasonably be expected to occur).

 

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(b) No consent, approval, clearance, waiting period expiration or termination, license, permit, order or authorization (“Consent”) of, or registration, declaration, notice, notification, submission or filing with, any national, Federal, state, supranational, provincial, local or other government, domestic or foreign, or any court of competent jurisdiction, administrative agency or commission or other governmental authority or instrumentality, domestic or foreign (a “Governmental Entity”), is required to be obtained or made by or with respect to the Company or any Company Subsidiary in connection with the execution, delivery and performance of this Agreement or the consummation of the transactions contemplated hereby, other than (i) compliance with and filings under the HSR Act, (ii) the filing with the SEC of such registration statements, reports, schedules and statements, or the taking of other actions, under the Exchange Act and the Securities Act as may be required in connection with this Agreement, the Merger and the other transactions contemplated hereby, (iii) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware and appropriate documents with the relevant authorities of the other jurisdictions in which the Company is qualified to do business, (iv) such filings as may be required under the rules and regulations of the OTCQX and (v) such other items (A) required solely by reason of the participation of Parent (as opposed to any third Person) in the transactions contemplated hereby or (B) that the failure of which to obtain or make would not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect (it being agreed that for purposes of this Section 4.5(b), clause (G) of the definition of the term “Company Material Adverse Effect” shall not be excluded in determining whether a Company Material Adverse Effect has occurred or would reasonably be expected to occur).

4.6 SEC Documents; Undisclosed Liabilities.

(a) Since December 31, 2017, the Company has filed or furnished with the SEC all forms, registration statements, reports, schedules and statements required to be filed or furnished under the Exchange Act and the Securities Act. At the time filed (or, in the case of registration statements, solely on the dates of effectiveness) (except to the extent amended by a subsequently Filed Company SEC Document prior to the date of this Agreement, in which case as of the date of such amendment), each Filed Company SEC Document complied in all material respects with the applicable requirements of the Exchange Act and the Securities Act, as the case may be and 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 made, in light of the circumstances under which they were made, not misleading.

(b) The audited consolidated financial statements and the unaudited quarterly financial statements (including, in each case, the notes thereto) of the Company included in the Filed Company SEC Documents (i) complied as to form in all material respects with the published rules and regulations of the SEC with respect thereto, (ii) have been prepared in all material respects in accordance with generally accepted accounting principles in the United States (“GAAP”) (except, in the case of unaudited quarterly statements, as permitted by Form 10-Q of the SEC or other rules and regulations of the SEC) applied in all material respects on a consistent

 

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basis during the periods involved (except as may be indicated in the notes thereto) and (iii) fairly present in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods covered thereby (subject, in the case of unaudited quarterly statements, to normal year-end adjustments).

(c) Except as reflected or reserved against in the consolidated balance sheet of the Company, as of December 31, 2018, or the notes thereto, included in the Filed Company SEC Documents (such balance sheet and the notes thereto, the “Company Balance Sheet”), the Company and the Company Subsidiaries do not have any liability or obligation of any nature (whether accrued, absolute, contingent or otherwise) other than (i) liabilities or obligations incurred in the ordinary course of business since the date of the Company Balance Sheet (other than any liability for breaches of Contract or relating to any Proceeding), (ii) liabilities or obligations not required to be disclosed in a consolidated balance sheet of the Company or in the notes thereto prepared in accordance with GAAP and the rules and regulations of the SEC applicable thereto, (iii) liabilities or obligations incurred in connection with the transactions contemplated hereby and (iv) liabilities or obligations that would not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect.

(d) The Company has established and maintains disclosure controls and procedures and a system of internal control over financial reporting (as such terms are defined in Rule 13a-15 and Rule 15d-15 under the Exchange Act) as required by the Exchange Act. From the date of the filing of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 to the date of this Agreement, the Company’s auditors and the Company Board have not been advised of (i) any significant deficiencies or material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information or (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

(e) The Filed Company SEC Documents accurately summarize, in all material respects, the outstanding Derivative Transaction positions of the Company and the Company Subsidiaries, including Hydrocarbon and financial Derivative Transaction positions attributable to the production and marketing activities of the Company and the Company Subsidiaries, as of the dates reflected therein.

4.7 Information Supplied. Subject to the accuracy of the representations and warranties of Parent and Merger Sub set forth in Article V, none of the information supplied or to be supplied by or on behalf of the Company for inclusion or incorporation by reference in the Joint Proxy Statement/Prospectus and the Form S-4 (and any amendment or supplement thereto) will, at the time such document is filed with the SEC, at any time it is amended or supplemented or at the time it is first published, sent or given to the Company’s or Parent’s stockholders, contain any untrue statement of any material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they are made, not false or misleading. The Company shall use commercially reasonable efforts to ensure the Joint Proxy Statement/Prospectus and the Form S-4 (i) will comply as to form in all material respects with the requirements of the Exchange Act and (ii) will not contain any untrue

 

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statement of any material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they are made, not false or misleading, except that the Company will make no representation or warranty with respect to statements included or incorporated by reference therein based on information supplied by or on behalf of Parent or Merger Sub for inclusion or incorporation by reference therein.

4.8 Absence of Certain Changes or Events.

(a) Since the date of the Company Balance Sheet, there has not been any Company Material Adverse Effect.

(b) From the date of the Company Balance Sheet to the date of this Agreement, the Company and the Company Subsidiaries have conducted their businesses in the ordinary course in substantially the same manner as previously conducted, and during such period have not taken any action that would have required the consent of Parent under Section 6.1(c), Section 6.1(e), Section 6.1(j) or Section 6.1(m).

4.9 Taxes. Except as would not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect:

(a) Each of the Company and the Company Subsidiaries has (i) duly and timely filed, or caused to be duly and timely filed on its behalf, taking into account any extensions of time within which to file, all Tax Returns required to have been filed by it, and all such Tax Returns are true and complete, and (ii) duly and timely paid, or caused to be paid, all Taxes required to have been paid by it (whether or not shown as due on any Tax Return).

(b) Each of the Company and the Company Subsidiaries has duly and timely withheld and paid all Taxes required to be withheld and paid with respect to its employees, independent contractors, creditors, stockholders and other third parties.

(c) No written agreement or other written document waiving or extending, or having the effect of waiving or extending, the statute of limitations or the period of assessment or collection of any Taxes relating to the Company or any of the Company Subsidiaries has been filed or entered into with any Governmental Entity.

(d) The Company and the Company Subsidiaries have established adequate accruals and reserves, in accordance with GAAP, on the financial statements included in the Filed Company SEC Documents for all Taxes payable by the Company and the Company Subsidiaries for all taxable periods and portions thereof through the date of such financial statements.

(e) No deficiency for any Tax has been asserted or assessed by a Governmental Entity in writing against the Company or any Company Subsidiary that has not been paid, settled or withdrawn.

(f) No Proceeding, audit or controversy in respect of Taxes of the Company or any Company Subsidiary is presently in progress or has been threatened in writing.

 

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(g) Neither the Company nor any Company Subsidiary is a party to or is bound by any Tax sharing, allocation or indemnification agreement or arrangement (other than such agreements or arrangements (i) exclusively between the Company and any Company Subsidiary or (ii) the primary subject matter of which is not Tax).

(h) Within the past two (2) years, neither the Company nor any Company Subsidiary has been a “distributing corporation” or a “controlled corporation” within the meaning of Section 355(a)(1)(A) of the Code (or any analogous or similar provision of Law) in a distribution intended to qualify for tax-free treatment under Section 355 of the Code (or so much of Section 356 of the Code as relates to Section 355 of the Code) or otherwise as a part of a plan (or series of related transactions), within the meaning of Section 355(e) of the Code, that includes the Integrated Mergers.

(i) Neither the Company nor any Company Subsidiary has been a party to a transaction that, as of the date of this Agreement, constitutes a “listed transaction” for purposes of Section 6011 of the Code and applicable Treasury Regulations.

(j) Neither the Company nor any Company Subsidiary (i) is or has been a member of any affiliated, consolidated, unitary, combined or similar group (other than any such group the common parent of which is the Company) or (ii) has any liability for the Taxes of any Person (other than the Company or the Company Subsidiaries) by reason of contract, assumption, transferee or successor liability, operation of Law, Treasury Regulations Section 1.1502-6 (or any analogous or similar provision of Law) or otherwise.

(k) To the Knowledge of the Company, no claim has ever been made by a Governmental Entity in a jurisdiction where the Company or any Company Subsidiary does not file a Tax Return that such entity is or may be required to file such Tax Return or pay Taxes in such jurisdiction that would be covered by or the subject of such Tax Return.

(l) Neither the Company nor any Company Subsidiary will be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any: (i) change in method of accounting for a taxable period (or portion thereof) ending on or prior to the Closing Date and made prior to the Closing or use of an improper method of accounting prior to the Closing; (ii) any written agreement with any Governmental Entity executed on or prior to the Closing; (iii) installment sale or open transaction disposition made prior to the Closing; (iv) prepaid amount received prior to the Closing; or (v) intercompany transaction or excess loss accounts described in the Treasury Regulations promulgated under Section 1502 of the Code (or any analogous or similar provision of Law) that existed prior to the Closing.

(m) There are no Liens for Taxes upon any property of the Company or any of the Company Subsidiaries except for statutory Liens for current Taxes not yet due and payable.

(n) To the Knowledge of the Company, neither the Company nor any of the Company Subsidiaries has taken or agreed to take any action not contemplated by this Agreement and/or any related ancillary documents that would prevent the Integrated Mergers, taken together, from qualifying for the Intended Tax Treatment. Neither the Company nor any of the Company Subsidiaries is aware of any agreement, plan or other circumstance that would prevent or impede the Integrated Mergers, taken together, from qualifying for the Intended Tax Treatment.

 

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4.10 Labor Relations. There are no collective bargaining or other labor union, works council or other labor organization Contracts to which the Company or any Company Subsidiary is a party or by which the Company or any Company Subsidiary is bound. None of the employees of the Company or any Company Subsidiary is represented by any labor union, works council or any other labor organization with respect to his or her employment by the Company or any Company Subsidiary. Since December 31, 2017, neither the Company nor any Company Subsidiary has experienced (a) any pending, or, to the Knowledge of the Company, threatened strikes, work stoppages, slowdowns, lockouts or other material labor disputes or (b) to the Knowledge of the Company, pending or threatened union organization attempts concerning any employees of the Company or any Company Subsidiary. There is no unfair labor practice charge or complaint or other labor-related Proceeding pending, or, to the Knowledge of the Company, threatened against the Company or any Company Subsidiary before the National Labor Relations Board or any similar Governmental Entity that would reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect.

4.11 Employee Benefits.

(a) Section 4.11(a) of the Company Disclosure Letter sets forth a true and complete list, as of the date of this Agreement, of each material Company Benefit Plan. With respect to each material Company Benefit Plan, the Company has provided to Parent true and complete copies of the following (as applicable): (i) the plan document(s), (ii) the most recent summary plan description (and any summaries of material modifications thereto), (iii) the most recent IRS determination or opinion letter and (iv) copies of any material non-routine correspondence with any Governmental Entity.

(b) Each Company Benefit Plan has been established, maintained, funded and administered, in all material respects, in accordance with its terms and all applicable laws, including ERISA and the Code. With respect to each Company Benefit Plan, all contributions, premiums and other payments that are due have been timely paid, and any such amounts not yet due have been paid or properly accrued.

(c) Each Company Benefit Plan intended to be “qualified” within the meaning of Section 401(a) of the Code has received a favorable determination letter as to such qualification or from the Internal Revenue Service, and no event has occurred, either by reason of any action or failure to act, that could reasonably be expected to adversely affect such Company Benefit Plan’s qualified status.

(d) No Company Benefit Plan is, and neither the Company nor any Company Subsidiary sponsors, maintains, contributes to or is required to contribute to, or has any actual or contingent liability under: (i) any plan that is or was subject to Section 302 or Title IV of ERISA or Section 412 of the Code or (ii) a “multiemployer plan” (as defined in Section 3(37) of ERISA). Neither the Company nor any Company Subsidiary has any current or contingent liability by reason of at any time being treated as a single employer with any other Person under Section 414 of the Code.

 

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(e) Except as set forth on Section 4.11(e) of the Company Disclosure Letter, no Company Benefit Plan provides, and neither the Company nor any Company Subsidiary has any current or contingent liability in respect of post-retirement health or other welfare benefits for retired, former or current employees, officers, directors, or other individual service providers (or any beneficiary thereof) of the Company or the Company Subsidiaries other than for continuation coverage required under COBRA for which the covered Person pays the full cost of coverage. Neither the Company nor any Company Subsidiary has incurred, or is reasonably expected to incur or to be subject to, any material Tax, penalty or other liability that may be imposed under PPACA, including under Sections 4980D, 4980H, 6721 or 6722 of the Code.

(f) No action, suit, claim (other than routine claims for benefits), proceeding, audit, hearing or investigation is pending or, to the Company’s Knowledge, threatened with respect to any Company Benefit Plan. There have been no “prohibited transactions” within the meaning of Section 4975 of the Code or Sections 406 or 407 of ERISA and not otherwise exempt under Section 408 of ERISA and no breaches of fiduciary duty (as determined under ERISA) with respect to any Company Benefit Plan, except as could not reasonably be expected to result in a material liability to the Company or a Company Subsidiary.

(g) No amount that could be received (whether in cash or property or the vesting of property), as a result of the consummation of the transactions contemplated by this Agreement, by any employee, officer or director of the Company or any of its Subsidiaries who is a “disqualified individual” (as such term is defined in proposed Treasury Regulations Section 1.280G-1) under any Company Benefit Plan could be characterized as an “excess parachute payment” (as defined in Section 280G(b)(1) of the Code).

(h) The Company does not have any obligation to “gross-up” or otherwise indemnify any individual for the imposition of the excise tax under Section 4999 of the Code or under Section 409A of the Code.

(i) None of the execution and delivery of this Agreement or the consummation of the Merger or any other transaction contemplated hereby (alone or in conjunction with any other event, including any termination of employment on or following the Effective Time) will, after giving effect to Section 3.2 of this Agreement, (i) entitle any current or former director, officer, employee, contractor, consultant or other service provider of the Company or any Company Subsidiary to any material increase in compensation or benefits, (ii) accelerate the time of payment or vesting, or trigger any payment or funding, of any compensation, equity award or other benefits to any current or former director, officer, employee, contractor, consultant or other service provider of the Company or any Company Subsidiary or trigger any other material obligation under any Company Benefit Plan or (iii) entitle any current or former employee, consultant, director or other service provider of the Company or any Company Subsidiary to a bonus, severance or change in control payment.

 

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4.12 Title to Properties; Oil and Gas Properties.

(a) The Company and the Company Subsidiaries have good and defensible title to all real and personal properties that are material to the business of the Company and the Company Subsidiaries, including Oil and Gas Properties described in the Company Reserve Report, in each case free and clear of all Liens and defects and imperfections of title except (i) such as do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company and the Company Subsidiaries, (ii) for Company Permitted Liens or (iii) such as would not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect. For purposes of the foregoing sentence, “good and defensible title” means title that is free from reasonable doubt that a prudent person engaged in the business of purchasing and owning, developing and operating producing or non-producing Oil and Gas Properties in the geographical areas in which they are located, with knowledge of all of the facts and their legal bearing, would be willing to accept, acting reasonably.

(b) As of the date of this Agreement, to the Knowledge of the Company, there is no default under any Oil and Gas Lease by the Company or any Company Subsidiary or any other party thereto, and no event has occurred that with the lapse of time or the giving of notice or both would constitute a default thereunder by the Company or any Company Subsidiary or any other party thereto, in each case except as would not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect.

(c) Except as would not, individually or in the aggregate, be reasonably expected to have a Company Material Adverse Effect, all royalties, overriding royalties and similar burdens on Hydrocarbon production from the Company’s Oil and Gas Properties payable by the Company or any Company Subsidiary to third parties have been properly and timely paid or held in suspense funds.

(d) As of the date of this Agreement, to the Knowledge of the Company, there is no outstanding authorization for expenditure or similar request or invoice for funding or participation under any agreement or contract which is binding on the Company, any Company Subsidiary or any Oil and Gas Property and which the Company reasonably anticipates will individually require expenditures by the Company or any Company Subsidiary in excess of $1,000,000.

4.13 Reserve Report. The factual, non-interpretive data relating to the Oil and Gas Properties of the Company on which the reserve report prepared by the Company and audited by its independent reserve engineers referred to in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (the “Company Reserve Report”) was accurate in all material respects at the time of preparation of the Company Reserve Report. With respect to the proved reserves reflected in the Company Reserve Report, the Company Reserve Report conforms in all material respects to the guidelines with respect thereto of the SEC. Except for changes (including changes in Hydrocarbon commodity prices) generally affecting the oil and gas industry and normal depletion by production, there has been no change in respect of the matters addressed in the Company Reserve Report that would reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect.

 

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4.14 Material Contracts.

(a) Except for this Agreement and the Contracts disclosed in the Filed Company SEC Documents, Section 4.14(a) of the Company Disclosure Letter sets forth a true and complete list, as of the date of this Agreement, and the Company has made available to Parent true and complete copies, of:

 

  (i)

each Contract that would be required to be filed by the Company as a “material contract” pursuant to Item 601(b)(10) of Regulation S-K under the Securities Act;

 

  (ii)

each Contract to which the Company or any Company Subsidiary is a party that (A) restricts the ability of the Company or any Company Subsidiary to compete in any business or with any Person in any geographical area, (B) requires the Company or any Company Subsidiary to conduct any business on a “most favored nations” basis with any third party or (C) provides for “exclusivity” or any similar requirement in favor of any third party, except in the case of each of clauses (A), (B) and (C) for such restrictions, requirements and provisions that are not material to the Company and the Company Subsidiaries, taken as a whole;

 

  (iii)

each Contract under which the Company or any Company Subsidiary licenses Intellectual Property from or to any third party (other than (A) generally commercially available, off-the-shelf software programs and (B) non-exclusive licenses in the ordinary course of business), except for such licenses and sublicenses that are not material to the Company and the Company Subsidiaries, taken as a whole;

 

  (iv)

any Contract pursuant to which the Company or any Company Subsidiary will acquire any material ownership interest in any other Person or other business enterprise other than any Company Subsidiary, in each case, with a value greater than $1,000,000 after the date of this Agreement;

 

  (v)

each Contract that constitutes a commitment relating to indebtedness for borrowed money or the deferred purchase price of property by the Company or any Company Subsidiary (whether incurred, assumed, guaranteed or secured by any asset) in excess of $1,000,000, other than agreements solely between or among the Company and any Company Subsidiaries;

 

  (vi)

each Contract for a Derivative Transaction;

 

  (vii)

each Contract to which the Company or any Company Subsidiary is a party that provides for annual payments, receipts or expenditures in excess of $1,000,000;

 

  (viii)

any Contract that is a settlement, conciliation or similar agreement with any Governmental Authority or pursuant to which the Company or any Company Subsidiary will have any material obligations after the date of this Agreement;

 

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  (ix)

each collective bargaining agreement or other Contract with any labor union, works council, or other labor organization respecting employees of the Company or any Company Subsidiary;

 

  (x)

each Contract with or binding upon the Company or any Company Subsidiary or any of their respective properties or assets that is of the type that would be required to be disclosed under Item 404 of Regulation S-K under the Securities Act; and

 

  (xi)

any Contract to which the Company or any Company Subsidiary is a party that is for the employment or engagement of any person on a full-time or part-time basis, including directors, employees and independent contractors and employees at annual compensation in excess of $1,000,000.

Each such Contract described in clauses (i) through (xi) above is referred to herein as a “Company Specified Contract.”

(b) As of the date of this Agreement, each of the Company Specified Contracts is valid, binding and enforceable on the Company or a Company Subsidiary, as the case may be, and, to the Knowledge of the Company, each other party thereto, and is in full force and effect except (i) for such failures to be valid, binding or enforceable or to be in full force and effect as would not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect and (ii) insofar as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other Laws of general applicability relating to or affecting creditors’ rights, or by principles governing the availability of equitable remedies, whether considered in a Proceeding at law or in equity. As of the date of this Agreement, to the Knowledge of the Company, there is no default under any Company Specified Contract by the Company or any Company Subsidiary or any other party thereto, and no event has occurred that with the lapse of time or the giving of notice or both would constitute a default thereunder by the Company or any Company Subsidiary or any other party thereto, in each case except as would not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect.

4.15 Litigation. As of the date of this Agreement, there is no claim, suit, action, investigation or proceeding (each, a “Proceeding”) pending or, to the Knowledge of the Company, threatened against the Company or any Company Subsidiary that would reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect, nor is there any Judgment outstanding against the Company or any Company Subsidiary that would reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect.

 

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4.16 Compliance with Laws.

(a) Except with respect to Tax matters (which are provided for exclusively in Section 4.9 and Section 4.11) and environmental compliance matters (which are provided for exclusively in Section 4.17) and as set forth on Section 4.16(a) of the Company Disclosure Letter, each of the Company and the Company Subsidiaries is and for the last three (3) years has been, in compliance with all, and is not in default under or in violation of any, applicable Laws, other than any noncompliance, default or violation that would not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect. Neither the Company nor any Company Subsidiary has received any written communication since December 31, 2018 and prior to the date of this Agreement from a Governmental Entity that alleges that the Company or any Company Subsidiary is not in compliance with or is in default or violation of any applicable Law, except where such non-compliance, default or violation would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.

(b) The Company and the Company Subsidiaries are in possession of all franchises, tariffs, grants, authorizations, licenses, permits, easements, variances, exemptions, consents, certificates, approvals and orders of any Governmental Entity necessary under applicable Law to own, lease and operate their properties and to lawfully carry on their businesses as they are being conducted as of the date of this Agreement (collectively, the “Company Permits”), except where the failure to be in possession of such Company Permits would not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect. All Company Permits are in full force and effect, except where the failure to be in full force and effect would not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect. No suspension or cancellation of any of the Company Permits is, to the Knowledge of the Company, pending or threatened, except where such suspension or cancellation would not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect.

4.17 Environmental Matters. Except for matters that would not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect:

(a) The Company and the Company Subsidiaries are in compliance with all Environmental Laws, including obtaining, maintaining and complying with all Environmental Permits required for the operation of their businesses as they are being conducted as of the date of this Agreement;

(b) Neither the Company nor any Company Subsidiary has received any written notice since December 31, 2018 (or earlier if pending or unresolved) and prior to the date of this Agreement from any Governmental Entity or other Person alleging the violation by the Company or any Company Subsidiary of or liability of the Company or any Company Subsidiary under any Environmental Law or any Environmental Permit;

(c) As of the date of this Agreement, there are no Proceedings or Judgments pending or, to the Knowledge of the Company, threatened against the Company or any Company Subsidiary relating to any Environmental Law or any Environmental Permit;

(d) To the Knowledge of the Company, neither the Company nor any Company Subsidiary has treated, stored, disposed of, arranged for the disposal of, transported, handled, Released or exposed any Person to any Hazardous Material in a manner that has given rise to any current, or that is reasonably expected to give rise to any future, liabilities or obligations of the Company or any Company Subsidiary pursuant to Environmental Laws; and

 

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(e) Neither the Company nor any Company Subsidiary has assumed, become subject to or provided an indemnity with respect to any liability of any other Person relating to Environmental Laws or Hazardous Materials.

4.18 Indebtedness. Section 4.18 of the Company Disclosure Letter contains a true and complete list of all Indebtedness of the Company and the Company Subsidiaries as of the date hereof and the Company has provided Parent with true and complete copies of all material agreements evidencing such Indebtedness.

4.19 Material Customers and Material Suppliers.

(a) Section 4.19(a)(i) of the Company Disclosure Letter sets forth the top ten (10) customers of the Company and the Company Subsidiaries collectively (based on the dollar amount of revenue from such customers) for the 12-month period ended December 31, 2018 (the “Company Material Customers”). Except as set forth on Section 4.19(a)(ii) of the Company Disclosure Letter, no such Company Material Customer has, during the last 12 months, cancelled or terminated any of its Contracts or arrangements or materially reduced its business in the aggregate, with the Company or any Company Subsidiary or, to the Knowledge of the Company, made any threat to the Company or any Company Subsidiary to cancel or otherwise terminate any of its Contracts or arrangements or materially reduce its business in the aggregate with the Company or any Company Subsidiary (other than changes to pricing and quantity of products and services which are currently permitted by the arrangements with such Company Material Customer).

(b) Section 4.19(b)(i) of the Company Disclosure Letter sets forth the top ten (10) suppliers of the Company and the Company Subsidiaries collectively (based on the dollar amount of purchases from such suppliers) for the 12-month period ended December 31, 2018 (the “Company Material Suppliers”). Except as set forth on Section 4.19(b)(ii) of the Company Disclosure Letter, no such Company Material Supplier has, during the last 12 months, cancelled or terminated any of its contracts or arrangements, or materially reduced its business in the aggregate, with the Company or any Company Subsidiary, or, to the Knowledge of the Company, made any threat to the Company or any Company Subsidiary to cancel or otherwise terminate any of its contracts or arrangements with, or materially reduce its supply to, the Company and the Company Subsidiaries.

4.20 Intellectual Property. The Company and the Company Subsidiaries own or have the right to use all Intellectual Property that is used in and necessary for the operation of the businesses of the Company and the Company Subsidiaries as presently conducted (collectively, the “Company Intellectual Property”) free and clear of all Liens except for Company Permitted Liens, except where the failure to own or have the right to use such Intellectual Property would not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect. To the Knowledge of the Company and the Company Subsidiaries, the use of the Company Intellectual Property by the Company and the Company Subsidiaries in the operation of the business of the Company and the Company Subsidiaries as presently conducted is not infringing upon or misappropriating any Intellectual Property of any other Person, except for such matters that would not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect.

 

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4.21 Insurance. The Company and the Company Subsidiaries maintain, or are entitled to the benefits of, insurance in such amounts and against such risks substantially as the Company believes to be customary for the industries in which the Company and the Company Subsidiaries operate. Except as would not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect, (a) all material insurance policies maintained by or on behalf of the Company or the Company Subsidiaries as of the date of this Agreement are in full force and effect, and all premiums due on such policies have been paid and (b) the Company and the Company Subsidiaries are in compliance with the terms and provisions of all insurance policies maintained by or on behalf of the Company or the Company Subsidiaries as of the date of this Agreement, and neither the Company nor any Company Subsidiary is in breach or default under, or has taken any action that would permit termination or material modification of, any material insurance policies.

4.22 Regulatory Matters. Neither the Company nor any Company Subsidiary is (a) an “investment company” or a company “controlled” by an “investment company” within the meaning of the U.S. Investment Company Act of 1940, as amended, and the rules and regulations promulgated thereunder or (b) a “holding company,” a “subsidiary company” of a “holding company,” an Affiliate of a “holding company,” a “public utility” or a “public-utility company,” as each such term is defined in the U.S. Public Utility Holding Company Act of 2005. Except for certain facilities, as described on Section 4.22 of the Company Disclosure Letter, used in the transport of Hydrocarbons which are subject to the Interstate Commerce Act and the U.S. Federal Energy Regulatory Commission, and which are in substantial compliance with the applicable Laws, rules and regulations issued by any Governmental Entity, neither the Company nor any Company Subsidiary owns or holds any natural gas, liquefied natural gas, natural gas liquid and other pipelines, lateral lines, pumps, pump stations, storage facilities, terminals, processing plants and other related operations, assets, machinery or equipment that are subject to (x) regulation by the U.S. Federal Energy Regulatory Commission under the Natural Gas Act of 1938, as amended, or (y) rate regulation or comprehensive nondiscriminatory access regulation under the Laws of any state or other local jurisdiction.

4.23 Brokers and Other Advisors. No broker, investment banker, financial advisor or other Person, other than UBS Securities LLC, the fees and expenses of which will be paid by the Company, is entitled to any broker’s, finder’s, financial advisor’s or other similar fee or commission in connection with this Agreement, the Merger and the other transactions contemplated hereby based upon arrangements made by or on behalf of the Company or any of its Affiliates.

4.24 Opinion of Financial Advisor. The Company has received the opinion of UBS Securities LLC, dated the date of this Agreement, to the effect that, as of such date and based upon and subject to the factors and assumptions set forth therein, the Exchange Ratio is fair from a financial point of view to the holders of Company Common Stock (other than the holders of Cancelled Shares and Appraisal Shares), a signed copy of which opinion will be made available to Parent for informational purposes only on a non-reliance basis promptly following the date of this Agreement.

 

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4.25 Related Party Transactions. Except as disclosed in the Filed Company SEC Documents, neither the Company nor any Company Subsidiary are party to any transaction or arrangement under which any (a) present or former executive officer or director of the Company or any Company Subsidiary, (b) beneficial owner (within the meaning of Section 13(d) of the Exchange Act) of 5% or more of any class of equity of the Company or (c) Affiliate, “associate” or member of the “immediate family” (as such terms are respectively defined in Rules 12b-2 and 16a-1 of the Exchange Act) of any of the foregoing is a party to any actual or proposed loan, lease or other contract with or binding upon the Company or any Company Subsidiary or owns or has any interest in any of their respective properties or assets, in each case as would be required to be disclosed by the Company pursuant to Item 404 of Regulation S-K promulgated under the Exchange Act.

4.26 Company Credit Agreement Amendment. The Company Credit Agreement Amendment will become effective upon the execution and delivery of this Agreement, and the Company has made available to Parent a true and complete copy thereof.

4.27 No Other Representations or Warranties. Except for the representations and warranties set forth in this Article IV, none of the Company, the Company Subsidiaries or any other Person makes or has made any express or implied representation or warranty with respect to the Company or the Company Subsidiaries or with respect to any other information provided to Parent or Merger Sub in connection with the Merger or the other transactions contemplated hereby, and each of Parent and Merger Sub, on its own behalf and on behalf of their respective Affiliates and its and their respective Representatives, disclaims reliance on any representations or warranties or other information provided to them by the Company or its Subsidiaries or their respective Affiliates or Representatives or any other Person except for the representations and warranties expressly set forth in this Article IV. Without limiting the generality of the foregoing, each of Parent and Merger Sub, on its own behalf and on behalf of its Affiliates and its and their respective Affiliates and Representatives, acknowledges and agrees that none of the Company, the Company Subsidiaries or any other Person will have or be subject to any liability or other obligation to Parent, Merger Sub or any other Person resulting from the distribution to Parent or Merger Sub (including their respective Affiliates and Representatives), or Parent’s or Merger Sub’s (or such Affiliates’ or Representatives’) use, of any such information, including with respect to (i) the Company or any Company Subsidiary or any of their respective businesses, assets, employees, permits, liabilities, operations, prospectus or condition (financial or otherwise) or (ii) any opinion, projection, forecast, statement, budget, estimate, advice or other similar information (including with respect to the future revenues, earnings, results or operations (or any component thereof), cash flows, financial condition (or any component thereof) or the future business and operations of the Company and the Company Subsidiaries, as well as any other business plan and cost-related plan information of the Company and/or the Company Subsidiaries) made, communicated or furnished (orally or in writing) or to be made, communicated or furnished (orally or in writing) to Parent, Merger Sub or any of their respective Affiliates or Representatives, in each case, whether made by the Company, the Company Subsidiaries or any of their respective Affiliates, Representatives or equity holders or any other Person.

 

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ARTICLE V

REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

Except as disclosed in the reports, schedules, forms, statements and other documents filed by Parent with or furnished by Parent to the SEC on or after December 31, 2017 (excluding any disclosures set forth in any such Filed Parent SEC Documents in any risk factor section, any forward-looking disclosure, any quantitative or qualitative disclosures about market risk or any other statements that are non-specific, predictive or primarily cautionary in nature other than historical facts included therein) and publicly available one (1) Business Day prior to the date of this Agreement (the “Filed Parent SEC Documents”) or as set forth in the disclosure letter delivered by Parent to the Company (the “Parent Disclosure Letter”), Parent and Merger Sub represent and warrant to the Company as follows:

5.1 Organization, General Authority and Standing. Each of Parent and the Parent Subsidiaries is duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is organized (in the case of good standing, to the extent the concept is recognized by such jurisdiction), except in the case of any Parent Subsidiary where any such failure would not reasonably be expected, individually or in the aggregate, to have a Parent Material Adverse Effect. Each of Parent and the Parent Subsidiaries (a) has full power and authority necessary to enable it to conduct its business as presently conducted and (b) is duly qualified or licensed to do business in each jurisdiction where the nature of its business makes such qualification or licensing necessary, except, in the case of any Parent Subsidiary, where the failure to have such power and authority or to be so qualified or licensed would not reasonably be expected, individually or in the aggregate, to have a Parent Material Adverse Effect. Parent is not in violation of its Organizational Documents in any material respect. True and complete copies of the Organizational Documents of the Parent, as amended to the date of this Agreement, are included in the Filed Parent SEC Documents.

5.2 Capital Structure.

(a) The authorized capital stock of Parent consists of 250,000,000 shares of Parent Common Stock, par value $0.01 per share (the “Parent Common Stock”) and 50,000,000 shares of preferred stock, par value $0.01 per share (the “Parent Preferred Stock”). At the close of business on the Measurement Date, (i) 20,415,005 shares of Parent Common Stock were issued and outstanding, (ii) 206,263 shares of Parent Common Stock were subject to Parent Stock Options, 343,230 shares of Parent Common Stock were subject to Parent RSUs and 568,737 shares of Parent Common Stock were subject to Parent PSUs, (iii) 205,343 shares of Parent Common Stock were held by Parent in its treasury, (iv) 6,979,609 shares of Parent Common Stock were subject to outstanding rights under the Parent Warrant Agreements, (v) 1,667,080 additional shares of Parent Common Stock were reserved for issuance pursuant to Parent Stock Plan, and (vi) 0 shares of Parent Preferred Stock were issued and outstanding. Except as set forth above, at the close of business on the Measurement Date, no shares of capital stock of Parent were issued, reserved for issuance or outstanding. From the Measurement Date to the date of this Agreement, there have been no issuances by Parent of shares of capital stock of Parent or options, warrants, convertible or exchangeable securities, stock-based performance units or other rights to acquire shares of capital stock of Parent or other rights that give the holder thereof any economic interest of a nature accruing to the holders of Parent Common Stock, other than the rights under the Parent Warrant Agreements or rights under the Parent Stock Plan.

(b) All outstanding shares of Parent Common Stock are, and all such shares that may be issued prior to the Effective Time will be when issued, duly authorized, validly issued, fully paid and nonassessable and not subject to preemptive rights.

 

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(c) As of the date of this Agreement, there are no bonds, debentures, notes or other indebtedness of Parent having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which holders of Parent Common Stock may vote (“Voting Parent Debt”).

(d) Except as set forth above and in the applicable Designated Stockholder Voting Agreements, as of the date of this Agreement, there are no options, warrants, convertible or exchangeable securities, stock-based performance units or other rights or Contracts to which Parent is a party or by which Parent is bound (i) obligating Parent to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock of, or any security convertible or exchangeable for any shares of capital stock of, Parent or any Voting Parent Debt, (ii) obligating Parent to issue, grant or enter into any such option, warrant, security, unit, right or Contract or (iii) that give any Person the right to receive any economic interest of any nature accruing to the holders of Parent Common Stock. As of the date of this Agreement, there are no outstanding contractual obligations of Parent to repurchase, redeem or otherwise acquire any shares of capital stock of Parent or options, warrants, convertible or exchangeable securities, stock-based performance units or other rights to acquire shares of capital stock of Parent, except for (A) the withholding of shares of Parent Common Stock to satisfy Tax obligations with respect to awards granted pursuant to the Parent Stock Plans and (B) the acquisition by Parent of Parent Stock Options, Parent RSUs and Parent PSUs in connection with the forfeiture of awards.

(e) All Parent Stock Options, Parent RSUs and Parent PSUs are evidenced by written award agreements, in each case substantially in the forms that have been made available to the Company, except that such agreements may differ from such forms with respect to the number of Parent Stock Options, Parent RSUs and Parent PSUs or shares of Parent Common Stock covered thereby, the exercise price (if applicable), the vesting schedule, the expiration date applicable thereto and other similar terms.

5.3 Parent Subsidiaries; Equity Interests.

(a) Section 5.3(a) of the Parent Disclosure Letter sets forth, as of the date of this Agreement, the name and jurisdiction of each (i) Parent Subsidiary and (ii) entity (other than the Parent Subsidiaries) in which Parent or any Parent Subsidiary owns any interest other than non-material interests. All of the outstanding interests of each Parent Subsidiary have been validly issued, fully paid and nonassessable and, except as set forth on Section 5.3(a) of the Parent Disclosure Letter, are owned by Parent, free and clear of all Liens, other than Parent Permitted Liens. As of the date of this Agreement, there are no options, warrants, rights, convertible or exchangeable securities, stock-based performance units or Contracts to which any Parent Subsidiary is a party or by which any Parent Subsidiary is bound obligating any Parent Subsidiary to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock of, or any security convertible or exchangeable for any shares of capital stock of, any Parent Subsidiary.

(b) Except as set forth on Section 5.3(a) of the Parent Disclosure Letter, Parent does not own, directly or indirectly, any capital stock, membership interest, partnership interest, joint venture interest or other equity interest in any Person.

 

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(c) The Parent Subsidiaries are not in violation of their respective Organizational Documents in any material respect.

5.4 Capitalization of Merger Sub; Business Conduct. All of the issued and outstanding equity interests of Merger Sub are, and immediately prior to the Effective Time will be, owned by Parent. Merger Sub was incorporated on May 2, 2019. Since its inception, Merger Sub has not engaged in any activity, other than such actions in connection with (a) its organization and (b) the preparation, negotiation and execution of this Agreement and the transactions contemplated hereby. Merger Sub has no operations, has not generated any revenues and has no liabilities other than those incurred in connection with the foregoing and in association with the Merger as provided in this Agreement.

5.5 Authority; Execution and Delivery; Enforceability.

(a) The execution and delivery by Parent and Merger Sub of this Agreement and the consummation by Parent and Merger Sub of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Parent and Merger Sub. Parent and Merger Sub have duly executed and delivered this Agreement, and, assuming due authorization, execution and delivery by the Company, this Agreement constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms (except insofar as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other Laws of general applicability relating to or affecting creditors’ rights, or by principles governing the availability of equitable remedies, whether considered in a Proceeding at law or in equity).

(b) The Parent Board, at a meeting duly called and held, has (i) determined that this Agreement and the transactions contemplated hereby, including the Merger and the Parent Stock Issuance, are in the best interests of, and advisable to, Parent and its stockholders, (ii) approved and adopted this Agreement and the transactions contemplated hereby, including the Merger and the Parent Stock Issuance, (iii) approved the execution, delivery and performance by Parent of this Agreement, including the Merger and the Parent Stock Issuance, upon the terms and subject to the conditions contained herein, (iv) directed that this Agreement be submitted to the holders of the Parent Common Stock at the Parent Stockholders Meeting to approve the Parent Stock Issuance, and (v) resolved to make the Parent Board Recommendation, subject to the terms and conditions in this Agreement. Parent, as the owner of all of the outstanding equity interests of Merger Sub, will immediately after the execution and delivery of this Agreement adopt this Agreement in its capacity as sole stockholder of Merger Sub. None of the foregoing actions by the Parent Board have been rescinded or modified in any way (unless such rescission or modification has been effected after the date hereof in accordance with the terms of Section 6.5).

(c) The only vote of holders of any class or series of capital stock of Parent necessary to approve this Agreement and to consummate the transactions contemplated hereby, including the Merger and the Parent Stock Issuance, is the approval of the Parent Stock Issuance by the affirmative vote of at least a majority of the votes cast in person or represented by proxy at the Parent Stockholders Meeting by the holders of Parent Common Stock entitled to vote thereon in accordance with Sections 312.03(c) and 312.07 of the NYSE Listed Company Manual (the “Parent Stockholder Approval”).

 

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(d) The Merger Sub Board, at a meeting duly called and held, has (i) determined that this Agreement and the transactions contemplated here, including the Merger, are advisable, fair to, and in the best interests of, Merger Sub and its sole stockholder, (ii) approved the execution and delivery by Merger Sub of this Agreement, the performance by Merger Sub of its covenants and agreements contained herein and the consummation of the transactions contemplated hereby, including the Merger, upon the terms and subject to the conditions contained herein and (iii) submitted this Agreement to Parent, as sole stockholder of Merger Sub, for adoption thereby and recommended that Parent approve and adopt this Agreement and the transactions contemplated hereby, including the Merger. None of the foregoing actions by the Merger Sub Board have been rescinded or modified in any way (unless such rescission or modification has been effected after the date hereof in accordance with the terms of Section 6.5).

5.6 No Conflicts; Consents.

(a) The execution and delivery by Parent and Merger Sub of this Agreement do not, and the consummation of the Merger and the other transactions contemplated hereby and compliance with the terms hereof will not, conflict with, or result in any violation or breach of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancelation or acceleration of any material obligation or to loss of a material benefit under, or result in the creation of any Lien upon any of the properties or assets of Parent or the Parent Subsidiaries under, any provision of (i) Parent’s Organizational Documents or the comparable Organizational Documents of the Parent Subsidiaries, (ii) any Contract to which Parent or any Parent Subsidiary is a party or by which any of their respective properties or assets is bound or (iii) subject to the filings and other matters referred to in Section 5.6(b), any Law applicable to Parent or the Parent Subsidiaries or their respective properties or assets, other than, in the case of clauses (ii) and (iii) above, any such items that would not reasonably be expected, individually or in the aggregate, to have a Parent Material Adverse Effect (it being agreed that for purposes of this Section 5.6(a), clause (G) of the definition of the term “Parent Material Adverse Effect” shall not be excluded in determining whether a Parent Material Adverse Effect has occurred or would reasonably be expected to occur).

(b) No Consent of, or registration, declaration, notice, notification, submission or filing with, any Governmental Entity, is required to be obtained or made by or with respect to Parent or any Parent Subsidiary in connection with the execution, delivery and performance of this Agreement or the consummation of the transactions contemplated hereby, other than (i) compliance with and filings under the HSR Act, (ii) the filing with the SEC of such registration statements, reports, schedules and statements, or the taking of, other actions under the Exchange Act and the Securities Act as may be required in connection with this Agreement, the Merger and the other transactions contemplated hereby, (iii) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware and appropriate documents with the relevant authorities of the other jurisdictions in which Parent and Merger Sub are qualified to do business, (iv) such filings as may be required under the rules and regulations of the NYSE and (v) such other items (A) required solely by reason of the participation of the Company (as opposed to any third Person) in the transactions contemplated hereby or (B) that the failure of which to obtain or make would not reasonably be expected, individually or in the aggregate, to have a Parent Material Adverse Effect (it being agreed that for purposes of this Section 5.6(b), clause (G) of the definition of the term “Parent Material Adverse Effect” shall not be excluded in determining whether a Parent Material Adverse Effect has occurred or would reasonably be expected to occur).

 

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5.7 SEC Documents; Undisclosed Liabilities.

(a) Since December 31, 2017, Parent has filed or furnished with the SEC all forms, registration statements, reports, schedules and statements required to be filed or furnished under the Exchange Act and the Securities Act. At the time filed (or, in the case of registration statements, solely on the dates of effectiveness) (except to the extent amended by a subsequently Filed Parent SEC Document prior to the date of this Agreement, in which case as of the date of such amendment), each Filed Parent SEC Document complied in all material respects with the applicable requirements of the Exchange Act and the Securities Act, as the case may be and 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 made, in light of the circumstances under which they were made, not misleading.

(b) The audited consolidated financial statements and the unaudited quarterly financial statements (including, in each case, the notes thereto) of Parent included in the Filed Parent SEC Documents (i) complied as to form in all material respects with the published rules and regulations of the SEC with respect thereto, (ii) have been prepared in all material respects in accordance with GAAP (except, in the case of unaudited quarterly statements, as permitted by Form 10-Q of the SEC or other rules and regulations of the SEC) applied in all material respects on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and (iii) fairly present in all material respects the consolidated financial position of Parent and its consolidated Subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods covered thereby (subject, in the case of unaudited quarterly statements, to normal year-end adjustments).

(c) Except as reflected or reserved against in the consolidated balance sheet of Parent, as of December 31, 2018, or the notes thereto, included in the Filed Parent SEC Documents (such balance sheet and the notes thereto, the “Parent Balance Sheet”), Parent and the Parent Subsidiaries do not have any liability or obligation of any nature (whether accrued, absolute, contingent or otherwise) other than (i) liabilities or obligations incurred in the ordinary course of business since the date of the Parent Balance Sheet (other than any liability for breaches of Contract or relating to any Proceeding), (ii) liabilities or obligations not required to be disclosed in a consolidated balance sheet of Parent or in the notes thereto prepared in accordance with GAAP and the rules and regulations of the SEC applicable thereto, (iii) liabilities or obligations incurred in connection with the transactions contemplated hereby and (iv) liabilities or obligations that would not reasonably be expected, individually or in the aggregate, to have a Parent Material Adverse Effect.

(d) Parent has established and maintains disclosure controls and procedures and a system of internal control over financial reporting (as such terms are defined in Rule 13a-15 and Rule 15d-15 under the Exchange Act) as required by the Exchange Act. From the date of the filing of Parent’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 to the date of this Agreement, Parent’s auditors and the Parent Board have not been advised of (i) any significant deficiencies or material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect Parent’s ability to record, process, summarize and report financial information or (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in Parent’s internal control over financial reporting.

 

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(e) The Filed Parent SEC Documents accurately summarize, in all material respects, the outstanding Derivative Transaction positions of Parent and the Parent Subsidiaries, including Hydrocarbon and financial Derivative Transaction positions attributable to the production and marketing activities of Parent and the Parent Subsidiaries, as of the dates reflected therein.

5.8 Information Supplied. Subject to the accuracy of the representations and warranties of the Company set forth in Article IV, none of the information supplied or to be supplied by or on behalf of Parent or Merger Sub for inclusion or incorporation by reference in the Joint Proxy Statement/Prospectus and the Form S-4 (and any amendment or supplement thereto) will, at the time such document is filed with the SEC, at any time it is amended or supplemented or at the time it is first published, sent or given to the Company’s or Parent’s stockholders, contain any untrue statement of any material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they are made, not false or misleading. Parent and Merger Sub shall use commercially reasonable efforts to ensure the Joint Proxy Statement/Prospectus and the Form S-4 (i) will comply as to form in all material respects with the requirements of the Exchange Act and (ii) will not contain any untrue statement of any material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they are made, not false or misleading, except that Parent and Merger Sub will make no representation or warranty with respect to statements included or incorporated by reference therein based on information supplied by or on behalf of the Company for inclusion or incorporation by reference therein.

5.9 Absence of Certain Changes or Events.

(a) Since the date of the Parent Balance Sheet, there has not been any Parent Material Adverse Effect.

(b) From the date of the Parent Balance Sheet to the date of this Agreement, Parent and the Parent Subsidiaries have conducted their businesses in the ordinary course in substantially the same manner as previously conducted, and during such period have not taken any action that would have required the consent of the Company under Section 6.2(c), Section 6.2(e), Section 6.2(j) or Section 6.2(m).

5.10 Taxes. Except as would not reasonably be expected, individually or in the aggregate, to have a Parent Material Adverse Effect:

(a) Each of Parent and the Parent Subsidiaries has (i) duly and timely filed, or caused to be duly and timely filed on its behalf, taking into account any extensions of time within which to file, all Tax Returns required to have been filed by it, and all such Tax Returns are true and complete, and (ii) duly and timely paid, or caused to be paid, all Taxes required to have been paid by it (whether or not shown as due on any Tax Return).

 

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(b) Each of Parent and the Parent Subsidiaries has duly and timely withheld and paid all Taxes required to be withheld and paid with respect to its employees, independent contractors, creditors, stockholders and other third parties.

(c) No written agreement or other written document waiving or extending, or having the effect of waiving or extending, the statute of limitations or the period of assessment or collection of any Taxes relating to Parent or any of the Parent Subsidiaries has been filed or entered into with any Governmental Entity.

(d) Parent and the Parent Subsidiaries have established adequate accruals and reserves, in accordance with GAAP, on the financial statements included in the Filed Parent SEC Documents for all Taxes payable by Parent and the Parent Subsidiaries for all taxable periods and portions thereof through the date of such financial statements.

(e) No deficiency for any Tax has been asserted or assessed by a Governmental Entity in writing against Parent or any Parent Subsidiary that has not been paid, settled or withdrawn.

(f) No Proceeding, audit or controversy in respect of Taxes of Parent or any Parent Subsidiary is presently in progress or has been threatened in writing.

(g) Neither Parent nor any Parent Subsidiary is a party to or is bound by any Tax sharing, allocation or indemnification agreement or arrangement (other than such agreements or arrangements (i) exclusively between Parent and any Parent Subsidiary or (ii) the primary subject matter of which is not Tax).

(h) Within the past two (2) years, neither Parent nor any Parent Subsidiary has been a “distributing corporation” or a “controlled corporation” within the meaning of Section 355(a)(1)(A) of the Code (or any analogous or similar provision of Law) in a distribution intended to qualify for tax-free treatment under Section 355 of the Code (or so much of Section 356 of the Code as relates to Section 355 of the Code) or otherwise as a part of a plan (or series of related transactions), within the meaning of Section 355(e) of the Code, that includes the Integrated Mergers.

(i) Neither Parent nor any Parent Subsidiary has been a party to a transaction that, as of the date of this Agreement, constitutes a “listed transaction” for purposes of Section 6011 of the Code and applicable Treasury Regulations.

(j) Neither Parent nor any Parent Subsidiary (i) is or has been a member of any affiliated, consolidated, unitary, combined or similar group (other than any such group the common parent of which is Parent) or (ii) has any liability for the Taxes of any Person (other than Parent or the Parent Subsidiaries) by reason of contract, assumption, transferee or successor liability, operation of Law, Treasury Regulations Section 1.1502-6 (or any analogous or similar provision of Law) or otherwise.

 

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(k) To the Knowledge of Parent, no claim has ever been made by a Governmental Entity in a jurisdiction where Parent or any Parent Subsidiary does not file a Tax Return that such entity is or may be required to file such Tax Return or pay Taxes in such jurisdiction that would be covered by or the subject of such Tax Return.

(l) Neither Parent nor any Parent Subsidiary will be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any: (i) change in method of accounting for a taxable period (or portion thereof) ending on or prior to the Closing Date and made prior to the Closing or use of an improper method of accounting prior to the Closing; (ii) any written agreement with any Governmental Entity executed on or prior to the Closing; (iii) installment sale or open transaction disposition made prior to the Closing; (iv) prepaid amount received prior to the Closing; or (v) intercompany transaction or excess loss accounts described in the Treasury Regulations promulgated under Section 1502 of the Code (or any analogous or similar provision of Law) that existed prior to the Closing.

(m) There are no Liens for Taxes upon any property of Parent or any of the Parent Subsidiaries except for statutory Liens for current Taxes not yet due and payable.

(n) To the Knowledge of Parent, neither Parent nor any of the Parent Subsidiaries has taken or agreed to take any action not contemplated by this Agreement and/or any related ancillary documents that would prevent the Integrated Mergers, taken together, from qualifying for the Intended Tax Treatment. Neither Parent nor any of the Parent Subsidiaries is aware of any agreement, plan or other circumstance that would prevent or impede the Integrated Mergers, taken together, from qualifying for the Intended Tax Treatment.

5.11 Labor Relations. There are no collective bargaining or other labor union, works council or other labor organization Contracts to which Parent or any Parent Subsidiary is a party or by which Parent or any Parent Subsidiary is bound. None of the employees of Parent or any Parent Subsidiary is represented by any labor union, works council or any other labor organization with respect to his or her employment by Parent or any Parent Subsidiary. Since December 31, 2017, neither Parent nor any Parent Subsidiary has experienced (a) any pending, or, to the Knowledge of Parent, threatened strikes, work stoppages, slowdowns, lockouts or other material labor disputes or (b) to the Knowledge of Parent, pending or threatened union organization attempts concerning any employees of Parent or any Parent Subsidiary. There is no unfair labor practice charge or complaint or other labor-related Proceeding pending, or, to the Knowledge of Parent, threatened against Parent or any Parent Subsidiary before the National Labor Relations Board or any similar Governmental Entity that would reasonably be expected, individually or in the aggregate, to have a Parent Material Adverse Effect.

5.12 Employee Benefits.

(a) Section 5.12(a) of the Parent Disclosure Letter sets forth a true and complete list, as of the date of this Agreement, of each material Parent Benefit Plan. With respect to each material Parent Benefit Plan, Parent has provided to the Company true and complete copies of the following (as applicable): (i) the plan document(s), (ii) the most recent summary plan description (and any summaries of material modifications thereto), (iii) the most recent IRS determination or opinion letter and (iv) copies of any non-routine correspondence with any Governmental Entity.

 

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(b) Each Parent Benefit Plan has been established, maintained, funded and administered, in all material respects, in accordance with its terms and all applicable laws, including ERISA and the Code. With respect to each Parent Benefit Plan, all contributions, premiums and other payments that are due have been timely paid, and any such amounts not yet due have been paid or properly accrued.

(c) Each Parent Benefit Plan intended to be “qualified” within the meaning of Section 401(a) of the Code has received a favorable determination letter as to such qualification or from the Internal Revenue Service, and no event has occurred, either by reason of any action or failure to act, that could reasonably be expected to adversely affect such Parent Benefit Plan’s qualified status.

(d) No Parent Benefit Plan is, and neither Parent nor any Parent Subsidiary sponsors, maintains, contributes to or is required to contribute to, or has any actual or contingent liability under: (i) any plan that is or was subject to Section 302 or Title IV of ERISA or Section 412 of the Code or (ii) a “multiemployer plan” (as defined in Section 3(37) of ERISA). Neither Parent nor any Parent Subsidiary has any current or contingent liability by reason of at any time being treated as a single employer with any other Person under Section 414 of the Code.

(e) Except as set forth on Section 5.12(e) of the Parent Disclosure Letter, no Parent Benefit Plan provides, and neither Parent nor any Parent Subsidiary has any current or contingent liability in respect of post-retirement health or welfare benefits for retired, former or current employees, officers, directors, or other individual service providers (or any beneficiary thereof) of Parent or the Parent Subsidiaries other than for continuation coverage required under COBRA for which the covered Person pays the full cost of coverage. Neither Parent nor any Parent Subsidiary has incurred, or is reasonably expected to incur or to be subject to, any material Tax, penalty or other liability that may be imposed under PPACA, including under Sections 4980D, 4980H, 6721 or 6722 of the Code.

(f) No action, suit, claim (other than routine claims for benefits), proceeding, audit, hearing or investigation is pending or, to Parent’s Knowledge, threatened with respect to any Parent Benefit Plan. There have been no “prohibited transactions” within the meaning of Section 4975 of the Code or Sections 406 or 407 of ERISA and not otherwise exempt under Section 408 of ERISA and no breaches of fiduciary duty (as determined under ERISA) with respect to any Parent Benefit Plan, except as could not reasonably be expected to result in a material liability to Parent or any Parent Subsidiary.

(g) No amount that could be received (whether in cash or property or the vesting of property), as a result of the consummation of the transactions contemplated by this Agreement, by any employee, officer or director of Parent or any of its Subsidiaries who is a “disqualified individual” (as such term is defined in proposed Treasury Regulations Section 1.280G-1) under any Parent Benefit Plan could be characterized as an “excess parachute payment” (as defined in Section 280G(b)(1) of the Code).

 

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(h) Parent does not have any obligation to “gross-up” or otherwise indemnify any individual for the imposition of the excise tax under Section 4999 of the Code or under Section 409A of the Code.

(i) None of the execution and delivery of this Agreement or the consummation of the Merger or any other transaction contemplated hereby (alone or in conjunction with any other event, including any termination of employment on or following the Effective Time) will, after giving effect to Section 3.2 of this Agreement, (i) entitle any current or former director, officer, employee, contractor, consultant or other service provider of Parent or any Parent Subsidiary to any material increase in compensation or benefits, (ii) accelerate the time of payment or vesting, or trigger any payment or funding, of any compensation, equity award or other benefits to any current or former director, officer, employee, contractor, consultant or other service provider of Parent or any Parent Subsidiary or trigger any other material obligation under any Parent Benefit Plan or (iii) entitle any current or former employee, consultant, director or other service provider of Parent or any Parent Subsidiary to a bonus, severance or change in control payment.

5.13 Title to Properties; Oil and Gas Properties.

(a) Parent and the Parent Subsidiaries have good and defensible title to all real and personal properties that are material to the business of Parent and the Parent Subsidiaries, including Oil and Gas Properties described in the Parent Reserve Report, in each case free and clear of all Liens and defects and imperfections of title except (i) such as do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by Parent and the Parent Subsidiaries, (ii) for Parent Permitted Liens or (iii) such as would not reasonably be expected, individually or in the aggregate, to have a Parent Material Adverse Effect. For purposes of the foregoing sentence, “good and defensible title” means title that is free from reasonable doubt that a prudent person engaged in the business of purchasing and owning, developing and operating producing or non-producing Oil and Gas Properties in the geographical areas in which they are located, with knowledge of all of the facts and their legal bearing, would be willing to accept, acting reasonably.

(b) As of the date of this Agreement, to the Knowledge of Parent, there is no default under any Oil and Gas Lease by Parent or the Parent Subsidiaries or any other party thereto, and no event has occurred that with the lapse of time or the giving of notice or both would constitute a default thereunder by Parent or any Parent Subsidiary or any other party thereto, in each case except as would not reasonably be expected, individually or in the aggregate, to have a Parent Material Adverse Effect.

(c) Except as would not, individually or in the aggregate, be reasonably expected to have a Parent Material Adverse Effect, all royalties, overriding royalties and similar burdens on Hydrocarbon production from Parent’s Oil and Gas Properties payable by Parent or any Parent Subsidiary to third parties have been properly and timely paid or held in suspense funds.

(d) As of the date of this Agreement, to the Knowledge of Parent, there is no outstanding authorization for expenditure or similar request or invoice for funding or participation under any agreement or contract which is binding on Parent, any Parent Subsidiary or any Oil and Gas Property and which Parent reasonably anticipates will individually require expenditures by Parent or any Parent Subsidiary in excess of $1,000,000.

 

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5.14 Reserve Report. The factual, non-interpretive data relating to the Oil and Gas Properties of Parent on which the reserve report prepared by Parent and audited by its independent reserve engineers referred to in Parent’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (the “Parent Reserve Report”) was accurate in all material respects at the time of preparation of Parent Reserve Report. With respect to the proved reserves reflected in the Parent Reserve Report, the Parent Reserve Report conforms in all material respects to the guidelines with respect thereto of the SEC. Except for changes (including changes in Hydrocarbon commodity prices) generally affecting the oil and gas industry and normal depletion by production, there has been no change in respect of the matters addressed in the Parent Reserve Report that would reasonably be expected, individually or in the aggregate, to have a Parent Material Adverse Effect.

5.15 Material Contracts.

(a) Except for this Agreement and the Contracts disclosed in the Filed Parent SEC Documents, Section 5.15(a) of the Parent Disclosure Letter sets forth a true and complete list, as of the date of this Agreement, and Parent has made available to the Company true and complete copies, of:

 

  (i)

each Contract that would be required to be filed by Parent as a “material contract” pursuant to Item 601(b)(10) of Regulation S-K under the Securities Act;

 

  (ii)

each Contract to which Parent or any Parent Subsidiary is a party that (A) restricts the ability of Parent or any Parent Subsidiary to compete in any business or with any Person in any geographical area, (B) requires Parent or any Parent Subsidiary to conduct any business on a “most favored nations” basis with any third party or (C) provides for “exclusivity” or any similar requirement in favor of any third party, except in the case of each of clauses (A), (B) and (C) for such restrictions, requirements and provisions that are not material to Parent and the Parent Subsidiaries, taken as a whole;

 

  (iii)

each Contract under which Parent or any Parent Subsidiary licenses Intellectual Property from or to any third party (other than (A) generally commercially available, off-the-shelf software programs and (B) non-exclusive licenses in the ordinary course of business), except for such licenses and sublicenses that are not material to Parent and the Parent Subsidiaries, taken as a whole;

 

  (iv)

any Contract pursuant to which Parent or any Parent Subsidiary will acquire any material ownership interest in any other Person or other business enterprise other than any Parent Subsidiary, in each case, with a value greater than $1,000,000 after the date of this Agreement;

 

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  (v)

each Contract that constitutes a commitment relating to indebtedness for borrowed money or the deferred purchase price of property by Parent or any Parent Subsidiary (whether incurred, assumed, guaranteed or secured by any asset) in excess of $1,000,000, other than agreements solely between or among Parent and any Parent Subsidiaries;

 

  (vi)

each Contract for a Derivative Transaction;

 

  (vii)

each Contract to which Parent or any Parent Subsidiary is a party that provides for annual payments, receipts or expenditures in excess of $1,000,000;

 

  (viii)

any Contract that is a settlement, conciliation or similar agreement with any Governmental Authority or pursuant to which Parent or any Parent Subsidiary will have any material obligations after the date of this Agreement;

 

  (ix)

each collective bargaining agreement and other Contract with any labor union, works council, or other labor organization respecting employees of Parent or any Parent Subsidiary;

 

  (x)

each Contract with or binding upon Parent or any Parent Subsidiary or any of their respective properties or assets that is of the type that would be required to be disclosed under Item 404 of Regulation S-K under the Securities Act; and

 

  (xi)

any Contract to which Parent or any Parent Subsidiary is a party that is for the employment or engagement of any person on a full-time or part-time basis, including directors, employees and independent contractors and employees at annual compensation in excess of $1,000,000.

Each such Contract described in clauses (i) through (xi) above is referred to herein as a “Parent Specified Contract.”

(b) As of the date of this Agreement, each of the Parent Specified Contracts is valid, binding and enforceable on Parent or a Parent Subsidiary, as the case may be, and, to the Knowledge of Parent, each other party thereto, and is in full force and effect except (i) for such failures to be valid, binding or enforceable or to be in full force and effect as would not reasonably be expected, individually or in the aggregate, to have a Parent Material Adverse Effect and (ii) insofar as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other Laws of general applicability relating to or affecting creditors’ rights, or by principles governing the availability of equitable remedies, whether considered in a Proceeding at law or in equity. As of the date of this Agreement, to the Knowledge of Parent, there is no default under any Parent Specified Contract by Parent or any Parent Subsidiary or any other party thereto, and no event has occurred that with the lapse of time or the giving of notice or both would constitute a default thereunder by Parent or any Parent Subsidiary or any other party thereto, in each case except as would not reasonably be expected, individually or in the aggregate, to have a Parent Material Adverse Effect.

 

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5.16 Litigation. As of the date of this Agreement, there is no Proceeding pending or, to the Knowledge of Parent, threatened against Parent or any Parent Subsidiary that would reasonably be expected, individually or in the aggregate, to have a Parent Material Adverse Effect, nor is there any Judgment outstanding against Parent or any Parent Subsidiary that would reasonably be expected, individually or in the aggregate, to have a Parent Material Adverse Effect.

5.17 Compliance with Laws.

(a) Except with respect to Tax matters (which are provided for exclusively in Section 5.10 and Section 5.12) and environmental compliance matters (which are provided for exclusively in Section 5.18) and as set forth on Section 5.17(a) of the Parent Disclosure Letter, each of Parent and the Parent Subsidiaries is, and for the last three (3) years has been, in compliance with all, and is not in default under or in violation of any, applicable Laws, other than any noncompliance, default or violation that would not reasonably be expected, individually or in the aggregate, to have a Parent Material Adverse Effect. Neither Parent nor any Parent Subsidiary has received any written communication since December 31, 2018 and prior to the date of this Agreement from a Governmental Entity that alleges that Parent or any Parent Subsidiary is not in compliance with or is in default or violation of any applicable Law, except where such non-compliance, default or violation would not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect.

(b) Parent and the Parent Subsidiaries are in possession of all franchises, tariffs, grants, authorizations, licenses, permits, easements, variances, exemptions, consents, certificates, approvals and orders of any Governmental Entity necessary under applicable Law to own, lease and operate their properties and to lawfully carry on their businesses as they are being conducted as of the date of this Agreement (collectively, the “Parent Permits”), except where the failure to be in possession of such Parent Permits would not reasonably be expected, individually or in the aggregate, have a Parent Material Adverse Effect. All Parent Permits are in full force and effect, except where the failure to be in full force and effect would not reasonably be expected, individually or in the aggregate, to have a Parent Material Adverse Effect. No suspension or cancellation of any of the Parent Permits is, to the Knowledge of Parent, pending or threatened, except where such suspension or cancellation would not reasonably be expected, individually or in the aggregate, to have a Parent Material Adverse Effect.

5.18 Environmental Matters. Except for matters that would not reasonably be expected, individually or in the aggregate, to have a Parent Material Adverse Effect:

(a) Parent and the Parent Subsidiaries are in compliance with all Environmental Laws, including obtaining, maintaining and complying with all Environmental Permits required for the operation of their businesses as they are being conducted as of the date of this Agreement;

(b) Neither Parent nor any Parent Subsidiary has received any written notice since December 31, 2018 (or earlier if pending or unresolved) and prior to the date of this Agreement from any Governmental Entity or other Person alleging the violation by Parent or any Parent Subsidiary of or liability of Parent or any Parent Subsidiary under any Environmental Law or any Environmental Permit;

 

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(c) As of the date of this Agreement, there are no Proceedings or Judgments pending or, to the Knowledge of Parent, threatened against Parent or any Parent Subsidiary relating to any Environmental Law or any Environmental Permit;

(d) To the Knowledge of Parent, neither Parent nor any Parent Subsidiary has treated, stored, disposed of, arranged for the disposal of, transported, handled, Released or exposed any Person to any Hazardous Material in a manner that has given rise to any current, or that is reasonably expected to give rise to any future, liabilities or obligations of Parent or any Parent Subsidiary pursuant to Environmental Laws; and

(e) Neither Parent nor any Parent Subsidiary has assumed, become subject to or provided an indemnity with respect to any liability of any other Person relating to Environmental Laws or Hazardous Materials.

5.19 Indebtedness. Section 5.19 of the Parent Disclosure Letter contains a true and complete list of all Indebtedness of Parent and the Parent Subsidiaries as of the date hereof and Parent has provided the Company with true and complete copies of all material agreements evidencing such Indebtedness.

5.20 Material Customers and Material Suppliers.

(a) Section 5.20(a)(i) of the Parent Disclosure Letter sets forth the top ten (10) customers of Parent and the Parent Subsidiaries collectively (based on the dollar amount of revenue from such customers) for the 12-month period ended December 31, 2018 (the “Parent Material Customers”). Except as set forth on Section 5.20(a)(ii) of the Parent Disclosure Letter, no such Parent Material Customer has, during the last 12 months, cancelled or terminated any of its Contracts or arrangements or materially reduced its business in the aggregate, with Parent or any Parent Subsidiary or, to the Knowledge of Parent, made any threat to Parent or any Parent Subsidiary to cancel or otherwise terminate any of its Contracts or arrangements or materially reduce its business in the aggregate with Parent or any Parent Subsidiary (other than changes to pricing and quantity of products and services which are currently permitted by the arrangements with such Parent Material Customer).

(b) Section 5.20(b)(i) of the Parent Disclosure Letter sets forth the top ten (10) suppliers of Parent and the Parent Subsidiaries collectively (based on the dollar amount of purchases from such suppliers) for the 12-month period ended December 31, 2018 (the “Parent Material Suppliers”). Except as set forth on Section 5.20(b)(ii) of the Parent Disclosure Letter, no such Parent Material Supplier has, during the last 12 months, cancelled or terminated any of its contracts or arrangements, or materially reduced its business in the aggregate, with Parent or any Parent Subsidiary, or, to the Knowledge of Parent, made any threat to Parent or any Parent Subsidiary to cancel or otherwise terminate any of its contracts or arrangements with, or materially reduce its supply to, Parent and the Parent Subsidiaries.

 

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5.21 Intellectual Property. Parent and the Parent Subsidiaries own or have the right to use all Intellectual Property that is used in and necessary for the operation of the businesses of Parent and the Parent Subsidiaries as presently conducted (collectively, the “Parent Intellectual Property”) free and clear of all Liens except for Parent Permitted Liens, except where the failure to own or have the right to use such Intellectual Property would not reasonably be expected, individually or in the aggregate, to have a Parent Material Adverse Effect. To the Knowledge of Parent and the Parent Subsidiaries, the use of the Parent Intellectual Property by Parent and the Parent Subsidiaries in the operation of the business of Parent and the Parent Subsidiaries as presently conducted is not infringing upon or misappropriating any Intellectual Property of any other Person, except for such matters that would not reasonably be expected, individually or in the aggregate, to have a Parent Material Adverse Effect.

5.22 Insurance. Parent and the Parent Subsidiaries maintain, or are entitled to the benefits of, insurance in such amounts and against such risks substantially as Parent believes to be customary for the industries in which Parent and the Parent Subsidiaries operate. Except as would not reasonably be expected, individually or in the aggregate, to have a Parent Material Adverse Effect, (a) all material insurance policies maintained by or on behalf of Parent or the Parent Subsidiaries as of the date of this Agreement are in full force and effect, and all premiums due on such policies have been paid and (b) Parent and the Parent Subsidiaries are in compliance with the terms and provisions of all insurance policies maintained by or on behalf of Parent or the Parent Subsidiaries as of the date of this Agreement, and neither Parent nor any Parent Subsidiary is in breach or default under, or has taken any action that would permit termination or material modification of, any material insurance policies.

5.23 Regulatory Matters. Neither Parent nor any Parent Subsidiary is (a) an “investment company” or a company “controlled” by an “investment company” within the meaning of the U.S. Investment Company Act of 1940, as amended, and the rules and regulations promulgated thereunder or (b) a “holding company,” a “subsidiary company” of a “holding company,” an Affiliate of a “holding company,” a “public utility” or a “public-utility company,” as each such term is defined in the U.S. Public Utility Holding Company Act of 2005. Neither Parent nor any Parent Subsidiary owns or holds any refined petroleum product, crude oil, natural gas, liquefied natural gas, natural gas liquid and other pipelines, lateral lines, pumps, pump stations, storage facilities, terminals, processing plants and other related operations, assets, machinery or equipment that are subject to (x) regulation by the U.S. Federal Energy Regulatory Commission under the Natural Gas Act of 1938, as amended, or (y) rate regulation or comprehensive nondiscriminatory access regulation under the Laws of any state or other local jurisdiction.

5.24 Brokers and Other Advisors. No broker, investment banker, financial advisor or other Person, other than Houlihan Lokey Capital, Inc., the fees and expenses of which will be paid by Parent, is entitled to any broker’s, finder’s, financial advisor’s or other similar fee or commission in connection with this Agreement, the Merger and the other transactions contemplated hereby based upon arrangements made by or on behalf of Parent or any of its Affiliates.

5.25 Opinion of Financial Advisor. Parent has received the opinion of Houlihan Lokey Capital, Inc., dated the date of this Agreement, to the effect that, as of such date and based upon and subject to the factors and assumptions set forth therein, the Exchange Ratio is fair from a financial point of view to Parent, a signed copy of which opinion will be made available to the Company for informational purposes only on a non-reliance basis promptly following the date of this Agreement.

 

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5.26 Related Party Transactions. Except as disclosed in the Filed Parent SEC Documents, neither Parent nor any Parent Subsidiary are party to any transaction or arrangement under which any (a) present or former executive officer or director of Parent or any Parent Subsidiary, (b) beneficial owner (within the meaning of Section 13(d) of the Exchange Act) of 5% or more of any class of equity of Parent or (c) Affiliate, “associate” or member of the “immediate family” (as such terms are respectively defined in Rules 12b-2 and 16a-1 of the Exchange Act) of any of the foregoing is a party to any actual or proposed loan, lease or other contract with or binding upon Parent or any Parent Subsidiary or owns or has any interest in any of their respective properties or assets, in each case as would be required to be disclosed by Parent pursuant to Item 404 of Regulation S-K promulgated under the Exchange Act.

5.27 No Other Representations or Warranties. Except for the representations and warranties set forth in this Article V, none of Parent, the Parent Subsidiaries (including Merger Sub) or any other Person makes or has made any express or implied representation or warranty with respect to Parent or the Parent Subsidiaries or with respect to any other information provided to the Company in connection with the Merger or the other transactions contemplated hereby, and the Company, on its own behalf and on behalf of its Affiliates and Representatives, disclaims reliance on any representations or warranties or other information provided to them by Parent or its Subsidiaries or their respective Affiliates or Representatives or any other Person except for the representations and warranties expressly set forth in this Article V. Without limiting the generality of the foregoing, the Company, on its own behalf and on behalf of its Affiliates and its Affiliates and Representatives, acknowledges and agrees that none of Parent, Parent’s Subsidiaries (including Merger Sub) or any other Person will have or be subject to any liability or other obligation to the Company or any other Person resulting from the distribution to the Company (including its Affiliates and Representatives), or the Company’s (or such Affiliates’ or Representatives’) use, of any such information, including with respect to (i) Parent, Merger Sub or any of their respective businesses, assets, employees, permits, liabilities, operations, prospectus or condition (financial or otherwise) or (ii) any opinion, projection, forecast, statement, budget, estimate, advice or other similar information (including with respect to the future revenues, earnings, results or operations (or any component thereof), cash flows, financial condition (or any component thereof) or the future business and operations of Parent or Merger Sub, as well as any other business plan and cost-related plan information of Parent and/or Merger Sub) made, communicated or furnished (orally or in writing) or to be made, communicated or furnished (orally or in writing) to the Company or any of its Affiliates or Representatives, in each case, whether made by Parent, Merger Sub or any of their respective Affiliates, Representatives or equity holders or any other Person.

 

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ARTICLE VI

COVENANTS

The Company hereby covenants to and agrees with Parent and Merger Sub, and Parent and Merger Sub hereby covenant to and agree with the Company, that:

6.1 Conduct of Business by the Company. From the date of this Agreement until the earlier of the Effective Time and the termination of this Agreement pursuant to Article VIII, and except (i) as expressly contemplated or permitted by this Agreement, (ii) as may be required by applicable Law or pursuant to the terms of any Company Benefit Plan, (iii) as set forth in the Company Disclosure Letter or (iv) with the prior written consent of Parent (which consent will not be unreasonably withheld, conditioned or delayed), the Company will not and will cause each Company Subsidiary not to:

(a) (i) conduct its business and the business of the Company Subsidiaries other than in the ordinary course in any material respect, (ii) fail to use commercially reasonable efforts to preserve intact its business organizations, goodwill and assets and maintain its rights, franchises and existing relations with customers, suppliers, employees and business associates, or (iii) take any action that adversely affects the ability of any Party to obtain any regulatory approvals for the transactions contemplated hereby; provided, however, that no action or omission by the Company or any Company Subsidiary with respect to matters specifically addressed by any provision of Section 6.1(b) through Section 6.1(r) shall be a breach of this Section 6.1(a);

(b) issue, sell, pledge, dispose of, grant, transfer, encumber or otherwise permit to become outstanding, or authorize the creation of, any additional equity or any additional Rights other than (i) grants of Company Stock Options, Company TSUs, Company Board RSUs and Company PSUs in the ordinary course of business and (ii) issuances of Company Common Stock in respect of the vesting, settlement and/or exercise of Company Stock Options, Company TSUs, Company Board RSUs and Company PSUs outstanding as of the date hereof or granted after the date hereof in accordance with their terms or in the ordinary course of business consistent with past practice;

(c) (i) split, combine or reclassify any of its equity interests or issue or authorize or propose the issuance of any other securities in respect of, in lieu of or in substitution for its equity interests, or (ii) repurchase, redeem or otherwise acquire, or permit any Company Subsidiary to purchase, redeem or otherwise acquire any membership, partnership or other equity interests or Rights, except as permitted by the terms of the Company Stock Plan and any related award agreements or to satisfy any withholding obligations of the holder thereof or as permitted by the terms of its securities outstanding on the date of this Agreement (or granted following the date of this Agreement in accordance with this Agreement) by any Company Benefit Plan;

(d) (i) sell, lease, transfer, farmout, exchange, dispose of, license, convey or discontinue all or any portion of the Company’s or any Company Subsidiary’s Oil and Gas Properties or other assets, business or properties other than (A) in the ordinary course of business (including sales, transfers and dispositions of inventory, commodities and produced Hydrocarbons, crude oil and refined products), (B) any individual sales, leases, dispositions or discontinuances for consideration not in excess of $500,000, or (C) any distributions expressly permitted under Section 6.1(e); (ii) acquire, by merger or otherwise, or lease any assets or all or any portion of the business or property of any other entity other than (A) in the ordinary course of business or (B) acquisitions resulting from a working interest holder’s non-participation election in a well or wells; (iii) merge, consolidate or enter into any other business combination transaction with any Person; or (iv) convert from a limited liability company or corporation, as the case may be, to any other business entity;

 

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(e) make or declare dividends or distributions to the holders of Company Common Stock or any Company Subsidiary (other than any dividend or distribution from a wholly owned Company Subsidiary to the Company or to any other wholly owned Company Subsidiary);

(f) amend the Company’s or any Company Subsidiary’s Organizational Documents;

(g) enter into any contract, agreement or arrangement that would be a Company Specified Contract, except as would not prevent or materially delay the consummation of the Merger or the other transactions contemplated by this Agreement;

(h) modify, amend, terminate or assign, or waive or assign any rights under any material agreement, in a manner that would reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect, or that would reasonably be expected to prevent or materially delay the consummation of the Merger or the other transactions contemplated by this Agreement;

(i) waive, release, assign, settle or compromise any material Proceeding or settle or compromise any Proceeding if such settlement or compromise (i) involves a material conduct remedy or material injunctive or similar relief, (ii) involves an admission of criminal wrongdoing by the Company or any Company Subsidiary or (iii) has in any material respect a restrictive impact on the business of the Company or any Company Subsidiary;

(j) implement or adopt any change in its GAAP accounting principles, practices or methods, other than as may be required by GAAP;

(k) fail to use commercially reasonable efforts to maintain, with financially responsible insurance companies, insurance in such amounts and against such risks and losses as is maintained by it at present except to the extent that any such failure would not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect;

(l) (i) make, change or rescind any material elections relating to Taxes, (ii) settle or compromise any material Proceeding, audit or controversy relating to Taxes, (iii) amend any Tax Return in any material respect, (iv) change in any material respect any of its methods of reporting income or deductions for U.S. federal income tax purposes, (v) agree to any extension or waiver of the statute of limitations with respect to Taxes, (vi) surrender any right to claim a material Tax refund, (vii) enter into any written agreement with any Governmental Entity with respect to Taxes or (viii) enter into any Tax sharing, allocation or indemnification agreement or arrangement (other than such agreements or arrangements (A) exclusively between the Company and any Company Subsidiary or (B) the primary subject matter of which is not Tax);

(m) except as required by applicable Law or as required pursuant to the terms of any Company Benefit Plan, (i) establish, adopt, enter into, terminate or amend, or take any action to accelerate the vesting or payment of any compensation, or benefits under, any Company Benefit Plan, (ii) grant to any director or officer any increase in compensation, bonus or fringe or other benefits, (iii) grant to any current or former director, officer, employee, individual independent contractor or consultant of the Company or any Company Subsidiary any increase in change in control, retention, severance or termination pay, (iv) enter into any employment,

 

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consulting, change in control, retention or severance agreement with any current or former director, officer, employee, contractor or consultant of Parent or any Parent Subsidiary or (v) enter into a collective bargaining agreement or other Contract with any labor union, works council, or other labor organization or recognize any labor union, works council, or other labor organization as the representative of any employees of the Company or any Company Subsidiary; provided, however, that the foregoing clauses (ii), (iii) and (iv) shall not restrict the Company or any Company Subsidiary from entering into or making available to newly hired employees or to employees in the context of promotions based on job performance or workplace requirements, in each case in the ordinary course of business, compensation and benefits plans, programs, policies, agreements and arrangements (including equity or incentive grants) that have a value that is consistent with the past practice of making compensation and benefits available to newly hired or promoted employees in similar positions;

(n) (i) incur, assume, guarantee or otherwise become liable for any Indebtedness (directly, contingently or otherwise), other than (A) borrowings under existing revolving credit facilities in the ordinary course of business consistent with past practices not to exceed $1,000,000 or (B) in the ordinary course of business, (ii) redeem, repurchase, cancel or otherwise acquire any Indebtedness (directly, contingently or otherwise), (iii) other than with respect to the existing revolving credit facilities, create any material Lien that is not a Company Permitted Lien on its property or the property of any Company Subsidiary in connection with any pre-existing Indebtedness, new Indebtedness or lease, or (iv) make or commit to make any capital expenditures other than such capital expenditures that do not exceed 115% of the Company’s 2019 capital budget as set forth in Section 6.1(n) of the Company Disclosure Letter;

(o) implement or otherwise enter into any derivative security with respect to Hydrocarbon production or marketing or enter into any Derivative Transaction applicable to the Company other than in the ordinary course of business;

(p) enter into any transaction or Contracts with any Affiliate or other Person that would be required to be disclosed by the Company under Item 404 of Regulation S-K promulgated under the Exchange Act;

(q) authorize, recommend, propose or announce an intention to adopt a plan of complete or partial dissolution or liquidation; or

(r) agree or commit to do anything prohibited by clauses (a) through (q) of this Section 6.1;

provided, however, that the foregoing does not limit or restrict the ability of the Company or any Company Subsidiary to take otherwise prohibited actions in response to emergency situations to the extent required in order to ensure the protection of individuals or assets or to ensure compliance with any Law (including Environmental Law, including with respect to any Release or threatened Release of Hazardous Materials), provided that the Company promptly notifies Parent of the same.

6.2 Conduct of Business by Parent. From the date of this Agreement until the earlier of the Effective Time and the termination of this Agreement pursuant to Article VIII, and except (i) as expressly contemplated or permitted by this Agreement, (ii) as may be required by applicable

 

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Law or pursuant to the terms of any Parent Benefit Plan, (iii) as set forth in the Parent Disclosure Letter or (iv) with the prior written consent of the Company (which consent will not be unreasonably withheld, conditioned or delayed), Parent will not and will cause each Parent Subsidiary not to:

(a) (i) conduct its business and the business of the Parent Subsidiaries other than in the ordinary course in any material respect, (ii) fail to use commercially reasonable efforts to preserve intact its business organizations, goodwill and assets and maintain its rights, franchises and existing relations with customers, suppliers, employees and business associates, or (iii) take any action that adversely affects the ability of any Party to obtain any regulatory approvals for the transactions contemplated hereby; provided, however, that no action or omission by Parent or any Parent Subsidiary with respect to matters specifically addressed by any provision of Section 6.2(b) through Section 6.2(r) shall be a breach of this Section 6.2(a);

(b) issue, sell, pledge, dispose of, grant, transfer, encumber or otherwise permit to become outstanding, or authorize the creation of, any additional equity or any additional Rights other than (i) grants of Parent RSUs and Parent PSUs in the ordinary course of business and (ii) issuances of Parent Common Stock in respect of the vesting, settlement and/or exercise of Parent RSUs and Parent PSUs outstanding as of the date hereof or granted after the date hereof accordance with the their terms or in the ordinary course of business consistent with past practice;

(c) (i) split, combine or reclassify any of its equity interests or issue or authorize or propose the issuance of any other securities in respect of, in lieu of or in substitution for its equity interests, or (ii) repurchase, redeem or otherwise acquire, or permit any Parent Subsidiary to purchase, redeem or otherwise acquire any membership, partnership or other equity interests or Rights, except as permitted by the terms of the Parent Stock Plans and any related award agreements or to satisfy any withholding obligations of the holder thereof or as permitted by the terms of its securities outstanding on the date of this Agreement (or granted following the date of this Agreement in accordance with this Agreement) by any Parent Benefit Plan;

(d) (i) sell, lease, transfer, farmout, exchange, dispose of, license, convey or discontinue all or any portion of Parent’s or any Parent Subsidiary’s Oil and Gas Properties or other assets, business or properties other than (A) in the ordinary course of business (including sales, transfers and dispositions of inventory, commodities and produced Hydrocarbons, crude oil and refined products), (B) any individual sales, leases, dispositions or discontinuances for consideration not in excess of $500,000, or (C) any distributions expressly permitted under Section 6.2(e); (ii) acquire, by merger or otherwise, or lease any assets or all or any portion of the business or property of any other entity other than (A) in the ordinary course of business or (B) acquisitions resulting from a working interest holder’s non-participation election in a well or wells; (iii) merge, consolidate or enter into any other business combination transaction with any Person; or (iv) convert from a limited liability company or corporation, as the case may be, to any other business entity;

(e) make or declare dividends or distributions to the holders of Parent Common Stock or any Parent Subsidiary (other than any dividend or distribution from a wholly owned Parent Subsidiary to the Company or to any other wholly owned Parent Subsidiary);

 

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(f) amend Parent’s or any Parent Subsidiary’s Organizational Documents;

(g) enter into any contract, agreement or arrangement that would be a Parent Specified Contract, except as would not prevent or materially delay the consummation of the Merger or the other transactions contemplated by this Agreement;

(h) modify, amend, terminate or assign, or waive or assign any rights under any material agreement, in a manner that would reasonably be expected, individually or in the aggregate, to have a Parent Material Adverse Effect, or that would reasonably be expected to prevent or materially delay the consummation of the Merger or the other transactions contemplated by this Agreement;

(i) waive, release, assign, settle or compromise any material Proceeding or settle or compromise any Proceeding if such settlement or compromise (i) involves a material conduct remedy or material injunctive or similar relief, (ii) involves an admission of criminal wrongdoing by Parent or any Parent Subsidiary or (iii) has in any material respect a restrictive impact on the business of Parent or any Parent Subsidiary;

(j) implement or adopt any change in its GAAP accounting principles, practices or methods, other than as may be required by GAAP;

(k) fail to use commercially reasonable efforts to maintain, with financially responsible insurance companies, insurance in such amounts and against such risks and losses as is maintained by it at present except to the extent that any such failure would not reasonably be expected, individually or in the aggregate, to have a Parent Material Adverse Effect;

(l) (i) make, change or rescind any material elections relating to Taxes, (ii) settle or compromise any material Proceeding, audit or controversy relating to Taxes, (iii) amend any Tax Return in any material respect, (iv) change in any material respect any of its methods of reporting income or deductions for U.S. federal income tax purposes, (v) agree to any extension or waiver of the statute of limitations with respect to Taxes, (vi) surrender any right to claim a material Tax refund, (vii) enter into any written agreement with any Governmental Entity with respect to Taxes or (viii) enter into any Tax sharing, allocation or indemnification agreement or arrangement (other than such agreements or arrangements (A) exclusively between Parent and any Parent Subsidiary or (B) the primary subject matter of which is not Tax);

(m) except as required by applicable Law or as required pursuant to the terms of any Parent Benefit Plan, (i) establish, adopt, enter into, terminate or amend, or take any action to accelerate the vesting or payment of any compensation, or benefits under, any Parent Benefit Plan, (ii) grant to any director or officer any increase in compensation, bonus or fringe or other benefits, (iii) grant to any current or former director, officer, employee, individual independent contractor or consultant of Parent or any Parent Subsidiary any increase in change in control, retention, severance or termination pay, (iv) enter into any employment, consulting, change in control, retention or severance agreement with any current or former director, officer, employee, contractor or consultant of Parent or any Parent Subsidiary, or (v) enter into a collective bargaining agreement or other Contract with any labor union, works council, or other labor organization or recognize any labor union, works council, or other labor organization as the representative of any

 

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employees of Parent or any Parent Subsidiary; provided, however, that the foregoing clauses (ii), (iii) and (iv) shall not restrict Parent or any Parent Subsidiary from entering into or making available to newly hired employees or to employees in the context of promotions based on job performance or workplace requirements, in each case in the ordinary course of business, compensation and benefits plans, programs, policies, agreements and arrangements (including equity or incentive grants) that have a value that is consistent with the past practice of making compensation and benefits available to newly hired or promoted employees in similar positions;

(n) (i) incur, assume, guarantee or otherwise become liable for any Indebtedness (directly, contingently or otherwise), other than (A) borrowings under existing revolving credit facilities in the ordinary course of business consistent with past practices not to exceed $1,000,000 or (B) in the ordinary course of business, (ii) redeem, repurchase, cancel or otherwise acquire any Indebtedness (directly, contingently or otherwise), (iii) other than with respect to the existing revolving credit facilities, create any material Lien that is not a Parent Permitted Lien on its property or the property of any Parent Subsidiary in connection with any pre-existing Indebtedness, new Indebtedness or lease, or (iv) make or commit to make any capital expenditures other than such capital expenditures that do not exceed 115% of Parent’s 2019 capital budget as set forth in Section 6.2(n) of the Parent Disclosure Letter;

(o) implement or otherwise enter into any derivative security with respect to Hydrocarbon production or marketing or enter into any Derivative Transaction applicable to Parent other than in the ordinary course of business;

(p) enter into any transaction or Contracts with any Affiliate or other Person that would be required to be disclosed by Parent under Item 404 of Regulation S-K promulgated under the Exchange Act;

(q) authorize, recommend, propose or announce an intention to adopt a plan of complete or partial dissolution or liquidation; or

(r) agree or commit to do anything prohibited by clauses (a) through (q) of this Section 6.2;

provided, however, that the foregoing does not limit or restrict the ability of Parent or any Parent Subsidiary to take otherwise prohibited actions in response to emergency situations to the extent required in order to ensure the protection of individuals or assets or to ensure compliance with any Law (including Environmental Law, including with respect to any Release or threatened Release of Hazardous Materials), provided that Parent promptly notifies the Company of the same.

6.3 Consummation of the Merger.

(a) Subject to the terms and conditions of this Agreement, the Company, on the one hand, and each of Parent and Merger Sub, on the other hand, will cooperate with the other and use (and will cause their respective Subsidiaries to use) its commercially reasonable efforts to (i) take, or cause to be taken, all actions, and do, or cause to be done, all things, necessary, proper or advisable to cause the conditions to the Closing to be satisfied as promptly as practicable and to consummate and make effective, in the most expeditious manner practicable, the Merger, including preparing and filing promptly and fully all documentation to effect all necessary filings,

 

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notifications, notices, petitions, statements, registrations, submissions of information, applications and other documents (including, filing any Notification and Report Form required pursuant to the HSR Act within ten (10) Business Days following the execution of this Agreement and to request early termination of the applicable waiting period), (ii) obtain promptly all Consents (including Environmental Permits) from any Governmental Entity or third party necessary, proper or advisable to consummate the Merger and (iii) obtain all necessary consents, approvals or waivers from third parties. Parent and the Company shall be responsible for their respective share of the payment of all filing fees under the HSR Act.

(b) Each of the Parties hereto will use commercially reasonable efforts to (i) cooperate in all respects with each other in connection with any filing to or submission with a Governmental Entity in connection with the transactions contemplated hereby and in connection with any investigation or inquiry by or before a Governmental Entity relating to the Merger, including any Proceeding initiated by a private Person, (ii) promptly inform the Other Party of (and supply to the Other Party) any material communication received by such Party from, or given by such Party to any third party or Governmental Entity and any material communication received or given in connection with any Proceeding by a private Person, in each case regarding the Merger, (iii) permit the Other Party to review in advance and incorporate their reasonable comments in any communication to be given by it to any Governmental Entity with respect to obtaining any Consents in connection with the transactions contemplated hereby and (iv) to the extent practicable, consult with the Other Party in advance of any substantive meeting, written communications or teleconference with any Governmental Entity or, in connection with any Proceeding by a private Person, with any other Person, and, to the extent not prohibited by the Governmental Entity or other Person, give the Other Party the opportunity to attend and participate in such meetings and teleconferences.

(c) Subject to Section 6.6, the Parties will use their respective commercially reasonable efforts to share information protected from disclosure under the attorney-client privilege, work product doctrine, joint defense privilege or any other privilege pursuant to this Section 6.3 in a manner so as to preserve the applicable privilege. Any Party may share information with any Other Party on an “outside counsel only” basis. Nothing in this Section 6.3 shall obligate the Parties to share any information regarding the value of the transaction or that would result in a violation of any contractual arrangement or, absent the entry of a mutually acceptable joint defense agreement, information covered by the attorney-client privilege, work product doctrine or other similar privilege, and any Party may redact such information before providing materials to any Other Party in accordance with this Section 6.3.

6.4 No Solicitation by Company and Company Change in Recommendation.

(a) From and after the date of this Agreement until the

Effective Time or, if earlier, the termination of this Agreement in accordance with Article VIII hereof, the Company will, and will cause the Company Subsidiaries and Company Affiliates to, and will use commercially reasonable efforts to cause its and their Representatives to, as applicable, (i) immediately cease, and cause to be terminated, any solicitation, encouragement, discussion or negotiation with any Person conducted heretofore by the Company or any Company Subsidiary or any of its or their Representatives with respect to any Company Alternative Proposal, (ii) within two (2) Business Days of the date of this Agreement, request the prompt return or

 

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destruction of all confidential information previously furnished to any Person within the last six (6) months for the purposes of evaluating a possible Company Alternative Proposal and (iii) immediately terminate access to any physical or electronic data rooms relating to a possible Company Alternative Proposal.

(b) Except as otherwise expressly permitted by this Section 6.4, from and after the date of this Agreement until the Effective Time or, if earlier, the termination of this Agreement in accordance with Article VIII hereof, the Company will not, and will cause the Company Subsidiaries and Company Affiliates not to, and will use commercially reasonable efforts to cause its and their Representatives not to, directly or indirectly, (i) initiate, solicit, propose or knowingly encourage or knowingly facilitate (including by furnishing or providing information or taking any other action) any inquiries, proposals, offers, requests for information, expressions of interest or the making, submission or announcement of any inquiry, proposal, offer, request for information or expression of interest from any Person which constitutes or may reasonably be expected to result in, a Company Alternative Proposal, (ii) enter into, participate in or engage in any discussions or negotiations with any Person with respect to a Company Alternative Proposal or any inquiry, indication of interest that would reasonably be expected to lead to a Company Alternative Proposal, (iii) furnish any information regarding the Company or the Company Subsidiaries, or access to the properties, assets or employees of the Company or the Company Subsidiaries, to any Person in connection with or in response to a Company Alternative Proposal, (iv) enter into any letter of intent or agreement in principle, or other agreement or arrangement providing for a Company Alternative Proposal (other than a Company Acceptable Confidentiality Agreement), (v) waive or release any person from, forebear in the enforcement of, or amend any standstill agreement or any standstill provisions of any other Contract, provided that if the Company Board determines in good faith after consultation with the Company’s legal counsel that the failure to waive a particular standstill provision would be a breach of the Company Board’s fiduciary duties under applicable Law, the Company may, with prior written notice to Parent, waive such standstill provision, solely to the extent necessary to permit a third party to make and pursue a Company Alternative Proposal, (vi) take any action to make any “moratorium”, “control share acquisition”, “fair price”, “supermajority”, “affiliate transactions” or “business combination statute or regulation” or other similar Takeover Laws, including Section 203 of the DGCL, inapplicable to any Person (other than, for the avoidance of doubt, Parent or any Parent Subsidiary) or any Company Alternative Proposal or (vii) resolve, agree or publicly propose to, or permit the Company or any Company Subsidiary or any of its or their Representatives to agree or publicly propose to take any of the actions referred to in clauses (i) – (vi).

(c) Unless specifically permitted by Section 6.4(e), the Company shall not (i) fail to include the Company Board Recommendation in the Joint Proxy Statement/Prospectus, (ii) withdraw, modify or qualify, or propose publicly to withdraw, modify or qualify, in a manner adverse to Parent, the Company Board Recommendation, (iii) recommend, adopt or approve, or propose publicly to recommend, adopt or approve, any Company Alternative Proposal, (iv) fail to publicly reaffirm the Company Board Recommendation within five (5) Business Days after Parent so requests in writing following any public disclosure of a Company Alternative Proposal, (v) fail to recommend, in a Solicitation/Recommendation Statement on Schedule 14D-9, against any Company Alternative Proposal subject to Regulation 14D under the Exchange Act within five (5) Business Days after the commencement of such Company Alternative Proposal and (vi) approve or authorize, or cause or permit the Company or any Company Subsidiary to enter into, any merger

 

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agreement, acquisition agreement, reorganization agreement, letter of intent, memorandum of understanding, agreement in principle, option agreement, joint venture agreement, partnership agreement or any other similar arrangement providing for any Company Alternative Proposal (other than a Company Acceptable Confidentiality Agreement) (the taking of any action described in this Section 6.4(c) being referred to as a “Company Change in Recommendation”).

(d) From and after the date of this Agreement, the Company shall promptly (and in any event within 24 hours) advise Parent of the receipt by the Company or by any of the Company’s Affiliates or, to the Company’s Knowledge, its or their respective Representatives of any Company Alternative Proposal made on or after the date of this Agreement or any inquiries, proposals, offers request for non-public information or data or expressions of interest relating to the Company or any Company Subsidiary made by any Person that may reasonably be expected to result in a Company Alternative Proposal or from any Person who has made or has communicated to the Company that it intends to make a Company Alternative Proposal or any request for discussions or negotiations with the Company or a Representative of the Company relating to a Company Alternative Proposal. The Company shall provide to Parent (within such 24 hour time frame) either (i) an unredacted copy of any such Company Alternative Proposal made in writing provided to the Company or any Company Subsidiary or any of their respective Representatives or, if such Company Alternative Proposal is not in writing, a reasonably detailed written description of the material terms thereof (including the identity of the Person making such Company Alternative Proposal and the price), or (ii) a written summary of the material terms of any such inquiry, proposal, offer, request or expression of interest (including the identity of the Person making such inquiry, proposal, offer, request or expression of interest and, as applicable, the nature of the information requested). Without limiting the Company’s other obligations under this Section 6.4, the Company shall keep Parent informed on a timely basis (and in any event within 24 hours) with respect to the status and material terms of any such Company Alternative Proposal and any material changes to the status of any such discussions or negotiations or the nature of any information requested of the Company with respect thereto, and shall promptly (and in no event later than 24 hours after transmittal or receipt) provide Parent with copies of any material correspondence and, with respect to material oral communications, a written summary of such correspondence or communications, between: (x) on the one hand, the Company or any of their Representatives; and (y) on the other hand, the Person that made or submitted such Company Alternative Proposal or any Representative of such Person. Without limiting the foregoing, the Company shall promptly (and in any event within 24 hours after such determination) inform Parent in writing if the Company determines to begin providing non-public information or to engage in discussions or negotiations concerning a Company Alternative Proposal pursuant to Section 6.4(e)(ii). The Company agrees that it will not, directly or indirectly, enter into any agreement with any Person which directly or indirectly prohibits the Company from providing any information to Parent in accordance with, or otherwise complying with, this Section 6.4.

(e) Notwithstanding anything in this Agreement to the contrary, the Company, directly or indirectly through one or more of its Representatives, may:

 

  (i)

comply with all applicable Laws, including by issuing a “stop, look and listen” communication pursuant to Rule 14d-9(f) under the Exchange Act or complying with Rule 14d-9 and Rule 14e-2 under the Exchange Act with respect to a Company Alternative Proposal if the Company Board determines that its failure to do so would reasonably be likely to constitute a violation of applicable Laws;

 

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  (ii)

prior to the receipt of the Company Stockholder Approval, engage in the activities prohibited by Sections 6.4(b)(ii) or 6.4(b)(iii), solely with and to any Person who has made a written, bona fide Company Alternative Proposal that did not result from a breach of this Section 6.4; provided, however, that (A) no non-public information that is prohibited from being furnished pursuant to Section 6.4(b) may be furnished until the Company receives an executed confidentiality agreement from such Person (an accurate and complete copy of which shall be provided to Parent substantially concurrently with the Company’s entry into such confidentiality agreement) containing limitations on the use and disclosure of nonpublic information furnished to such Person by or on behalf of the Company that are no less favorable to the Company in the aggregate than the terms of the Confidentiality Agreement; provided, further, that such confidentiality agreement does not contain provisions that prohibit the Company from complying with the provisions of this Section 6.4 (such agreement, a “Company Acceptable Confidentiality Agreement”), (B) the Company also provides Parent, prior to or substantially concurrently with the time such non-public information is provided or made available to such Person, any non-public information furnished to such other Person that was not previously furnished to Parent, and (C) prior to taking any such actions, the Company Board (or a committee thereof) determines in good faith, after consultation with its financial advisors and legal counsel, that such Company Alternative Proposal is, or would reasonably be expected to lead to, a Company Superior Proposal and, after consultation with its legal counsel, that the failure to engage in such activities would be a breach of the Company Board’s fiduciary duties under applicable Law; and

 

  (iii)

prior to the receipt of the Company Stockholder Approval, in response to the Company’s receipt of a Company Alternative Proposal that did not result from a breach of this Section 6.4, if the Company Board (or any committee thereof) so chooses, cause the Company to effect a Company Change in Recommendation, if prior to taking such action (A) the Company Board (or a committee thereof) determines in good faith, after consultation with its financial advisors and legal counsel, that such Company Alternative Proposal is a Company Superior Proposal (taking into account any adjustment to the terms and conditions of this Agreement proposed by Parent in response to such Company Alternative Proposal), (B) the Company Board (or a committee thereof) has determined in good faith, after consultation with its legal counsel, that failure to do so would be a breach of the Company Board’s fiduciary duties under

 

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  applicable Law, and (C) the Company shall have given notice to Parent that the Company has received such proposal, specifying the material terms and conditions of such proposal, and that the Company intends to take such action, and either (1) Parent shall not have proposed revisions to the terms and conditions of this Agreement prior to the earlier to occur of the scheduled time for the Company Stockholders Meeting and the fifth Business Day after the date on which such notice is given to Parent, or (2) if Parent within the period described in the foregoing clause (1) shall have proposed revisions to the terms and conditions of this Agreement, the Company Board (or any committee thereof), after consultation with its financial advisors and legal counsel, shall, at the end of such period, have determined in good faith that the Company Alternative Proposal remains a Company Superior Proposal with respect to Parent’s revised proposal; provided, however, that each time material modifications to the financial terms of a Company Alternative Proposal determined to be a Company Superior Proposal are made, the time period set forth in this clause (C) following which the Company may effect a Company Change in Recommendation or terminate this Agreement shall be extended for 48 hours after notification of such change to Parent; provided, further, that during the time periods set forth in this clause (C) above, the Company shall cause its Representatives (including its executive officers) to be available to negotiate in good faith (to the extent Parent desires to negotiate) any proposal by Parent to amend the terms and conditions of this Agreement such that such Company Alternative Proposal would no longer constitute a Company Superior Proposal.

 

  (f)

Notwithstanding anything in this Agreement to the contrary, prior to the receipt of the Company Stockholder Approval, in response to a Company Intervening Event that occurs or arises after the date of this Agreement, the Company may, if the Company Board (or any committee thereof) so chooses, effect a Company Change in Recommendation (only of the type contemplated by Section 6.4(c)(i) or Section 6.4(c)(ii)) if prior to taking such action (A) the Company Board (or a committee thereof) determines in good faith after consultation with its legal counsel that the failure to take such action would be a breach of the Company Board’s fiduciary duties under applicable Law, (B) the Company shall have given notice to Parent that the Company has determined that a Company Intervening Event has occurred or arisen (which notice will reasonably describe such Company Intervening Event) and that the Company intends to effect a Company Change in Recommendation, and either (1) Parent shall not have proposed revisions to the terms and conditions of this Agreement prior to the earlier to occur of (y) the scheduled time for the Company Stockholders Meeting and (z) the fifth Business Day after the date on which such notice is given to Parent, or (2) if Parent within the period described in the foregoing clause (1) shall have proposed revisions to the terms and conditions of this Agreement, the Company Board (or any committee thereof), after consultation with its legal counsel, shall, at the end of such period, have determined in good faith that such proposed changes do not obviate the need for the Company Board to effect a Company Change in Recommendation and that the failure to make a Company Change in Recommendation would be a breach of the Company Board’s fiduciary duties under

 

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applicable Law, provided that during the time periods set forth in this clause (B) above, the Company shall cause its Representatives (including its executive officers) to be available to negotiate in good faith (to the extent Parent desires to negotiate) any proposal by Parent to amend the terms and conditions of this Agreement in a manner that would obviate the need to effect a Company Change in Recommendation.

(g) For purposes of this Section 6.4 and Section 6.5, the term “Person” means any Person or “group,” as defined in Section 13(d) of the Exchange Act, other than, with respect to the Company, Parent or any Parent Subsidiary and with respect to Parent, the Company.

(h) For the avoidance of doubt, any violation of the restrictions set forth in this Section 6.4 by any of the Company’s controlled Affiliates or any of their respective Representatives (solely in the case of Representatives, acting at the Company’s or any of the Company’s controlled Affiliates’ direction) shall be a breach of this Section 6.4 by the Company.

6.5 No Solicitation by Parent and Parent Change in Recommendation.

(a) From and after the date of this Agreement until the

Effective Time or, if earlier, the termination of this Agreement in accordance with Article VIII hereof, Parent will, and will cause the Parent Subsidiaries and the Parent Affiliates to, and will use commercially reasonable efforts to cause its and their Representatives to, as applicable, (i) immediately cease, and cause to be terminated, any solicitation, encouragement, discussion or negotiation with any Person conducted heretofore by Parent or any Parent Subsidiary or any of its or their Representatives with respect to any Parent Alternative Proposal, (ii) within two (2) Business Days of the date of this Agreement, request the prompt return or destruction of all confidential information previously furnished to any Person within the last six (6) months for the purposes of evaluating a possible Parent Alternative Proposal and (iii) immediately terminate access to any physical or electronic data rooms relating to a possible Parent Alternative Proposal.

(b) Except as otherwise expressly permitted by this Section 6.5, from and after the date of this Agreement until the Effective Time or, if earlier, the termination of this Agreement in accordance with Article VIII hereof, Parent will not, and will cause the Parent Subsidiaries and the Parent Affiliates not to, and will use commercially reasonable efforts to cause its and their Representatives not to, directly or indirectly, (i) initiate, solicit, propose or knowingly encourage or knowingly facilitate (including by furnishing or providing information or taking any other action) any inquiries, proposals, offers, requests for information, expressions of interest or the making, submission or announcement of any inquiry, proposal, offer, request for information or expression of interest from any Person which constitutes or may reasonably be expected to result in, a Parent Alternative Proposal, (ii) enter into, participate in or engage in any discussions or negotiations with any Person with respect to a Parent Alternative Proposal or any inquiry, indication of interest that would reasonably be expected to lead to a Parent Alternative Proposal, (iii) furnish any information regarding Parent or the Parent Subsidiaries, or access to the properties, assets or employees of Parent or the Parent Subsidiaries, to any Person in connection with or in response to a Parent Alternative Proposal, (iv) enter into any letter of intent or agreement in principle, or other agreement or arrangement providing for a Parent Alternative Proposal (other than a Parent Acceptable Confidentiality Agreement), (v) waive or release any person from, forebear in the enforcement of, or amend any standstill agreement or any standstill provisions of

 

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any other Contract, provided that if the Parent Board determines in good faith after consultation with Parent’s legal counsel that the failure to waive a particular standstill provision would be a breach of the Parent Board’s fiduciary duties under applicable Law, Parent may, with prior written notice to the Company, waive such standstill provision, solely to the extent necessary to permit a third party to make and pursue a Parent Alternative Proposal, (vi) take any action to make any “moratorium”, “control share acquisition”, “fair price”, “supermajority”, “affiliate transactions” or “business combination statute or regulation” or other similar Takeover Laws, including Section 203 of the DGCL, inapplicable to any Person (other than, for the avoidance of doubt, the Company or any Company Subsidiary) or any Parent Alternative Proposal or (vii) resolve, agree or publicly propose to, or permit Parent or any Parent Subsidiary or any of its or their Representatives to agree or publicly propose to take any of the actions referred to in clauses (i) – (vi).

(c) Unless specifically permitted by Section 6.5(e), Parent shall not (i) fail to include the Parent Board Recommendation in the Joint Proxy Statement/Prospectus, (ii) withdraw, modify or qualify, or propose publicly to withdraw, modify or qualify, in a manner adverse to the Company, the Parent Board Recommendation, (iii) recommend, adopt or approve, or propose publicly to recommend, adopt or approve, any Parent Alternative Proposal, (iv) fail to publicly reaffirm the Parent Board Recommendation within five (5) Business Days after the Company so requests in writing following any public disclosure of a Parent Alternative Proposal, (v) fail to recommend, in a Solicitation/Recommendation Statement on Schedule 14D-9, against any Parent Alternative Proposal subject to Regulation 14D under the Exchange Act within five (5) Business Days after the commencement of such Parent Alternative Proposal and (vi) approve or authorize, or cause or permit Parent or any Parent Subsidiary to enter into, any merger agreement, acquisition agreement, reorganization agreement, letter of intent, memorandum of understanding, agreement in principle, option agreement, joint venture agreement, partnership agreement or any other similar arrangement providing for any Parent Alternative Proposal (other than a Parent Acceptable Confidentiality Agreement) (the taking of any action described in this Section 6.5(c) being referred to as a “Parent Change in Recommendation”).

(d) From and after the date of this Agreement, Parent shall promptly (and in any event within 24 hours) advise the Company of the receipt by Parent or by any of Parent’s Affiliates or, to Parent’s Knowledge, its or their respective Representatives of any Parent Alternative Proposal made on or after the date of this Agreement or any inquiries, proposals, offers request for non-public information or data or expressions of interest relating to Parent or any Parent Subsidiary made by any Person that may reasonably be expected to result in a Parent Alternative Proposal or from any Person who has made or has communicated to Parent that it intends to make a Parent Alternative Proposal or any request for discussions or negotiations with Parent or a Representative of Parent relating to a Parent Alternative Proposal. Parent shall provide to the Company (within such 24 hour time frame) either (i) an unredacted copy of any such Parent Alternative Proposal made in writing provided to Parent or any Parent Subsidiary or any of their respective Representatives or, if such Parent Alternative Proposal is not in writing, a reasonably detailed written description of the material terms thereof (including the identity of the Person making such Parent Alternative Proposal and the price), or (ii) a written summary of the material terms of any such inquiry, proposal, offer, request or expression of interest (including the identity of the Person making such inquiry, proposal, offer, request or expression of interest and, as applicable, the nature of the information requested). Without limiting Parent’s other obligations under this Section 6.5, Parent shall keep the Company informed on a timely basis (and in any event

 

75


within 24 hours) with respect to the status and material terms of any such Parent Alternative Proposal and any material changes to the status of any such discussions or negotiations or the nature of any information requested of Parent with respect thereto, and shall promptly (and in no event later than 24 hours after transmittal or receipt) provide the Company with copies of any material correspondence and, with respect to material oral communications, a written summary of such correspondence or communications, between: (x) on the one hand, Parent or any of their Representatives; and (y) on the other hand, the Person that made or submitted such Parent Alternative Proposal or any Representative of such Person. Without limiting the foregoing, Parent shall promptly (and in any event within 24 hours after such determination) inform the Company in writing if Parent determines to begin providing non-public information or to engage in discussions or negotiations concerning a Parent Alternative Proposal pursuant to Section 6.5(e)(ii). Parent agrees that it will not, directly or indirectly, enter into any agreement with any Person which directly or indirectly prohibits Parent from providing any information to the Company in accordance with, or otherwise complying with, this Section 6.5.

(e) Notwithstanding anything in this Agreement to the contrary, Parent, directly or indirectly through one or more of its Representatives, may:

 

  (i)

comply with all applicable Laws, including by issuing a “stop, look and listen” communication pursuant to Rule 14d-9(f) under the Exchange Act or complying with Rule 14d-9 and Rule 14e-2 under the Exchange Act with respect to a Parent Alternative Proposal if the Parent Board determines that its failure to do so would reasonably be likely to constitute a violation of applicable Laws;

 

  (ii)

prior to the receipt of the Parent Stockholder Approval, engage in the activities prohibited by Sections 6.5(b)(ii) or 6.5(b)(iii), solely with and to any Person who has made a written, bona fide Parent Alternative Proposal that did not result from a breach of this Section 6.5; provided, however, that (A) no non-public information that is prohibited from being furnished pursuant to Section 6.5(b) may be furnished until Parent receives an executed confidentiality agreement from such Person (an accurate and complete copy of which shall be provided to the Company substantially concurrently with Parent’s entry into such confidentiality agreement) containing limitations on the use and disclosure of nonpublic information furnished to such Person by or on behalf of Parent that are no less favorable to Parent in the aggregate than the terms of the Confidentiality Agreement; provided, further, that such confidentiality agreement does not contain provisions that prohibit Parent from complying with the provisions of this Section 6.5 (such agreement, a “Parent Acceptable Confidentiality Agreement”), (B) Parent also provides the Company, prior to or substantially concurrently with the time such non-public information is provided or made available to such Person, any non-public information furnished to such other Person that was not previously furnished to the Company, and (C) prior to taking any such actions, the Parent

 

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  Board (or a committee thereof) determines in good faith, after consultation with its financial advisors and legal counsel, that such Parent Alternative Proposal is, or would reasonably be expected to lead to, a Parent Superior Proposal and, after consultation with its legal counsel, that the failure to engage in such activities would be a breach of the Parent Board’s fiduciary duties under applicable Law; and

 

  (iii)

prior to the receipt of the Parent Stockholder Approval, in response to Parent’s receipt of a Parent Alternative Proposal that did not result from a breach of this Section 6.5, if the Parent Board (or any committee thereof) so chooses, cause Parent to effect a Parent Change in Recommendation, if prior to taking such action (A) Parent Board (or a committee thereof) determines in good faith, after consultation with its financial advisors and legal counsel, that such Parent Alternative Proposal is a Parent Superior Proposal (taking into account any adjustment to the terms and conditions of this Agreement proposed by the Company in response to such Parent Alternative Proposal), (B) the Parent Board (or a committee thereof) has determined in good faith, after consultation with its legal counsel, that failure to do so would be a breach of the Parent Board’s fiduciary duties under applicable Law, and (C) Parent shall have given notice to the Company that Parent has received such proposal, specifying the material terms and conditions of such proposal, and that Parent intends to take such action, and either (1) the Company shall not have proposed revisions to the terms and conditions of this Agreement prior to the earlier to occur of the scheduled time for the Parent Stockholders Meeting and the fifth Business Day after the date on which such notice is given to the Company, or (2) if the Company within the period described in the foregoing clause (1) shall have proposed revisions to the terms and conditions of this Agreement, the Parent Board (or any committee thereof), after consultation with its financial advisors and legal counsel, shall, at the end of such period, have determined in good faith that the Parent Alternative Proposal remains a Parent Superior Proposal with respect to the Company’s revised proposal; provided, however, that each time material modifications to the financial terms of a Parent Alternative Proposal determined to be a Parent Superior Proposal are made, the time period set forth in this clause (C) following which Parent may effect a Parent Change in Recommendation or terminate this Agreement shall be extended for 48 hours after notification of such change to the Company; provided, further, that during the time periods set forth in this clause (C) above, Parent shall cause its Representatives (including its executive officers) to be available to negotiate in good faith (to the extent the Company desires to negotiate) any proposal by the Company to amend the terms and conditions of this Agreement such that such Parent Alternative Proposal would no longer constitute a Parent Superior Proposal.

 

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(f) Notwithstanding anything in this Agreement to the contrary, prior to the receipt of the Parent Stockholder Approval, in response to a Parent Intervening Event that occurs or arises after the date of this Agreement, Parent may, if the Parent Board (or any committee thereof) so chooses, effect a Parent Change in Recommendation (only of the type contemplated by Section 6.5(c)(i) or Section 6.5(c)(ii)) if prior to taking such action (A) the Parent Board (or a committee thereof) determines in good faith after consultation with its legal counsel that the failure to take such action would be a breach of the Parent Board’s fiduciary duties under applicable Law, (B) Parent shall have given notice to the Company that Parent has determined that a Parent Intervening Event has occurred or arisen (which notice will reasonably describe such Parent Intervening Event) and that Parent intends to effect a Parent Change in Recommendation, and either (1) the Company shall not have proposed revisions to the terms and conditions of this Agreement prior to the earlier to occur of (y) the scheduled time for the Parent Stockholders Meeting and (z) the fifth Business Day after the date on which such notice is given to the Company, or (2) if the Company within the period described in the foregoing clause (1) shall have proposed revisions to the terms and conditions of this Agreement, the Parent Board (or any committee thereof), after consultation with its legal counsel, shall, at the end of such period, have determined in good faith that such proposed changes do not obviate the need for the Parent Board to effect a Parent Change in Recommendation and that the failure to make a Parent Change in Recommendation would be a breach of the Parent Board’s fiduciary duties under applicable Law, provided that during the time periods set forth in this clause (B) above, Parent shall cause its Representatives (including its executive officers) to be available to negotiate in good faith (to the extent the Company desires to negotiate) any proposal by the Company to amend the terms and conditions of this Agreement in a manner that would obviate the need to effect a Parent Change in Recommendation.

(g) For the avoidance of doubt, any violation of the restrictions set forth in this Section 6.5 by any of Parent’s controlled Affiliates or any of their respective Representatives (solely in the case of Representatives, acting at Parent’s or any of Parent’s controlled Affiliates’ direction) shall be a breach of this Section 6.5 by Parent.

6.6 Access to Information: Confidentiality.

(a) From the date hereof until the Effective Time or the earlier termination of this Agreement in accordance with its terms, upon reasonable prior notice, the Company shall, and shall cause each of its Subsidiaries to, afford Parent and its Representatives reasonable access during normal business hours to (and, with respect to books and records, the right to copy) all of the Company’s and the Company Subsidiaries’ properties, offices, commitments, books, contracts, records and correspondence (in each case, whether in physical or electronic form), and Representatives. The Company shall furnish promptly to Parent (i) a copy of each report, schedule and other document filed or submitted by it pursuant to the requirements of federal or state securities Laws and a copy of any communication (including “comment letters”) received by the Company from the SEC concerning compliance with securities Laws and (ii) all other relevant information concerning its and its Subsidiaries’ business, properties and personnel as Parent may reasonably request. Notwithstanding the foregoing provisions of this Section 6.6(a), the Company

 

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shall not be required to, or to cause any of the Company Subsidiaries to, (i) grant such access if the Company reasonably determines that it would cause significant risk of (A) disrupting or impairing the business or operations of the Company or any of the Company Subsidiaries, (B) constituting a violation of any contract with respect to confidentiality or non-disclosure owing to a third party (including any Governmental Authority) to which the Company or any of the Company Subsidiaries is a party, (C) constituting a violation of any applicable Law, (D) disclosure of any information that in the reasonable judgment of the Company would result in the disclosure of any trade secrets or other confidential business information, or (E) resulting in a waiver of attorney-client privilege, work product doctrine or similar privilege, or (ii) grant access to conduct environmental sampling or testing or invasive or subsurface investigations.

(b) From the date hereof until the Effective Time or the earlier termination of this Agreement in accordance with its terms, upon reasonable prior notice, Parent shall, and shall cause each of its Subsidiaries to, afford the Company and its Representatives reasonable access during normal business hours to (and, with respect to books and records, the right to copy) all of Parent’s and the Parent Subsidiaries’ properties, offices, commitments, books, contracts, records and correspondence (in each case, whether in physical or electronic form), and Representatives. Parent shall furnish promptly to the Company (i) a copy of each report, schedule and other document filed or submitted by it pursuant to the requirements of federal or state securities Laws and a copy of any communication (including “comment letters”) received by Parent from the SEC concerning compliance with securities Laws and (ii) all other relevant information concerning its and its Subsidiaries’ business, properties and personnel as the Company may reasonably request. Notwithstanding the foregoing provisions of this Section 6.6(b), Parent shall not be required to, or to cause any of the Parent Subsidiaries to, (i) grant such access if Parent reasonably determines that it would cause significant risk of (A) disrupting or impairing the business or operations of Parent or any of the Parent Subsidiaries, (B) constituting a violation of any contract with respect to confidentiality or non-disclosure owing to a third party (including any Governmental Authority) to which Parent or any of the Parent Subsidiaries is a party, (C) constituting a violation of any applicable Law, (D) disclosure of any information that in the reasonable judgment of Parent would result in the disclosure of any trade secrets or other confidential business information, or (E) resulting in a waiver of attorney-client privilege, work product doctrine or similar privilege, or (ii) grant access to conduct environmental sampling or testing or invasive or subsurface investigations.

(c) The Confidentiality Agreement dated as of January 11, 2019 between Parent and the Company (the “Confidentiality Agreement”) shall survive the execution and delivery of this Agreement and shall apply to all information furnished thereunder or hereunder. All information provided to any party or its Representatives pursuant to or in connection with this Agreement is deemed to be “Confidential Information” as defined under the Confidentiality Agreement.

6.7 Public Statements. The initial press release with respect to the execution of this Agreement shall be a joint press release to be reasonably agreed upon by Parent and the Company. Parent and the Company will not, and each of the foregoing will cause its Representatives not to, issue any public announcements or make other public disclosures regarding this Agreement or the transactions contemplated hereby, without the prior written approval of the Other Party; provided, however, that a Party or its Representatives may issue a public announcement or other public disclosures required by Law or the rules of any stock exchange upon which such Party’s or its

 

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parent entity’s capital stock is traded, provided that such Party uses commercially reasonable efforts to afford the Other Party an opportunity to first review the content of the proposed disclosure and provide reasonable comments regarding same; provided, further, that this Section 6.7 shall not be deemed to restrict in any manner the Company’s ability to communicate with its employees and that the Company shall not be required by this Section 6.7 to consult with, or obtain the approval of, any Other Party with respect to a public announcement in connection with the receipt and existence of a Company Alternative Proposal and matters related thereto or a Company Change in Recommendation.

6.8 Takeover Laws. None of the Company, Parent or Merger Sub will take any action that would cause the transactions contemplated by this Agreement to be subject to requirements imposed by any Takeover Laws, and each of them will take all reasonable steps within its control to exempt (or ensure the continued exemption of) the transactions contemplated by this Agreement from the Takeover Laws of any state that purport to apply to this Agreement, the Designated Stockholder Voting Agreements or the transactions contemplated hereby.

6.9 Obligations of Merger Sub. Parent shall take all action reasonably necessary to cause Merger Sub to perform its obligations under this Agreement and to consummate the transactions contemplated hereby, including the Merger, upon the terms and subject to the conditions set forth in this Agreement.

6.10 Indebtedness.

(a) From and after the date of this Agreement, and through the earlier of the Effective Time and the date on which this Agreement is terminated in accordance with Article VIII, Parent shall, and shall cause each of the Parent Subsidiaries to, and shall use reasonable best efforts to cause its and their Representatives to provide timely cooperation in connection with the satisfaction of all conditions precedent to the Company Borrowing Base Amendment or any Company Refinancing Facility, as applicable, including:

 

  (i)

executing and delivering definitive financing documents, including guarantee and collateral documents, hedging agreements and other certificates and documents as may be reasonably requested by the Company, and, to the extent reasonably requested by the Company, making available appropriate members of senior management of Parent to assist in the negotiation of such agreements and other documents and instruments;

 

  (ii)

using commercially reasonable efforts to provide reasonable assistance to the Company in connection with the preparation of pro forma financial information to be included in any marketing materials to be used in connection with the Company Borrowing Base Amendment or any Company Refinancing Facility, as applicable;

 

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  (iii)

using commercially reasonable efforts to obtain consents of the auditors and the relevant independent reserve engineers of Parent for use of their reports in any materials relating to the Company Borrowing Base Amendment or any Company Refinancing Facility, as applicable, and using commercially reasonable efforts to cause such auditors and independent reserve engineers to cooperate with the Company; and

 

  (iv)

cooperating with the Company to satisfy the conditions precedent to the Company Borrowing Base Amendment or any Company Refinancing Facility, as applicable, to the extent within the control of Parent or its Affiliates, and taking all corporate or limited liability company actions, subject to the occurrence of the Closing, reasonably requested by the Company to permit the consummation of the Company Borrowing Base Amendment or any Company Refinancing Facility.

(b) Notwithstanding anything to the contrary in this Agreement, the Company will be responsible for the payment of all costs and expenses incurred by either Parent or Company in connection with the cooperation pursuant to and compliance with this Section 6.10.

6.11 Indemnification; Directors and Officers Insurance.

(a) Without limiting any additional rights that any director, officer, trustee, employee, agent, or fiduciary may have under any employment or indemnification agreement or under the Company’s Organizational Documents, or, if applicable, the Company Subsidiaries’ Organizational Documents, in each case as in effect on the date of this Agreement and made available to Parent, during the period commencing at the Effective Time and ending on the sixth anniversary of the Effective Time, Parent and the Surviving Entity, jointly and severally, will: (i) indemnify and hold harmless each person who (A) is now, or has been or becomes at any time prior to the Effective Time, an officer, director or employee of the Company or any Company Subsidiary or (B) was an officer, director or employee of Parent prior to the Effective Time but whose service to Parent in his or her capacity as an officer, director or employee, as applicable, was terminated or severed as part of the transactions contemplated hereby, and also with respect to any such Person, in such Person’s capacity as a director, officer, employee, member, trustee or fiduciary of another corporation, foundation, partnership, joint venture, trust, pension or other employee benefit plan or enterprise (regardless of whether such other entity or enterprise is affiliated with the Company or Parent, as and if applicable) serving at the request of or on behalf of the Company or any Company Subsidiary or Parent or any Parent Subsidiary, as and if applicable and together with such Person’s heirs, executors or administrators (collectively, the “Indemnified Parties”) to the fullest extent authorized or permitted by applicable Law in connection with any Proceeding and any losses, claims, damages, liabilities, costs, Indemnification Expenses, Judgments, fines, penalties and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of any thereof) resulting therefrom; and (ii) promptly pay on behalf of or, within five (5) days after any request for advancement, advance to each of the Indemnified Parties, any Indemnification Expenses incurred in defending, serving as a witness with respect to or otherwise participating with respect to any Proceeding in advance of the final disposition of such Proceeding, including payment on behalf of or advancement to the Indemnified Party of any Indemnification Expenses incurred by

 

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such Indemnified Party in connection with enforcing any rights with respect to such indemnification or advancement, in each case without the requirement of any bond or other security. The indemnification and advancement obligations of Parent and the Surviving Entity pursuant to this Section 6.11 extend to acts or omissions occurring at or before the Effective Time and any Proceeding relating thereto (including with respect to any acts or omissions occurring in connection with the consummation of the Merger and the transactions contemplated by this Agreement, including the consideration and approval thereof and the process undertaken in connection therewith and any Proceeding relating thereto), and all rights to indemnification and advancement conferred hereunder continue as to any Indemnified Party who has ceased to be a director or officer of the Company or any Company Subsidiary or Parent or any Parent Subsidiary after the date of this Agreement and inure to the benefit of such person’s heirs, executors and personal and legal representatives. As used in this Section 6.11: (x) the term “Indemnification Expenses” means documented out of pocket attorneys’ fees and expenses and all other reasonable and documented out of pocket costs, expenses and obligations (including experts’ fees, travel expenses, court costs, retainers, transcript fees, duplicating, printing and binding costs, as well as telecommunications, postage and courier charges) paid or incurred in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to investigate, defend, be a witness in or participate in, any Proceeding for which indemnification is sought pursuant to this Section 6.11, including any Proceeding relating to a claim for indemnification or advancement brought by an Indemnified Party; and (y) the phrase “to the fullest extent authorized or permitted by applicable Law” includes, but is not limited to (1) to the fullest extent authorized or permitted by any provision of the DGCL that authorizes or permits additional indemnification by agreement or otherwise, or the corresponding provision of any amendment to or replacement of the DGCL and (2) to the fullest extent authorized or permitted by any amendments to or replacements of the DGCL adopted after the date of this Agreement that increase the extent to which an entity may indemnify its directors, officers, trustees, employees, agents, or fiduciaries or persons serving in any capacity in which any Indemnified Party serves, provided that any amendment, alteration or repeal of the DGCL that adversely affects any right of any Indemnified Party will be prospective only and does not limit or eliminate any such right with respect to any Proceeding involving any occurrence or alleged occurrence of any action or omission to act that took place prior to such amendment or repeal. Neither Parent nor the Surviving Entity will settle, compromise or consent to the entry of any Judgment in any actual or threatened Proceeding in respect of which indemnification has been or could be sought by such Indemnified Party hereunder unless such settlement, compromise or Judgment includes an unconditional release of such Indemnified Party from all liability arising out of such Proceeding without admission or finding of wrongdoing, or such Indemnified Party otherwise consents thereto.

(b) Without limiting the foregoing, Parent and Merger Sub agree that all rights to indemnification, advancement of expenses and exculpation from liabilities for acts or omissions occurring at or prior to the Effective Time now existing in favor of the Indemnified Parties as provided in the Company’s Organizational Documents or the Company Subsidiaries’ Organizational Documents will be assumed by the Surviving Entity and Parent in the Merger, without further action, at the Effective Time and will survive the Merger and continue in full force and effect in accordance with their terms.

 

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(c) Parent’s Organizational Documents, each Parent Subsidiary’s Organizational Documents, the Surviving Entity’s Organizational Documents and each Company Subsidiary’s Organizational Documents will contain provisions no less favorable in the aggregate with respect to indemnification, advancement of expenses, exculpation and limitations on liability of directors and officers than are set forth in Parent’s Organizational Documents, each such Parent Subsidiary’s Organizational Documents, the Company’s Organizational Documents and each such Company Subsidiary’s Organizational Documents, which provisions will not be amended, repealed or otherwise modified for a period of six (6) years from the Effective Time in any manner that would affect adversely the rights thereunder of individuals who, at or prior to the Effective Time, were Indemnified Parties, unless such modification is required by Law and then only to the minimum extent required by Law; provided, however, that any such modification shall be prospective only and shall not limit or eliminate any such right with respect to any Proceeding involving any occurrence or alleged occurrence of any action or omission to act that took place prior to modification; and provided, further, that all rights to indemnification in respect of any Proceeding made within such period continue until the disposition of such Proceeding.

(d) Parent and the Company may each, on or prior to the Effective Time, obtain and purchase up to six (6) years of tail coverage for their respective current directors’ and officers’ liability and fiduciary liability insurance policies providing coverage for post-Effective Time claims asserting actual or alleged acts or omissions occurring prior to or at the Effective Time.

(e) If Parent, the Surviving Entity or any of their respective successors or assigns (i) consolidates with or merges with or into any other person and is not the continuing or surviving corporation, partnership or other entity of such consolidation or merger, or (ii) transfers or conveys all or substantially all of its properties and assets to any person, then, and in each such case, proper provision will be made so that the successors and assigns of Parent or the Surviving Entity assume the obligations set forth in this Section 6.11.

(f) Parent will cause the Surviving Entity to perform all of the obligations of the Surviving Entity under this Section 6.11.

(g) This Section 6.11 survives the consummation of the Merger and is intended to be for the benefit of, and to be enforceable by, the Indemnified Parties and their respective heirs and personal representatives, and will be binding on Parent, the Surviving Entity and their respective successors and assigns.

6.12 Section 16 Matters. Prior to the Effective Time, Parent, Merger Sub and the Company shall take all such steps as may be required to cause any dispositions of equity securities of the Company (including derivative securities) or acquisitions of equity securities of Parent (including derivative securities) in connection with this Agreement by each individual who is subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to the Company, or may become subject to such reporting requirements with respect to Parent, to be exempt under Rule 16b-3 under the Exchange Act.

 

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6.13 Employee Matters.

(a) Until December 31, 2019 (or, if earlier, an applicable Continuing Employee’s termination date) (the “Continuation Period”), Parent shall, and shall cause the Surviving Entity or LLC Sub to, provide to the employees of Parent and its Subsidiaries who remain as employees of Parent and its Subsidiaries following the Effective Time (each, a “Continuing Employee”), compensation and employee benefits (excluding any defined benefit pension, equity or equity-based, deferred compensation or post-termination or retiree health or welfare benefits) in a manner that neither favors nor disfavors such individual, in whole or in part, on the basis of whether such individual was an employee of Parent or any of its Subsidiaries, on the one hand, or the Company or any of its Subsidiaries on the other hand, immediately prior to the Effective Time; provided, however, that this Section 6.13 shall be deemed satisfied in the event Parent should for the Continuation Period, either (i) provide compensation and employee benefits (excluding any defined benefit pension, equity or equity-based, deferred compensation or post-termination or retiree health or welfare benefits) that are substantially comparable in the aggregate to the compensation and employee benefits (excluding any defined benefit pension, equity or equity-based, deferred compensation or post-termination or retiree health or welfare benefits) to which the Continuing Employees were entitled immediately prior to the Effective Time or (ii) provide compensation and employee benefits (excluding any defined benefit pension, deferred compensation or post-termination or retiree health or welfare benefits) to the Continuing Employees at the same level as applies to similarly situated individuals employed by the Company its Subsidiaries immediately prior to the Effective Time. Nothing herein shall limit the right of Parent or the employing Parent Subsidiary (including the Company and its Subsidiaries) to terminate the employment of any Continuing Employee at any time. During the Continuation Period, Parent will continue to maintain the Parent Severance Plan or a more favorable severance plan for the benefit of Continuing Employees, and Parent shall ensure the ongoing eligibility of any Continuing Employee who is employed by Parent as of December 31, 2019 and who, as of the Effective Time, was eligible to receive a payment under such plan based on continued service through December 31, 2019.

(b) During the Continuation Period, Parent shall take all commercially reasonable actions necessary or appropriate to permit each Continuing Employee to either continue to participate in the Parent Benefit Plans set forth on Section 5.12(a) of the Parent Disclosure Letter or be eligible to participate in the Company Benefit Plans set forth on Section 4.11(a) of the Company Disclosure Letter. To the extent Parent causes a Continuing Employee to cease to be eligible to participate in a Parent Benefit Plan and instead provides for such Continuing Employee to be eligible to participate in a Company Benefit Plan or other benefit plan sponsored or maintained by Parent or one of its Affiliates (the “Replacement Plans”) during the plan year in which the Closing Date occurs, if such Replacement Plan is a group health plan, Parent shall use commercially reasonable efforts to credit (or cause to be credited) such Continuing Employee, for the year during which such coverage under such Replacement Plan begins, with any deductibles and copayments already incurred during such year under the comparable Parent Benefit Plan. Parent, the Surviving Entity, LLC Sub, their Affiliates, and the Replacement Plans shall recognize each Continuing Employee’s years of service and level of seniority with the Parent and its Subsidiaries (including service and seniority with any other employer that was recognized prior to the Effective Time) for purposes of terms of employment and eligibility to participate, vesting and (for purposes of vacation and severance benefits only) benefit determination (but not for benefit accruals under any defined benefit or retiree welfare arrangement) under the Replacement Plans; provided, however, that (i) such service shall only be credited to the same extent and for the same purpose as such service was credited under the analogous Parent Benefit Plan set forth on Section 5.12(a) of the Parent Disclosure Letter and (ii) no such service shall be credited to the extent doing so would result in a duplication of benefits. Parent shall cause each Replacement Plan that is a group health plan to waive any preexisting condition exclusion or restriction with respect to participation and coverage requirements applicable to a Continuing Employee to the extent such exclusion or restriction did not apply with respect to such employee under the corresponding Parent Benefit Plan.

 

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(c) Parent expressly agrees and confirms its obligation to abide by and honor all of the terms of the Parent Benefit Plans as such Parent Benefit Plans are in effect, provided that nothing herein shall restrict Parent from amending, modifying or terminating any Parent Benefit Plan in accordance with (and only if permitted under) its terms or pursuant to agreement with an applicable participant, beneficiary or counterparty of or to such Parent Benefit Plan. Parent and Company further expressly agree that, except to the extent necessary to avoid a violation of Code Section 409A, the transactions contemplated by this Agreement shall be treated as a “change in control” as of the Effective Time for purposes of all Parent Benefit Plans, including the Parent Stock Plans and all applicable employment agreements in effect prior to the Effective Time to which any employee of Parent or its Subsidiaries is a party. Parent agrees to satisfy promptly all applicable severance, retention and change in control payments and benefits owing to Parent employees, directors and other service providers under the Parent Benefit Plans. Without limiting the foregoing, (i) with respect to any employee of Parent and its Subsidiaries whose employment is terminated without “cause” (as such term is defined in the applicable Parent Benefit Plan, but also including employees who are deemed to be terminated without cause pursuant to Section 6.13(d) below) on or within one year after the Closing Date, (A) all Parent Stock Options held by such employee shall become fully vested, (B) all Parent RSUs held by such employee shall become fully vested and shall be settled promptly upon termination, (C) all Parent PSUs that are subject to the achievement of specific Parent stock price levels shall be deemed earned at the level specified in Section 3(e)(ii) of the applicable award agreement and shall become vested and settled promptly upon termination, (D) all Parent PSUs that are not described in the foregoing clause (C) shall be deemed earned at the target level of such award and shall become vested and settled promptly upon termination, and (E) all cash amounts pursuant to the “Share Buyback Equalization Program” approved by the Company Board on December 21, 2018 (the “Equalization Program”) that are owing to such Parent employee(s) shall be paid promptly upon termination, (ii) all Parent RSUs held by members of the Parent Board shall become fully vested and shall be settled promptly upon the Closing Date, and (iii) all cash amounts pursuant to the Equalization Program that are owing to non-employee directors of the Company shall be paid promptly upon the Closing Date.

(d) At least one Business Day prior to the Closing Date, Parent shall cease contributions to, and adopt written resolutions to terminate, the Midstates Petroleum Company, LLC 401(k) Plan (the “Parent 401(k) Plan”) and to one hundred percent vest all participants under the Parent 401(k) Plan, such termination and vesting to be effective no later than the Business Day preceding the Closing Date. Prior to the execution of any such resolutions, Parent shall provide the Company unexecuted draft resolutions for Company’s review and consent.

(e) For purposes of Section 6.13(c) and for purposes of eligibility to receive severance payments under the Parent Severance Plan (or a replacement plan maintained or implemented in compliance with the last sentence of Section 6.13(a)), an employee of Parent shall be deemed to have been terminated without “cause” if such employee incurs a termination of employment with Parent or any of its Subsidiaries on or within one year after the Closing Date on account of such employee refusing to either (i) relocate his or her principal place of employment to a location that is more than 50 miles from his or her then current principal place of employment, or (ii) accept a job position that would result in a material diminution in duties, authority or responsibility.

 

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(f) Nothing in this Agreement shall constitute the establishment of or an amendment to, or be construed as establishing or amending, any benefit or compensation plan, program, contract, arrangement or agreement sponsored, maintained or contributed to by the Company, Parent or any of their respective Subsidiaries, and, subject to the last sentence of Section 6.13(a), nothing in this Agreement shall be deemed to alter or limit the ability of Parent or any of its Affiliates (including, following the Effective Time, the Surviving Entity and, following consummation of the LLC Sub Merger, LLC Sub) to amend, modify or terminate any benefit or compensation plan, program, policy, agreement or arrangement. The provisions of this Section 6.13 are for the sole benefit of the Parties and nothing herein, expressed or implied, is intended or will be construed to confer upon or give to any Person (including, for the avoidance of doubt, any Continuing Employee or other current or former employee of the Company or any Company Subsidiary), other than the Parties and their respective permitted successors and assigns, any legal or equitable or other rights or remedies under or by reason of any provision of this Agreement.

(g) Parent agrees, upon the Company’s reasonable request, to facilitate discussions between Parent and Company employees a reasonable time in advance of the Closing Date regarding employment, retention, consulting or other arrangements to be effective following the consummation of the Merger.

6.14 Transaction Litigation. The Company shall give Parent the opportunity to participate in the defense or settlement of any security holder litigation against the Company or its respective directors relating to the Merger and the other transactions contemplated by this Agreement, and no such settlement shall be agreed to without the prior written consent of Parent, which consent shall not be unreasonably withheld, conditioned or delayed. Parent shall give the Company the opportunity to participate in the defense or settlement of any security holder litigation against Parent or its directors relating to the Merger and the other transactions contemplated by this Agreement, and no such settlement shall be agreed to without the prior written consent of the Company, which consent shall not be unreasonably withheld, conditioned or delayed.

6.15 Cessation of Quotation. The Company will cooperate with Parent and use reasonable best efforts to take, or cause to be taken, all actions and all things reasonably necessary, proper or advisable on its part under applicable Laws and rules and policies of the OTCQX to cause the cessation of quotation of Company Common Stock on the OTCQX on the Closing Date and prior to the Effective Time.

6.16 Preparation of Form S-4 and Joint Proxy Statement/Prospectus.

(a) As promptly as reasonably practicable after the execution and delivery of this Agreement, the Company and Parent shall jointly prepare and cause to be filed with the SEC, in a form mutually acceptable to the Parties, a joint proxy statement/prospectus to be sent to the respective holders of Company Common Stock and Parent Common Stock in connection with the

 

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Company Stockholders Meeting and Parent Stockholders Meeting and the prospectus relating to the shares of Parent Common Stock to be issued in connection with the Merger (as amended or supplemented from time to time, the “Joint Proxy Statement/Prospectus”), and Parent shall prepare (with the Company’s reasonable cooperation) and file with the SEC the Form S-4, in which the Joint Proxy Statement/Prospectus will be included as a prospectus, in connection with the registration under the Securities Act of the shares of Parent Common Stock to be issued in connection with the Merger. Each of the Company and Parent shall use its commercially reasonable efforts to ensure that the Form S-4 and the Joint Proxy Statement/Prospectus comply as to form in all material respects with the rules and regulations promulgated by the SEC under the Exchange Act and the Securities Act and with all other applicable Law. Each of the Company and Parent, as applicable, shall ensure that the Joint Proxy Statement/Prospectus includes (i) the opinion of its financial advisor referred to in Section 4.24 and Section 5.25, as applicable, (ii) the Tax opinions referred to in Section 6.18(b) and (iii) a summary of the financial analysis conducted by such respective financial advisor. Subject to Section 6.4, Section 6.5 and Section 6.16(d), the Joint Proxy Statement/Prospectus shall include the Company Board Recommendation and Parent Board Recommendation. Parent and the Company shall use their respective commercially reasonable efforts to have the Form S-4 declared effective under the Securities Act as promptly as possible after filing thereof (including by responding to any comments of the SEC). Parent and the Company shall also make all necessary filings with respect to the Merger and the transactions contemplated herein under the Securities Act and the Exchange Act and any necessary state or “blue sky” securities Laws in connection with the issuance of shares of Parent Common Stock. Parent and the Company will cause the Joint Proxy Statement/Prospectus to be mailed to the respective holders of Parent Common Stock and Company Common Stock as soon as practicable after the Form S-4 is declared effective by the SEC.

(b) Each of Parent and the Company shall furnish all information concerning such Party and its Affiliates to the Other Party, and provide such other assistance, as may be reasonably requested by such Other Party and shall otherwise reasonably assist and cooperate with the Other Party in the preparation, filing, and, as applicable, distribution of the Joint Proxy Statement/Prospectus and the Form S-4 and the resolution of any comments received from the SEC. If at any time prior to the receipt of the Company Stockholder Approval and Parent Stockholder Approval, any information relating to the Company or Parent, or any of their respective Affiliates, directors or officers, should be discovered by the Company or Parent that is required to be set forth in an amendment or supplement to either the Joint Proxy Statement/Prospectus or the Form S-4, so that either such document would not include any misstatement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they are made, not false or misleading, the Party that discovers such information shall promptly notify the other Party and an appropriate amendment or supplement describing such information shall be promptly filed with the SEC and, with respect to the Joint Proxy Statement/Prospectus, to the extent required by applicable Law, disseminated to the respective holders of Parent Common Stock and Company Common Stock, as applicable.

(c) The Parties shall notify each other promptly of the receipt of any comments, whether written or oral, from the SEC or its staff and of any request by the SEC or its staff for amendments or supplements to the Joint Proxy Statement/Prospectus or the Form S-4 or for additional information and shall supply each other with copies of (i) all correspondence between

 

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any Party and/or any of its Representatives, on the one hand, and the SEC or its staff, on the other hand, with respect to the Joint Proxy Statement/Prospectus or the Form S-4 and (ii) all stop orders of the SEC relating to the Joint Proxy Statement/Prospectus or the Form S-4. Each Party shall give the Other Party and its counsel a reasonable opportunity to participate in preparing the proposed response by such Party to comments received from the SEC or its staff and to provide comments on any proposed response thereto, and such Party shall give reasonable consideration to such comments. Unless, in the case of Parent, the Parent Board has made a Parent Change in Recommendation or, in the case of the Company, the Company Board has made a Company Change in Recommendation:

 

  (i)

each of Parent and the Company shall use its reasonable best efforts (1) to respond as promptly as reasonably practicable to any comment from the SEC with respect to, or any request from the SEC for amendments or supplements to, the Joint Proxy Statement/Prospectus and (2) to have the SEC advise Parent and the Company as promptly as reasonably practicable that the SEC has no further comments on the Joint Proxy Statement/Prospectus; and

 

  (ii)

each of Parent and the Company shall file the Joint Proxy Statement/Prospectus in definitive form with the SEC and cause such definitive Joint Proxy Statement/Prospectus to be sent to the respective holders of Parent Common Stock and Company Common Stock as promptly as reasonably practicable after the SEC advises Parent and the Company that the SEC has no further comments on the Joint Proxy Statement/Prospectus.

(d) No amendment or supplement to the Joint Proxy Statement/Prospectus or the Form S-4 will be made by the Company or Parent without the approval of the Other Party, which approval shall not be unreasonably withheld, conditioned or delayed, provided that (i) the Company in connection with a Company Change in Recommendation made in compliance with the terms hereof may (and Parent shall comply with any request by the Company to) amend or supplement the Joint Proxy Statement/Prospectus (including by incorporation by reference) to the extent it contains (A) a Company Change in Recommendation, (B) a statement of the reasons of the Company Board for making such a Company Change in Recommendation and (C) additional information reasonably related to the foregoing and (ii) Parent in connection with a Parent Change in Recommendation made in compliance with the terms hereof may (and the Company shall comply with any request by Parent to) amend or supplement the Joint Proxy Statement/Prospectus (including by incorporation by reference) to the extent it contains (A) a Parent Change in Recommendation, (B) a statement of the reasons of the Parent Board for making such a Parent Change in Recommendation and (C) additional information reasonably related to the foregoing.

6.17 Company Stockholders Meeting; Parent Stockholders Meeting; Other Approvals.

(a) The Company shall take all action necessary in accordance with applicable Laws and the Organizational Documents of the Company to duly give notice of, convene and hold the Company Stockholders Meeting for the purpose of obtaining the Company Stockholder Approval, as promptly as reasonably practicable following the clearance of the Joint Proxy Statement/Prospectus by the SEC (and in any event no later than forty-five days thereafter). Except

 

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as otherwise expressly permitted by Section 6.4, the Company shall (i) through the Company Board, recommend, including through a recommendation in the Joint Proxy Statement/Prospectus, that the holders of Company Common Stock vote in favor of the approval of the adoption of this Agreement at the Company Stockholders Meeting and (ii) solicit from holders of Company Common Stock proxies in favor of the approval of the adoption of this Agreement. Notwithstanding anything to the contrary in this Agreement (except for the sentence immediately following this sentence), the Company (A) shall be required to adjourn or postpone the Company Stockholders Meeting (1) to the extent necessary to ensure that any required supplement or amendment to the Joint Proxy Statement/Prospectus is provided to the holders of Company Common Stock within a reasonable amount of time in advance of the Company Stockholders Meeting or (2) if, as of the time for which the Company Stockholders Meeting is scheduled, there are insufficient shares of Company Common Stock represented (either in person or by proxy) to constitute a quorum necessary to conduct business at such Company Stockholders Meeting and (B) may, and at Parent’s request shall, adjourn or postpone the Company Stockholders Meeting if, as of the time for which the Company Stockholders Meeting is scheduled, there are insufficient shares of Company Common Stock represented (either in person or by proxy) to obtain the Company Stockholder Approval; provided, however, that unless otherwise agreed to by the Parties, the Company Stockholders Meeting shall not be adjourned or postponed to a date that is more than twenty Business Days after the date for which the Company Stockholders Meeting was previously scheduled (it being understood that such Company Stockholders Meeting shall be adjourned or postponed every time the circumstances described in the foregoing clause (A)(1) and clause (A)(2) exist, and such Company Stockholders Meeting may be adjourned or postponed every time the circumstances described in the foregoing clause (B) exist) and provided, further, that the Company Stockholders Meeting shall not be adjourned or postponed to a date on or after two (2) Business Days prior to the Outside Date, as the same may be postponed in accordance with the terms of this Agreement. Notwithstanding the foregoing, the Company may adjourn or postpone the Company Stockholders Meeting to a date no later than the second Business Day after the expiration of the periods contemplated by Section 6.4(e) or Section 6.4(f). Unless this Agreement has been terminated in accordance with its terms, the Company’s obligation to call, give notice of, convene and hold the Company Stockholders Meeting in accordance with this Section 6.17(a) shall not be limited or otherwise affected by the making, commencement, disclosure, announcement or submission of any Company Alternative Proposal or Company Superior Proposal, or by any Company Change in Recommendation. If requested by Parent, the Company shall promptly provide to Parent all voting tabulation reports relating to the Company Stockholders Meeting that have been prepared by the Company or the Company’s transfer agent, proxy solicitor or other Representatives.

(b) Parent shall take all action necessary in accordance with applicable Laws and the Organizational Documents of Parent to duly give notice of, convene and hold the Parent Stockholders Meeting for the purpose of obtaining the Parent Stockholder Approval, as promptly as reasonably practicable following the clearance of the Joint Proxy Statement/Prospectus by the SEC (and in any event no later than forty-five days thereafter). Except as otherwise expressly permitted by Section 6.5, Parent shall (i) through the Parent Board, recommend, including through a recommendation in the Joint Proxy Statement/Prospectus, that the holders of Parent Common Stock vote in favor of the approval of the adoption of this Agreement at the Parent Stockholders Meeting and (ii) solicit from holders of the Parent Common Stock proxies in favor of the approval of the adoption of this Agreement. Notwithstanding anything to the contrary in this Agreement

 

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(except for the sentence immediately following this sentence), Parent (A) shall be required to adjourn or postpone the Parent Stockholders Meeting (1) to the extent necessary to ensure that any required supplement or amendment to the Joint Proxy Statement/Prospectus is provided to the holders of Parent Common Stock within a reasonable amount of time in advance of the Parent Stockholders Meeting or (2) if, as of the time for which the Parent Stockholders Meeting is scheduled, there are insufficient shares of Parent Common Stock represented (either in person or by proxy) to constitute a quorum necessary to conduct business at such Parent Stockholders Meeting and (B) may, and at the Company’s request shall, adjourn or postpone the Parent Stockholders Meeting if, as of the time for which the Parent Stockholders Meeting is scheduled, there are insufficient shares of Parent Common Stock represented (either in person or by proxy) to obtain the Parent Stockholder Approval; provided, however, that unless otherwise agreed to by the Parties, the Parent Stockholders Meeting shall not be adjourned or postponed to a date that is more than twenty Business Days after the date for which the Parent Stockholders Meeting was previously scheduled (it being understood that such Parent Stockholders Meeting shall be adjourned or postponed every time the circumstances described in the foregoing clause (A)(1) and clause (A)(2) exist, and such Parent Stockholders Meeting may be adjourned or postponed every time the circumstances described in the foregoing clause (B) exist) and provided, further, that the Parent Stockholders Meeting shall not be adjourned or postponed to a date on or after two (2) Business Days prior to the Outside Date, as the same may be postponed in accordance with the terms of this Agreement. Notwithstanding the foregoing, Parent may adjourn or postpone the Parent Stockholders Meeting to a date no later than the second Business Day after the expiration of the periods contemplated by Section 6.5(e) or Section 6.5(f). Unless this Agreement has been terminated in accordance with its terms, Parent’s obligation to call, give notice of, convene and hold the Parent Stockholders Meeting in accordance with this Section 6.17(b) shall not be limited or otherwise affected by the making, commencement, disclosure, announcement or submission of any Parent Alternative Proposal or Parent Superior Proposal, or by any Parent Change in Recommendation. If requested by the Company, Parent shall promptly provide to the Company all voting tabulation reports relating to the Parent Stockholders Meeting that have been prepared by Parent or Parent’s transfer agent, proxy solicitor or other Representatives.

(c) Immediately after the execution of this Agreement, Parent shall duly approve and adopt this Agreement in its capacity as sole stockholder of Merger Sub in accordance with applicable Law and the certificate of incorporation and bylaws or equivalent Organizational Documents of Merger Sub and deliver to the Company evidence of its vote or action by written consent so approving and adopting this Agreement.

6.18 Intended Tax Treatment.

(a) The Parties intend that the Integrated Mergers, taken together, will qualify for the Intended Tax Treatment, shall report the Integrated Mergers, taken together, as such for U.S. federal and applicable state and local income Tax purposes and shall not take any position inconsistent with such treatment unless otherwise required to do so pursuant to a final determination within the meaning of Section 1313(a) of the Code or applicable state or local income Tax Law. Both prior to and following the Effective Time, Parent and the Company shall use their commercially reasonable efforts, and shall cause their respective Subsidiaries to use their commercially reasonable efforts, to take or cause to be taken any action necessary for the Integrated Mergers, taken together, to qualify for the Intended Tax Treatment, including by reasonably refraining from any action that such party knows, or is reasonably expected to know, would impede or prevent the Intended Tax Treatment.

 

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(b) Parent and the Company shall cooperate and use, and shall cause their respective Subsidiaries to cooperate and use, their commercially reasonable efforts to obtain any Tax opinions required to be filed with the SEC in connection with the filing of the Form S-4. Such efforts shall include (i) Parent, Merger Sub and LLC Sub delivering to Latham & Watkins LLP and Kirkland & Ellis LLP Tax representation letters in substantially the form set forth in Exhibit C and (ii) the Company delivering to Latham & Watkins LLP and Kirkland & Ellis LLP Tax representation letters in substantially the form set forth in Exhibit D, in each case, with any modifications thereto that are reasonably requested by counsel and dated and executed as of the date the Form S-4 shall have been declared effective by the SEC or such other date(s) as determined reasonably necessary by Latham & Watkins LLP or Kirkland & Ellis LLP in connection with the filing of the Form S-4 or its exhibits.

(c) Parent and the Company shall cooperate and use, and shall cause their respective Subsidiaries to cooperate and use, their commercially reasonable efforts to obtain the Company Tax Opinion and Parent Tax Opinion. Such efforts shall include (i) Parent, Merger Sub and LLC Sub delivering to Latham & Watkins LLP and Kirkland & Ellis LLP Tax representation letters in substantially the form set forth in Exhibit C and (ii) the Company delivering to Latham & Watkins LLP and Kirkland & Ellis LLP Tax representation letters in substantially the form set forth in Exhibit D, in each case, with any modifications thereto that are reasonably requested by Latham & Watkins LLP or Kirkland & Ellis LLP and dated and executed as of the date of the Company Tax Opinion and Parent Tax Opinion.

(d) This Agreement is intended to constitute and is adopted as a “plan of reorganization” for purposes of Sections 354 and 361 of the Code and within the meaning of Treasury Regulations Section 1.368-2(g) and 1.368-3(a).

6.19 Treatment of Company Warrants. Prior to the Effective Time, Parent and the Company shall make all necessary and appropriate provisions to ensure that, pursuant to the terms of the Company Warrant Agreement, holders of the Company Warrants have the right to acquire and receive, upon the exercise of such warrants, the number of shares of Parent Common Stock that would have been issued or paid to the holders of the Company Warrants if such holders were to have exercised the Company Warrants immediately prior to the Effective Time, including Parent’s assumption by written instrument of the obligations to deliver to each such holder such shares of Parent Common Stock pursuant to the terms of the Company Warrant Agreement.

6.20 Treatment of Company Registration Rights Agreement. Prior to the Effective Time, Parent and the Company shall use reasonable best efforts to cause the assumption by Parent of the obligations of the Company under that certain Registration Rights Agreement, dated May 4, 2017, by and between the Company and certain holders of Company Common Stock party thereto (the “Company Registration Rights Agreement”), which efforts shall include negotiating in good faith to enter into a consolidated registration rights agreement among Parent and the holders of Company Common Stock that are party to the Company Registration Rights Agreement and the holders of Parent Common Stock that are party to that certain Registration Rights Agreement, dated October 21, 2016, by and between Parent and certain holders of Parent Common Stock party thereto.

 

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6.21 Waiver of Company Change in Control Payments. Prior to the Effective Time, the Company shall use its commercially reasonable efforts to obtain written waivers from any current or former director, officer, employee, contractor, consultant of the Company or any Company Subsidiary for which the consummation of the Merger would accelerate the time of payment or vesting, or trigger any payment or funding, of any compensation, equity award or other benefits under any Company Benefit Plan (the “Company CIC Payments”), with such waivers to expressly waive the right to receive any such Company CIC Payments in relation to the consummation of the Merger.

ARTICLE VII

CONDITIONS TO CONSUMMATION OF THE MERGER

7.1 Mutual Closing Conditions. The obligations of each of the Parties to consummate the Merger are conditioned upon the satisfaction at or prior to the Closing (or waiver by both the Company and Parent) of each of the following:

(a) Stockholder approvals. The Parent Stockholder Approval and Company Stockholder Approval shall have been obtained.

(b) Effectiveness of Form S-4. The Form S-4 shall have been declared effective under the Securities Act and shall not be the subject of any stop order or Proceeding seeing a stop order.

(c) No Injunctions or Restraints. No Law (whether preliminary, temporary or permanent) issued, enacted, promulgated, entered or enforced by a court of competent jurisdiction or other Governmental Entity having jurisdiction over any Party restraining, enjoining, prohibiting or rendering illegal the consummation of the transactions contemplated by this Agreement (brought by a third party) is in effect, and no Proceeding before a Governmental Entity seeking such a Law shall be pending.

(d) Regulatory Approval. All Consents necessary, proper or advisable to consummate the Merger shall have been obtained and all applicable waiting periods under the HSR Act shall have expired or been terminated.

(e) Listing. The shares of Parent Common Stock to be issued in the Merger shall have been approved for listing on the NYSE, subject to official notice of issuance.

7.2 Conditions to Parents and Merger Subs Obligations to Effect the Merger. The obligations of Parent and Merger Sub to consummate the Merger shall be subject to the satisfaction on or prior to the Closing Date of each of the following conditions, any and all of which may be waived in whole or in part by Parent and Merger Sub, to the extent permitted by applicable Law:

 

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(a) the representations and warranties of the Company contained in (i) this Agreement (other than in Section 4.2(a) and Section 4.8(a)) shall be true and correct as of the date of this Agreement and as of the Closing Date, as if made as of such time (except to the extent expressly made as of an earlier date, in which case as of such date), except where the failure of such representations and warranties to be so true and correct (without giving effect to any limitation as to “materiality” or “Company Material Adverse Effect” set forth in any individual such representation or warranty) would not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect, (ii) Section 4.2(a) shall be true and correct as of the date of this Agreement and as of the Closing Date, as if made as of such time (except to the extent expressly made as of an earlier date, in which case as of such date), except for any Immaterial Inaccuracies, and (iii) Section 4.8(a) shall be true and correct as of the date of this Agreement and as of the Closing Date, as if made as of such time;

(b) the Company shall have performed or complied in all material respects with its obligations or covenants under the Agreement required to be performed or complied with by it under the Agreement at or prior to the Effective time;

(c) prior to the Effective Time, the Company shall deliver to Parent a certificate, signed on behalf of the Company by its chief executive officer or chief financial officer that the conditions set forth in clauses (a), (b) and (c) above shall have occurred and be continuing as of the Effective Time; and

(d) Parent shall have received a written Tax opinion from Latham & Watkins LLP, counsel to Parent (or, if Latham & Watkins LLP is unable to deliver such opinion, Kirkland & Ellis LLP), dated as of the Closing Date, in form and substance reasonably satisfactory to Parent and based on the facts, representations, assumptions and exclusions set forth or described in such opinion, to the effect that the Integrated Mergers, taken together, will qualify for the Intended Tax Treatment (the “Parent Tax Opinion”). Latham & Watkins LLP or Kirkland & Ellis LLP, as applicable, shall be entitled to rely upon customary assumptions, representations, warranties, and covenants from each of the Company, Parent, Merger Sub and LLC Sub (or any other relevant parties), in each case, in form and substance reasonably satisfactory to Latham & Watkins LLP or Kirkland & Ellis LLP, as applicable, including Tax representation letters in substantially the forms set forth in Exhibit C hereto and Exhibit D hereto, with any modifications to such representation letters that are reasonably requested by Latham & Watkins LLP or Kirkland & Ellis LLP, as applicable. Each such representation letter shall be dated as of the date of the Parent Tax Opinion.

7.3 Conditions to the Companys Obligations to Effect the Merger. The obligations of the Company to consummate the Merger shall be subject to the satisfaction on or prior to the Closing Date of each of the following conditions, any and all of which may be waived in whole or in part by the Company, to the extent permitted by applicable Law:

(a) the representations and warranties of Parent contained in (i) this Agreement (other than in Section 5.2(a) and Section 5.9(a)) shall be true and correct as of the date of this Agreement and as of the Closing Date, as if made as of such time (except to the extent expressly made as of an earlier date, in which case as of such date), except where the failure of such representations and warranties to be so true and correct (without giving effect to any limitation as to “materiality” or “Parent Material Adverse Effect” set forth in any individual such representation or warranty) would not reasonably be expected, individually or in the aggregate, to have a Parent Material Adverse Effect, (ii) Section 5.2(a) shall be true and correct as of the date of this

 

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Agreement and as of the Closing Date, as if made as of such time (except to the extent expressly made as of an earlier date, in which case as of such date), except for any Immaterial Inaccuracies, and (iii) Section 5.9(a) shall be true and correct as of the date of this Agreement and as of the Closing Date, as if made as of such time;

(b) Parent and Merger Sub shall have performed or complied in all material respects with their respective obligations or covenants under the Agreement required to be performed or complied with by them under the Agreement at or prior to the Effective time;

(c) not less than three (3) Business Days prior to the Closing Date, the Company shall have received payoff letters from each holder of Payoff Indebtedness that will be outstanding immediately prior to the Closing, in form reasonably satisfactory to the Company, setting forth the total amounts payable to each such holder, agent and trustee of such Payoff Indebtedness to fully satisfy all principal, interest, and all fees, costs and expenses as of the anticipated Closing Date (and the daily accrual thereafter), together with appropriate wire instructions, and the agreement of each such holder, agent and trustee of Payoff Indebtedness that upon payment in full of such amounts owed to such holder, agent or trustee, the loan documents and, if applicable, the indenture documents related to such Payoff Indebtedness shall be terminated with respect to Parent and the Parent Subsidiaries that are borrowers, issuers or guarantors thereof (or the assets or equity of which secure such Indebtedness) and such holder, agent or trustee shall release and terminate all Liens on Parent and the Parent Subsidiaries and their respective assets and equity securing such Payoff Indebtedness (the “Payoff Letters”), together with any applicable documents necessary to evidence the release and termination of all Liens on Parent and the Parent Subsidiaries and their respective assets and equity securing, and any guarantees by Parent and the Parent Subsidiaries in respect of, such Payoff Indebtedness;

(d) prior to the Effective Time, Parent shall deliver to the Company a certificate, signed on behalf of Parent by its chief executive officer or chief financial officer that the conditions set forth in clauses (a) and (b) above shall have occurred and be continuing as of the Effective Time; and

(e) The Company shall have received a written Tax opinion from Kirkland & Ellis LLP, counsel to the Company (or, if Kirkland & Ellis LLP is unable to deliver such opinion, Latham & Watkins LLP), dated as of the Closing Date, in form and substance reasonably satisfactory to the Company and based on the facts, representations, assumptions and exclusions set forth or described in such opinion, to the effect that the Integrated Mergers, taken together, will qualify for the Intended Tax Treatment (the “Company Tax Opinion”). Kirkland & Ellis LLP or Latham & Watkins LLP, as applicable, shall be entitled to rely upon customary assumptions, representations, warranties, and covenants from each of the Company, Parent, Merger Sub and LLC Sub (or any other relevant parties), in each case, in form and substance reasonably satisfactory to Kirkland & Ellis LLP or Latham & Watkins LLP, as applicable, including Tax representation letters in substantially the forms set forth in Exhibit C hereto and Exhibit D hereto, with any modifications to such representation letters that are reasonably requested by Kirkland & Ellis LLP or Latham & Watkins LLP, as applicable. Each such representation letter shall be dated as of the date of the Company Tax Opinion.

 

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7.4 Frustration of Closing Conditions. None of the Parties may rely, either as a basis for not consummating the Merger or for terminating this Agreement, on the failure of any condition set forth in Sections 7.1, 7.2 or 7.3 to be satisfied if such failure was caused by such Party’s breach of any provision of this Agreement.

ARTICLE VIII

TERMINATION

8.1 Termination of Agreement. This Agreement may be terminated at any time prior to the Closing as follows:

(a) by the mutual written consent of the Company and Parent;

(b) by the Company or Parent if there is in effect a final nonappealable order of a Governmental Entity of competent jurisdiction restraining, enjoining or otherwise prohibiting the consummation of the transactions contemplated hereby or if there is adopted any Law that permanently makes consummation of the transactions illegal or otherwise permanently prohibited, provided that the right to terminate this Agreement under this Section 8.1(b) is not available to the Company, on the one hand, or Parent, on the other hand, if such order was primarily due to a material breach by the Company, on the one hand, or either of Parent or Merger Sub, on the other hand, of this Agreement;

(c) by the Company or Parent if, (i) after final adjournment or postponement of the Parent Stockholders Meeting at which a vote of the holders of Parent Common Stock has been taken in accordance with this Agreement, the Parent Stockholder Approval has not been obtained or (ii) after final adjournment or postponement of the Company Stockholders Meeting at which a vote of the holders of Company Common Stock has been taken in accordance with this Agreement, the Company Stockholder Approval has not been obtained;

(d) by Parent if (i) the Company has breached or failed to perform any of its representations, warranties, covenants or agreements set forth in this Agreement, or (ii) any representation or warranty of the Company becomes untrue, and, with respect to either clause (i) or (ii) above, which breach, failure to perform or untruth if it was continuing as of the Closing Date would result in the failure of the conditions set forth in Section 7.2(a) or Section 7.2(b) to be satisfied and such breach, failure to perform or untruth is incapable of being cured (or becoming true) or, if capable of being cured (or becoming true), is not cured (or does not become true) by the earlier of (x) the Outside Date or (y) within 30 days following receipt by the Company of notice of such breach, failure or untruth from Parent, provided that Parent and Merger Sub are not in material breach of this Agreement and that no Parent Designated Stockholder is in material breach of its obligations under the applicable Designated Stockholder Voting Agreement;

(e) by the Company if (i) Parent has breached or failed to perform any of its representations, warranties, covenants or agreements set forth in this Agreement, or (ii) any representation or warranty of Parent becomes untrue, and, with respect to either clause (i) or (ii) above, which breach, failure to perform or untruth if it was continuing as of the Closing Date would result in the failure of the conditions set forth in Section 7.3(a) or Section 7.3(b) to be satisfied and such breach, failure to perform or untruth is incapable of being cured (or becoming

 

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true) or, if capable of being cured (or becoming true), is not cured (or does not become true) by the earlier of (x) the Outside Date or (y) within 30 days following receipt by Parent of notice of such breach, failure or untruth from the Company, provided that the Company is not in material breach of this Agreement and that no Company Designated Stockholder is in material breach of its obligations under the applicable Designated Stockholder Voting Agreement;

(f) by the Company or Parent if the Closing does not occur on or before the date that is six (6) months from the date hereof (the “Outside Date”), provided that such failure of the Closing to occur is not due to the failure of such Party to perform and comply in all material respects with the covenants and agreements to be performed or complied with by such Party prior to the Closing;

(g) by Parent, if (i) prior to, but not after, the time the Company Stockholder Approval is obtained, the Company Board (or a committee thereof) shall have effected a Company Change in Recommendation or (ii) the Company is in violation in any material respect of its obligations under Section 6.4;

(h) by the Company, if (i) prior to, but not after, the time the Parent Stockholder Approval is obtained, the Parent Board (or a committee thereof) shall have effected a Parent Change in Recommendation or (ii) Parent is in violation in any material respect of its obligations under Section 6.5;

(i) by Parent, if any of the Company Designated Stockholders fail to execute and deliver to Parent the applicable Designated Stockholder Voting Agreement within one business day following the execution of this Agreement; and

(j) by the Company if any of the Parent Designated Stockholders fail to execute and deliver to the Company the applicable Designated Stockholder Voting Agreement within one business day following the execution of this Agreement.

8.2 Procedure Upon Termination. In the event of termination of this Agreement by Parent or the Company, or both, pursuant to Section 8.1, written notice thereof shall be given to the Other Party, and this Agreement will terminate without further action by Parent or the Company.

8.3 Effect of Termination. In the event that this Agreement is validly terminated as provided in Section 8.1, then each of the Parties will be relieved of its duties and obligations arising under this Agreement after the date of such termination and such termination will be without liability to Parent or the Company, provided that the agreements and obligations of the Parties set forth in Section 6.6(c), this Section 8.3, Section 8.4 and Article IX hereof will survive any such termination and are enforceable hereunder; provided, further, that nothing in this Section 8.3 relieves any of Parent, Merger Sub or the Company of any liability for fraud or any Willful Breach of this Agreement occurring prior to termination, or as provided in the Confidentiality Agreement, in which case the aggrieved Party shall be entitled to all rights and remedies available at Law or in equity (in the case of the Confidentiality Agreement, subject to the terms thereof). “Willful Breach” means an intentional and willful material breach, or an intentional and willful material failure to perform, in each case, that is the consequence of an act or omission by a Party with the Knowledge that the taking of, or failure to take, such act would, or would reasonably be expected to, cause a material breach of this Agreement.

 

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8.4 Fees and Expense Reimbursement.

(a) In the event that (i) a Company Alternative Proposal is publicly submitted, publicly proposed, publicly disclosed or otherwise communicated to the Company Board prior to, and not withdrawn at the time of, the Company Stockholders Meeting, (ii) this Agreement is terminated by Parent pursuant to Section 8.1(d) (Company Terminable Breach) or by the Company or Parent pursuant to Section 8.1(f) (Outside Date) or Section 8.1(c)(ii) (Failure to Obtain Company Stockholder Approval), and (iii) the Company enters into a definitive agreement with respect to, or consummates, a Company Alternative Proposal within 12 months after the date this Agreement is terminated, then the Company will pay to Parent the Company Termination Fee, within two (2) Business Days of the consummation of such Company Alternative Proposal. For purposes of this Section 8.4(a), any reference in the definition of Company Alternative Proposal to “15%” shall be deemed to be to be a reference to “more than 50%.”

(b) In the event that (i) a Parent Alternative Proposal is publicly submitted, publicly proposed, publicly disclosed or otherwise communicated to the Parent Board prior to, and not withdrawn at the time of, the Parent Stockholders Meeting, (ii) this Agreement is terminated by the Company pursuant to Section 8.1(e) (Parent Terminable Breach) or by Parent or the Company pursuant to Section 8.1(f) (Outside Date) or Section 8.1(c)(i) (Failure to Obtain Parent Stockholder Approval), and (iii) Parent enters into a definitive agreement with respect to, or consummates, a Parent Alternative Proposal within 12 months after the date this Agreement is terminated, then Parent will pay to the Company the Parent Termination Fee, within two (2) Business Days of the consummation of such Parent Alternative Proposal. For purposes of this Section 8.4(b), any reference in the definition of Parent Alternative Proposal to “15%” shall be deemed to be to be a reference to “more than 50%.”

(c) In the event this Agreement is terminated by Parent or the Company pursuant to Section 8.1(c)(ii) (Failure to Obtain Company Stockholder Approval) or by Parent pursuant to Section 8.1(d) (Company Terminable Breach), then the Company will pay to Parent the Parent Expenses (unless Parent is then entitled to terminate this Agreement pursuant to Section 8.1(g) (Company Change in Recommendation or Material Breach of Non-Solicit), in which event the Company will pay to Parent the Company Termination Fee) within two (2) Business Days after the date of such termination.

(d) In the event this Agreement is terminated by Parent or the Company pursuant to Section 8.1(c)(i) (Failure to Obtain Parent Stockholder Approval) or by Company pursuant to Section 8.1(e) (Parent Terminable Breach), then Parent will pay to the Company the Company Expenses (unless the Company is then entitled to terminate this Agreement pursuant to Section 8.1(h) (Parent Change in Recommendation or Material Breach of Non-Solicit), in which event Parent will pay to the Company the Parent Termination Fee) within two (2) Business Days after the date of such termination.

(e) In the event this Agreement is terminated by Parent pursuant to Section 8.1(g) (Company Change in Recommendation or Material Breach of Non-Solicit), the Company will pay to Parent the Company Termination Fee within two (2) Business Days after the date of such termination.

 

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(f) In the event this Agreement is terminated by the Company pursuant to Section 8.1(e) (Parent Change in Recommendation or Material Breach of Non-Solicit), then Parent will pay to the Company the Parent Termination Fee within two (2) Business Days after the date of such termination.

(g) Any payment of the Parent Termination Fee, the Company Termination Fee, Parent Expenses or Company Expenses will be made in cash by wire transfer of same day funds to an account designated in writing by the recipient of such payment.

(h) Each of the Parties acknowledges that the provisions of this Section 8.4 are an integral part of the transactions contemplated hereby and that, without these agreements, the Other Party would not enter into this Agreement. The Parties agree that (i) in the event that the Company pays the Company Termination Fee to Parent, the Company has no further liability to Parent of any kind in respect of this Agreement and the transactions contemplated hereby and (ii) in the event that Parent pays the Parent Termination Fee to the Company, Parent and Merger Sub have no further liability to the Company of any kind in respect of this Agreement and the transactions contemplated hereby. Each Party further acknowledges that any such Termination Fee is not a penalty, but rather is liquidated damages in a reasonable amount that will compensate the Company or Parent and Merger Sub, as applicable, in the circumstances under which such Termination Fee is payable for the efforts and resources expended and opportunities foregone while negotiating this Agreement and in reliance on this Agreement and on the expectation of the consummation of the transactions contained herein, including the Merger. In addition, if either the Company or Parent fails to pay in a timely manner any amount due pursuant to this Section 8.4, then (i) such Party shall reimburse the other Party for all costs and expenses (including disbursements and fees of counsel) incurred in the collection of such overdue amounts, including in connection with any related claims or Proceedings commenced and (ii) such Party shall pay to the other Party interest on the amounts payable pursuant to this Section 8.4, including the costs and expenses described in clause (i) of this Section 8.4(h) from and including the date payment of such amounts were due through the date of actual payment at the prime rate set forth in The Wall Street Journal in effect on the date such payment was required to be made plus six percent (6%).

(i) As used herein, “Parent Termination Fee” means an amount equal to $4,500,000, and “Company Termination Fee” means an amount equal to $4,500,000 (each, a “Termination Fee”).

(j) In no event shall Parent or Company be entitled to more than one payment of a Parent Termination Fee, Company Termination Fee, Parent Expenses or Company Expenses, as applicable, in connection with this Agreement.

(k) Except as otherwise provided in this Agreement, each Party shall pay its own expenses incident to preparing for, entering into and carrying out this Agreement and the consummation of the transactions contemplated by this Agreement. For the avoidance of doubt, Parent shall bear and pay the expenses incurred in connection with the filing of the Form S-4 and the printing and mailing to the holders of Parent Common of the Joint Proxy Statement/Prospectus Stock and the Company shall bear and pay the expenses incurred in connection with the filing, printing and mailing to the holders of Company Common Stock of the Joint Proxy Statement/Prospectus.

 

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ARTICLE IX

MISCELLANEOUS

9.1 Amendment or Supplement. At any time prior to the Effective Time, this Agreement may be amended or supplemented in any and all respects by written agreement of the Parties hereto, by action taken or authorized by their respective boards of directors; provided, however, that there will be no amendment or change to the provisions of this Agreement that by Law would require approval by the Company stockholders unless such approval is obtained.

9.2 Counterparts. This Agreement may be executed in any number of counterparts, each of which is an original, and all of which, when taken together, constitute one Agreement. Delivery of an executed signature page of this Agreement by facsimile or other customary means of electronic transmission (e.g., “pdf”) will be effective as delivery of a manually executed counterpart hereof.

9.3 Notices. All notices and other communications hereunder will be in writing and deemed given if (a) delivered personally, (b) if transmitted by facsimile (upon confirmation of transmission by the transmitting equipment) (c) if transmitted by electronic mail (“e-mail”) (if confirmation of receipt of such e-mail is requested and received), or (d) mailed by a nationally recognized overnight courier or registered or certified mail (return receipt requested), postage prepaid, to the Parties at the following addresses (or at such other address for a Party as specified by like notice, provided that notices of a change of address will be effective only upon receipt thereof):

 

  (a)

If to Parent or Merger Sub, to:

Midstates Petroleum Company, Inc.

321 South Boston, Suite 1000

Tulsa, OK 74103

Attention: Scott C. Weatherholt

Email: scott.weatherholt@midstatespetroleum.com

With a copy to (which does not constitute notice):

Latham & Watkins LLP

811 Main Street, Suite 3700

Houston, Texas 77002

Attention: Ryan J. Maierson and William N. Finnegan IV

Email: ryan.maierson@lw.com

bill.finnegan@lw.com

Facsimile: (713) 546-5401

 

99


  (b)

If to the Company, to:

Amplify Energy Corp.

500 Dallas Street, Suite 1700

Houston, Texas 77002

Attention: Eric Willis

Email: eric.willis@amplifyenergy.com

With a copy to (which does not constitute notice):

Kirkland & Ellis LLP

609 Main Street, 45th Floor

Houston, Texas 77002

Attention: Doug Bacon, P.C. and Kim Hicks

Email: doug.bacon@kirkland.com

kim.hicks@kirkland.com

Facsimile: (713) 835-3601

9.4 Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned, in whole or in part, by operation of Law or otherwise, by any of the Parties without the prior written consent of the Other Party, except that (a) Merger Sub may assign, in its sole discretion, any of or all its rights, interests and obligations under this Agreement to any wholly owned Parent Subsidiary, (b) Parent may assign any of its rights (but not delegate any of its obligations) under this Agreement to one or more wholly owned Subsidiaries of Parent but, in each case, no such assignment shall relieve the Parent of any of its obligations hereunder and (c) the Company may assign any of its rights (but not delegate any of its obligations) under Section 8.4 to one or more wholly owned Subsidiaries. Any purported assignment not permitted under this Section 9.4 shall be null and void.

9.5 Entire Understanding: No Third-Party Beneficiaries. This Agreement (including the exhibits, annexes, the Confidentiality Agreement, the Designated Stockholder Voting Agreements, the Company Disclosure Letter and the Parent Disclosure Letter) and the documents, instruments and other agreements among the Parties as contemplated by or referenced herein, together with the Confidentiality Agreement, constitutes the entire agreement and understanding of the Parties with respect to the matters therein and herein and supersedes all prior agreements and understandings on such matters. The provisions of this Agreement are binding upon and inure to the benefit of the Parties hereto and their respective successors and assigns, and no provision of this Agreement is intended to confer any rights, benefits, remedies, obligations or liabilities hereunder upon any Person other than the Parties hereto and their respective successors except (a) as provided in Section 6.11 (which will be to the benefit of the Persons referred to in such Section) and (b) following the Effective Time, the rights of holders of Company Common Stock to receive the Merger Consideration.

9.6 Severability. Any provision of this Agreement that is invalid, illegal or unenforceable in any jurisdiction will, as to that jurisdiction, be ineffective only to the extent of such invalidity, illegality or unenforceability, without affecting in any way the remaining provisions of this Agreement in such jurisdiction or rendering that or any other provision of this Agreement invalid, illegal or unenforceable in any other jurisdiction.

 

100


9.7 Governing Law; Venue; Waiver of Jury Trial.

(a) 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, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF.

(b) THE PARTIES IRREVOCABLY SUBMIT TO THE JURISDICTION OF THE COURT OF CHANCERY OF THE STATE OF DELAWARE OR, IF THE COURT OF CHANCERY OF THE STATE OF DELAWARE LACKS JURISDICTION OVER SUCH MATTER, THE SUPERIOR COURT OF THE STATE OF DELAWARE AND THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA LOCATED IN THE STATE OF DELAWARE IN CONNECTION WITH ANY DISPUTE THAT ARISES IN RESPECT OF THIS AGREEMENT AND THE DOCUMENTS REFERRED TO IN THIS AGREEMENT OR IN RESPECT OF THE TRANSACTIONS CONTEMPLATED HEREBY, AND HEREBY WAIVE, AND AGREE NOT TO ASSERT, AS A DEFENSE IN ANY ACTION, SUIT OR PROCEEDING FOR INTERPRETATION OR ENFORCEMENT HEREOF OR ANY SUCH DOCUMENT THAT IT IS NOT SUBJECT THERETO OR THAT SUCH ACTION, SUIT OR PROCEEDING MAY NOT BE BROUGHT OR IS NOT MAINTAINABLE IN SAID COURTS OR THAT VENUE THEREOF MAY NOT BE APPROPRIATE OR THAT THIS AGREEMENT OR ANY SUCH DOCUMENT MAY NOT BE ENFORCED IN OR BY SUCH COURTS, AND THE PARTIES IRREVOCABLY AGREE THAT ALL CLAIMS WITH RESPECT TO SUCH ACTION, SUIT OR PROCEEDING SHALL BE HEARD AND DETERMINED EXCLUSIVELY BY SUCH A DELAWARE STATE OR FEDERAL COURT. THE PARTIES HEREBY CONSENT TO AND GRANT ANY SUCH COURT JURISDICTION OVER THE PERSON OF SUCH PARTIES AND OVER THE SUBJECT MATTER OF SUCH DISPUTE AND AGREE THAT MAILING OF PROCESS OR OTHER PAPERS IN CONNECTION WITH SUCH ACTION, SUIT OR PROCEEDING IN THE MANNER PROVIDED IN SECTION 9.3 OR IN SUCH OTHER MANNER AS MAY BE PERMITTED BY LAW SHALL BE VALID AND SUFFICIENT SERVICE THEREOF.

9.8 No Recourse. This Agreement may only be enforced against, and any claims or causes of action that may be based upon, arise out of or relate to this Agreement, or the negotiation, execution or performance of this Agreement may only be made against the entities that are expressly identified as Parties hereto and no past, present or future Affiliate, director, officer, employee, incorporator, member, manager, partner, stockholder, agent, attorney or representative of any Party hereto has any liability for any obligations or liabilities of the Parties or for any claim based on, in respect of, or by reason of, the transactions contemplated hereby.

 

101


9.9 Affiliate Liability.

(a) Each of the following is referred to as a “Company Affiliate” for purposes of this Section 9.9: (i) any Company Designated Stockholder, (ii) any Affiliate of any Company Designated Stockholder (other than the Company) and (iii) any director, officer, employee, Representative or agent of the Company, any Company Designated Stockholder or any Affiliate of any Company Designated Stockholder. No Company Affiliate shall have any liability or obligation to Parent or Merger Sub of any nature whatsoever in connection with or under this Agreement or the transactions contemplated hereby, and Parent and Merger Sub hereby waive and release all claims of any such liability and obligation, except in each case as expressly provided by the applicable Designated Stockholder Voting Agreement between such Company Designated Stockholder and Parent.

(b) Each of the following is referred to as a “Parent Affiliate” for purposes of this Section 9.9: (i) any Parent Designated Stockholder, (ii) any Affiliate of any Parent Designated Stockholder (other than Parent) and (iii) any director, officer, employee, Representative or agent of Parent, any Parent Designated Stockholder or any Affiliate of any Parent Designated Stockholder. No Parent Affiliate shall have any liability or obligation to the Company of any nature whatsoever in connection with or under this Agreement or the transactions contemplated hereby, and the Company hereby waives and releases all claims of any such liability and obligation, except in each case as expressly provided by the applicable Designated Stockholder Voting Agreement between such Parent Designated Stockholder and the Company.

9.10 Specific Performance. The Parties agree that irreparable damage, for which monetary damages would not be an adequate remedy, would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached by the parties. Prior to the termination of this Agreement pursuant to Article VIII, it is accordingly agreed that the Parties shall be entitled to an injunction or injunctions, or any other appropriate form of specific performance or equitable relief, to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any court of competent jurisdiction, in each case in accordance with this Section 9.10, this being in addition to any other remedy to which they are entitled under the terms of this Agreement at law or in equity. Each Party accordingly agrees not to raise any objections to the availability of the equitable remedy of specific performance to prevent or restrain breaches or threatened breaches of, or to enforce compliance with, the covenants and obligations of such Party under this Agreement all in accordance with the terms of this Section 9.10. Each Party further agrees that neither the Other Party nor any other Person shall be required to obtain, furnish or post any bond or similar instrument in connection with or as a condition to obtaining any remedy referred to in this Section 9.10, and each party irrevocably waives any right it may have to require the obtaining, furnishing or posting of any such bond or similar instrument.

9.11 Transfer Taxes. All transfer, documentary, sales, use, stamp, registration and other such Taxes and fees (including penalties and interest) incurred in connection with the transactions contemplated by this Agreement shall be paid by the Surviving Entity when due (except as otherwise set forth in this Agreement).

[Signature pages follow]

 

102


IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed in counterparts by their duly authorized officers, all as of the day and year first written above.

 

COMPANY
AMPLIFY ENERGY CORP.
By:  

/s/ Kenneth Mariani

Name:   Kenneth Mariani
Title:   President and Chief Executive Officer

[Signature page to Agreement and Plan of Merger]


PARENT
MIDSTATES PETROLEUM COMPANY, INC.
By:  

/s/ David J. Sambrooks

Name:   David J. Sambrooks
Title:   President and Chief Executive Officer
MERGER SUB
MIDSTATES HOLDINGS, INC.
By:  

/s/ David J. Sambrooks

Name:   David J. Sambrooks
Title:   President and Chief Executive Officer

[Signature page to Agreement and Plan of Merger]


Exhibit A

Certificate of Incorporation of the Company

[see attached]

 

Exhibit A


SECOND AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

OF

AMPLIFY ENERGY CORP.

1. Name. The name of the corporation is Amplify Energy Corp. (the “Corporation”).

2. Address; Registered Office and Agent. The address of the Corporation’s registered office is 850 New Burton Road, Suite 201, Dover, Delaware 19904 (Kent County). The name of the registered agent of the Corporation at that address is Cogency Global Inc.

3. Purposes. The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware (the “DGCL”).

4. Number of Shares. The total number of shares of all classes of stock which the Corporation shall have authority to issue one (1) share of common stock, par value $0.01 per share (the “Common Stock”).

5. Voting Powers. Each holder of Common Stock, as such, shall be entitled to one vote in person or by proxy for each share of Common Stock held of record by such holder on all matters on which stockholders generally are entitled to vote.

6. Election of Directors. Unless and except to the extent that the By-laws of the Corporation (the “By-laws”) shall so require, the election of directors of the Corporation need not be by written ballot.

7. Limitation of Liability; Indemnification. The Corporation hereby eliminates, to the fullest extent permitted by law (as contemplated by Section 102(b)(7) of the DGCL), the personal liability of any person who serves as a director of the Corporation to the Corporation and/or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director’s duty of loyalty to the Corporation or its stockholders, (ii) for any act or omission not in good faith or which involves intentional misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL, or (iv) for any transaction from which the director derived an improper personal benefit. If the DGCL is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the DGCL, as so amended. In the event that it is determined that Delaware law does not apply, the liability of a director of the Corporation to the company or its stockholders for monetary damages shall be eliminated to the fullest extent permissible under applicable law. Any repeal of modification of the foregoing paragraph shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification.


8. Certificate Amendments. The Corporation reserves the right at any time, and from time to time, to amend or repeal any provision contained in this Second Amended and Restated Certificate of Incorporation (this “Certificate of Incorporation”), and add other provisions authorized by the laws of the State of Delaware at the time in force, in the manner now or hereafter prescribed by applicable law; and all rights, preferences and privileges of whatsoever nature conferred upon stockholders, directors or any other persons whomsoever by and pursuant to this Certificate of Incorporation (as amended) are granted subject to the rights reserved in this Article 8.


Exhibit B

LLC Sub Merger Agreement

[see attached]

 

Exhibit B


Form of LLC Sub Merger Agreement

AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER (this “Agreement”) dated as of                     is by and between Amplify Energy Corp., a Delaware corporation (the “Company”), and Alpha Mike Holdings, LLC, a Delaware limited liability company (“LLC Sub,” and together with the Company, the “Parties”) and a wholly owned subsidiary of Midstates Petroleum Company, Inc., a Delaware corporation (“Parent”).

RECITALS

WHEREAS, LLC Sub is an entity disregarded as separate from Parent for U.S. federal income tax purposes;

WHEREAS, Parent, the Company, and Midstates Holdings, Inc. (“Merger Sub”), a Delaware corporation and a direct wholly owned subsidiary of Parent, entered into an Agreement and Plan of Merger dated as of May 5, 2019 (the “Merger Agreement”);

WHEREAS, pursuant to the Merger Agreement, at the Effective Time (as defined in the Merger Agreement), Merger Sub was merged with and into the Company (the “First Merger”), with the Company as the surviving corporation (the “Surviving Corporation”);

WHEREAS, the Merger Agreement provides that immediately following the First Merger, the Surviving Corporation shall be merged with and into LLC Sub, with LLC Sub continuing as the surviving entity following such merger (the “Second Merger” and, together with the First Merger, the “Mergers”);

WHEREAS, for U.S. federal income tax purposes, it is intended that the Mergers, taken together, qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”), and the regulations thereunder, and that the Merger Agreement constitutes a “plan of reorganization” within the meaning of Treasury Regulations §§ 1.368-2(g) and 1.368-3(a);

WHEREAS, it is proposed that LLC Sub and the Surviving Corporation enter into this Agreement to effectuate the Second Merger;

WHEREAS, the sole member of LLC Sub has approved this Agreement and the transactions contemplated hereby, including the Second Merger; and

WHEREAS, the Board of Directors of the Company has (i) approved and declared advisable this Agreement and the transactions contemplated hereby, including the Second Merger, (ii) resolved to submit this Agreement to the stockholders of the Company for adoption, and (iii) recommended that the stockholders of the Company approve the adoption of this Agreement and the transactions contemplated hereby, including the Second Merger.


NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the Parties agree as follows:

ARTICLE I

THE SECOND MERGER

1.1 Second Merger. At the Second Merger Effective Time (as defined below), upon the terms and subject to the conditions hereof and in accordance with the General Corporation Law of the State of Delaware (the “DGCL”) and the Delaware Limited Liability Company Act (the “DLLCA”), the Surviving Corporation shall be merged with and into LLC Sub, whereupon the separate existence of the Surviving Corporation shall cease and LLC Sub shall continue its existence as a limited liability company under the laws of the State of Delaware (the “Surviving Entity”).

1.2 Effective Time of the Second Merger. LLC Sub shall execute and file a Certificate of Merger with the Secretary of State of the State of Delaware in accordance with the requirements of the DGCL and the DLLCA, and make any other filings or recordings as may be required by Delaware law in connection with the Second Merger. Subject to the provisions of this Agreement and the Merger Agreement, the Second Merger will become effective immediately upon the filing of the Certificate of Merger with the Secretary of State of the State of Delaware, or such later date and time as may be specified in the Certificate of Merger (the “Second Merger Effective Time”).

1.3 Effects of the Second Merger. At and after the Second Merger Effective Time, the Second Merger shall have the effects set forth in this Agreement and the applicable provisions of the DGCL and the DLLCA.

1.4 Cancellation of Surviving Corporation Common Stock. At the Second Merger Effective Time, by virtue of the Second Merger and without any actions of the Parties or otherwise, each share of the common stock, par value $0.0001 per share, of the Surviving Corporation (the “Common Stock”) issued and outstanding immediately prior to the Second Merger Effective Time, shall automatically be canceled and extinguished without any conversion thereof, and no payment shall be made with respect thereto.

1.5 Surviving Entity Membership Interests. The limited liability company interests in LLC Sub shall not be affected, altered or modified in any respect by reason of the Second Merger, and shall remain as they were immediately prior to the Second Merger Effective Time.

ARTICLE II

THE SURVIVING ENTITY

2.1 Certificate of Formation. At the Second Merger Effective Time and without any further action on the part of the Parties or otherwise, the certificate of formation of LLC Sub (the “Certificate of Formation”), as in effect immediately prior to the Second Merger Effective Time, shall continue to be the Certificate of Formation of the Surviving Entity until altered, amended or repealed in accordance with applicable law.


2.2 Limited Liability Company Agreement. At the Second Merger Effective Time and without any further action on the part of the Parties or otherwise, the Limited Liability Company Operating Agreement of LLC Sub, as in effect immediately prior to the Second Merger Effective Time, shall continue to be the Limited Liability Company Operating Agreement of the Surviving Entity until altered, amended or repealed in accordance with the provisions thereof or applicable law.

2.3 Intended Tax Treatment. It is intended that the Mergers, taken together, shall qualify as a “reorganization” within the meaning of Section 368(a) of the Code, and that the Merger Agreement constitutes a “plan of reorganization” within the meaning of Treasury Regulations §§ 1.368-2(g) and 1.368-3(a).

ARTICLE III

CONDITION

3.1 Condition to Each Party’s Obligations to Effect the Second Merger. The respective obligation of each Party to effect the Second Merger shall be subject to the requisite approval and adoption of this Agreement and the Second Merger by the holders of a majority of the issued and outstanding Common Stock entitled to vote thereon and the sole member of LLC Sub in accordance with the DGCL and the DLLCA, respectively.

ARTICLE IV

MISCELLANEOUS

4.1 Captions and Counterparts. The captions in this Agreement are for convenience only and shall not be considered a part, or to affect the construction or interpretation, of any provision of this Agreement. This Agreement may be executed in counterparts, each of which shall be an original, but all of which together shall constitute one and the same instrument.

4.2 Governing Law. This Agreement shall be governed by, and construed and interpreted in accordance with, the laws of the State of Delaware, without regard to any conflicts of law principles.

4.3 Amendment. No provision of this Agreement may be amended, changed, or modified in any manner, orally or otherwise, except by an instrument in writing signed by the Parties.

4.4 Further Assurances. The Parties shall execute and deliver such further instruments of conveyance, transfer and assignment, including filing the necessary documents with the Secretary of State of Delaware to complete the Second Merger and will take such other actions as either of them may reasonably request of the other to effectuate the purposes of this Agreement and to carry out the terms hereof.

4.5 Complete Agreement. This Agreement and the Merger Agreement contain the complete agreement among the Parties with respect to the Second Merger and supersedes all prior agreements and understandings with respect to the Second Merger.


4.6 Successors; Binding Effect; Third Parties. This Agreement shall be binding on the successors of the Surviving Corporation and LLC Sub. Nothing herein expressed or implied is intended or is to be construed to confer upon or give to any person, other than the Parties to this Agreement or their respective successors and assigns any rights, remedies, obligations or liabilities under, or by reason of, this Agreement.

4.7 Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or the effectiveness or validity of any provision in any other jurisdiction, and this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

[SIGNATURES ON THE FOLLOWING PAGE]


IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the date first written above.

 

Amplify Energy Corp.
By:  

 

Name:  
Title:  
Alpha Mike Holdings, LLC
By:  

 

Name:  
Title:  

[Signature Page to LLC Sub Merger Agreement]

EX-10.1

Exhibit 10.1

Execution Version

FIRST AMENDMENT TO CREDIT AGREEMENT

This FIRST AMENDMENT TO CREDIT AGREEMENT (this “First Amendment”), dated as of May 5, 2019, is among AMPLIFY ENERGY OPERATING LLC, a Delaware limited liability company (the “Borrower”), AMPLIFY ACQUISITIONCO INC., a Delaware corporation (the “Parent”), AMPLIFY ENERGY CORP., a Delaware corporation, as Public Parent under the Credit Agreement on the date hereof and until the First Amendment Implementation Date (herein, the “Amplify Parent”), each of the other undersigned guarantors (together with the Borrower and the Parent, collectively, the “Loan Parties”), each of the Lenders that is a signatory hereto and BANK OF MONTREAL, as administrative agent for the Lenders (in such capacity, together with its successors, the “Administrative Agent”).

Recitals

A. The Borrower, the Parent, the Administrative Agent and the Lenders are parties to that certain Credit Agreement dated as of November 2, 2018 (as amended, restated, amended and restated, modified or otherwise supplemented from time to time prior to the date hereof, the “Credit Agreement”), pursuant to which the Lenders have, subject to the terms and conditions set forth therein, made certain credit available to and on behalf of the Borrower.

B. The Borrower has advised the Administrative Agent and the Lenders that it intends to enter into that certain Agreement and Plan of Merger dated as of May 5, 2019 (the “Merger Agreement”), by and among Amplify Parent, Midstates Holdings, Inc., a Delaware corporation, and Midstates Petroleum Company, Inc., a Delaware corporation (the “Company”), pursuant to which Amplify Parent will be acquired, directly or indirectly, by the Company (the “Merger”).

C. The Borrower, the Parent, the Administrative Agent and the Lenders desire to amend the Credit Agreement to, among other things, permit the transactions contemplated by the Merger Agreement.

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

Section 1. Defined Terms. Each capitalized term which is defined in the Credit Agreement, but which is not defined in this First Amendment, shall have the meaning ascribed such term in the Credit Agreement, as amended hereby. Unless otherwise indicated, all section and exhibit references in this First Amendment refer to the respective sections and exhibits in the Credit Agreement.

Section 2. Amendments to the Credit Agreement. In reliance on the representations, warranties, covenants and agreements contained in this First Amendment, and subject to the satisfaction of the conditions precedent set forth in Section 4 hereof, (i) the Credit Agreement (but not the Schedules and Exhibits attached thereto, except as expressly set forth in clauses (ii)

 

1


and (iii)) shall be amended effective as of the First Amendment Implementation Date by deleting the stricken text (indicated textually in the same manner as the following example: stricken text) and to add the double-underlined text (indicated textually in the same manner as the following example: double-underlined text) as set forth in the pages of the Credit Agreement attached as Exhibit A hereto, (ii) Exhibit K (Public Parent Pledge Agreement) shall be amended and restated as of the First Amendment Implementation Date as set forth in the Exhibit K attached hereto, and (iii) the new Exhibit N (Intermediate Parent Pledge Agreement) attached hereto as Exhibit N shall be inserted to the Credit Agreement as Exhibit N thereto.

Section 3. Pre-Merger Amendments to the Credit Agreement. In reliance on the representations, warranties, covenants and agreements contained in this First Amendment, and subject to the satisfaction of the conditions precedent set forth in Section 4 hereof, the Credit Agreement shall be amended effective as of the First Amendment Effectiveness Date in the manner provided in this Section 3.

3.1 Amendment to Section 7.04 of the Credit Agreement. Section 7.04 of the Credit Agreement is hereby amended by deleting the “and” at the end of Section 7.04(d), by replacing the “.” at the end of Section 7.04(e) with “; and” and by adding a new Section 7.04(f) to read in full as follows:

(f) the Parent may merge with a wholly-owned Subsidiary of the Public Parent, in connection with tax planning matters; provided that the continuing or surviving Person of such merger is a direct wholly-owned subsidiary of the Public Parent.

3.2 Amendment to Section 7.08 of the Credit Agreement. The proviso in Section 7.08 of the Credit Agreement is hereby amended by deleting the “or (ii)” and by adding the following clause in place thereof:

(ii) transactions between or among the Public Parent and the Parent in connection with the activities contemplated by Section 7.04(f), or (iii)

3.3 Amendment to Section 7.21 of the Credit Agreement. The parenthetical in Section 7.21 of the Credit Agreement is hereby amended by replacing “and (e)” with “, (e)” and by adding the following clauses at the end of the parenthetical:

(f) transactions between or among the Public Parent and the Parent in connection with the activities contemplated by Section 7.04(f), and (g) Liens permitted under Section 7.01(a), (c) and (t)

Section 4. Conditions Precedent to Execution Date. The effectiveness of the First Amendment (other than the amendments to the Credit Agreement contained in Section 2 hereof) shall occur upon satisfaction of the following conditions (the date such conditions have been satisfied, the “First Amendment Effectiveness Date”):

4.1 The Administrative Agent shall have received counterparts of this First Amendment from the Loan Parties and the Majority Lenders.

 

2


4.2 All reasonable and documented fees and expenses due and owing to Mayer Brown LLP invoiced at least three (3) Business Days prior to the First Amendment Effectiveness Date shall have been paid or reimbursed by the Borrower or Parent

4.3 The Administrative Agent shall have received a copy of the Merger Agreement certified by Amplify Parent as true, correct and complete.

4.4 Each of the Amplify Parent, Parent, the Borrower and each other Loan Party shall have confirmed and acknowledged to the Administrative Agent and the Lenders, and by its execution and delivery of this First Amendment each of the Amplify Parent, Parent, the Borrower and each other Loan Party does hereby confirm and acknowledge to the Administrative Agent and the Lenders, that (a) the execution, delivery and performance of this First Amendment has been duly authorized by all requisite corporate or limited liability company action, as applicable, on the part of the Amplify Parent, Parent, the Borrower and each other Loan Party, (b) the Credit Agreement and each other Loan Document to which it is a party constitute valid and legally binding agreements enforceable against the each of the Amplify Parent, the Parent, the Borrower and each other Loan Party in accordance with their respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or other similar laws relating to or affecting the enforcement of creditors’ rights generally and by general principles of equity, and (c) the representations and warranties by the each of the Amplify Parent, the Parent, the Borrower and each other Loan Party contained in Article V of the Credit Agreement or any other Loan Document to which such entity is a party are true and correct on and as of the First Amendment Effectiveness Date in all material respects (or if such representation or warranty is qualified by or subject to a “materiality”, “material adverse effect”, “material adverse change” or any similar term or qualification, such representation or warranty shall be true and correct in all respects) as though made on and as of the date hereof, except to the extent that such representations and warranties specifically refer to an earlier date, in which case was true and correct, in all material respects (or if such representation or warranty is qualified by or subject to a “materiality”, “material adverse effect”, “material adverse change” or any similar term or qualification, such representation or warranty shall continue to be true and correct in all respects) as of such earlier date, and (d) no Default or Event of Default exists under the Credit Agreement or any of the other Loan Documents.

Section 5. Conditions Precedent to First Amendment Implementation Date. The effectiveness and implementation of the amendments to the Credit Agreement contained in Section 2 hereof shall occur upon the satisfaction of the following conditions on or prior to November 10, 2019 (the date of such effectiveness is referred to herein as the (“First Amendment Implementation Date”)) (and, for the avoidance of doubt, if the Merger has not been consummated on or prior to November 10, 2019, such amendments shall not be implemented):

5.1 The Administrative Agent shall have received evidence reasonably satisfactory to the Administrative Agent confirming that the Merger has been consummated.

5.2 The Administrative Agent shall have received a certificate of a Responsible Officer of the Borrower certifying that no Default or Event of Default shall exist immediately prior to or after giving effect to the amendments contained in Section 2 of the First Amendment.

 

3


Section 6. Conditions Subsequent to First Amendment Implementation Date. Not later than thirty (30) days (or such later date as the Administrative Agent may agree in its reasonable discretion) immediately following the First Amendment Implementation Date:

6.1 Amplify Parent shall execute and deliver, and cause any other Intermediate Parent to execute and deliver, to the Administrative Agent an Intermediate Parent Pledge Agreement, together with (i) all certificated Pledged Equity in and of the Parent and any other Intermediate Parent (if any) and related blank stock powers and (ii) such officer’s and secretary’s certificates and opinions of counsel with respect thereto, in each case as the Administrative Agent shall deem necessary.

6.2 The Administrative Agent shall have received a duly executed counterpart of the Public Parent Pledge Agreement from the Company with respect to the Company’s Equity Interest in any Intermediate Parent (and Parent, if any), together with (i) all certificated Pledged Equity in and of the Parent and any other Intermediate Parent (if any) and related blank stock powers and such officer’s and (ii) secretary’s certificates and opinions of counsel with respect thereto, in each case as the Administrative Agent shall deem necessary.

Section 7. Miscellaneous.

7.1 Confirmation and Effect and No Waiver. The provisions of the Credit Agreement (as amended by this First Amendment) shall remain in full force and effect in accordance with its terms following the effectiveness of this First Amendment. Each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof”, “herein”, or words of like import shall mean and be a reference to the Credit Agreement as amended hereby, and each reference to the Credit Agreement in any other document, instrument or agreement executed and/or delivered in connection with the Credit Agreement shall mean and be a reference to the Credit Agreement as amended hereby. This First Amendment is a Loan Document for all purposes under the Loan Documents. The execution, delivery and effectiveness of this First Amendment shall not operate as a waiver of any default of the Amplify Parent, the Parent, the Borrower or any other Loan Party or any right, power or remedy of the Administrative Agent or the Lenders under any of the Loan Documents, nor constitute a waiver of any provision of any of the Loan Documents. This First Amendment shall serve as an amendment to the Credit Agreement, but shall not extinguish or novate the Loans or any other Obligation under the Credit Agreement.

7.2 Ratification and Affirmation of Loan Parties. Each of the Amplify Parent and each of the Loan Parties hereby expressly (a) acknowledges the terms of this First Amendment, (b) ratifies and affirms all of their respective Obligations and each of their other obligations under the Credit Agreement and the other Loan Documents to which it is a party, as amended hereby, (c) acknowledges, renews and extends its continued liability under the Credit Agreement and the other Loan Documents to which it is a party, as amended hereby, (d) ratifies and affirms all Liens granted by it pursuant to the Loan Documents to secure the Secured Obligations (except to the extent that such Liens have been released in accordance with the Loan Documents) and affirms that after giving effect to this First Amendment, the terms of the Security Instruments secure, and will continue to secure, all Secured Obligations thereunder, and (e) agrees that its guarantee under the Guaranty, if applicable, and the other Loan Documents to which it is a party, as amended hereby, remains in full force and effect with respect to the Obligations.

 

4


7.3 Counterparts. This First Amendment may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. Delivery of an executed counterpart of a signature page of this First Amendment by facsimile or electronic (e.g., pdf) transmission shall be effective as delivery of a manually executed original counterpart hereof.

7.4 No Oral Agreement. THIS WRITTEN FIRST AMENDMENT, THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS EXECUTED IN CONNECTION HEREWITH AND THEREWITH REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

7.5 Governing Law. THIS FIRST AMENDMENT (INCLUDING, BUT NOT LIMITED TO, THE VALIDITY AND ENFORCEABILITY HEREOF) SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

7.6 Payment of Expenses. The Borrower agrees to pay or reimburse the Administrative Agent for fees and expenses in connection with this First Amendment pursuant to the terms and conditions of Section 10.04 of the Credit Agreement.

7.7 Severability. If any provision of this First Amendment is held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the remaining provisions of this First Amendment shall not be affected or impaired thereby and (b) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

7.8 Successors and Assigns. This First Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns as permitted under Section 10.06 of the Credit Agreement.

[Signature pages follow]

 

 

5


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

 

BORROWER:     AMPLIFY ENERGY OPERATING LLC,
    a Delaware limited liability company,
    as the Borrower
    By:  

/s/ Martyn Willsher

    Name:   Martyn Willsher
    Title:   Senior Vice President and Chief Financial Officer
PARENT:     AMPLIFY ACQUISITIONCO INC.,
    a Delaware corporation,
    as Parent
    By:  

/s/ Martyn Willsher

    Name:   Martyn Willsher
    Title:   Senior Vice President and Chief Financial Officer
AMPLIFY PARENT:     AMPLIFY ENERGY CORP.,
    a Delaware corporation,
    as Amplify Parent
    By:  

/s/ Martyn Willsher

    Name:   Martyn Willsher
    Title:   Senior Vice President and Chief Financial Officer


GUARANTORS:     AMPLIFY ENERGY SERVICES LLC,
    a Delaware limited liability company
    By:  

/s/ Martyn Willsher

    Name:   Martyn Willsher
    Title:   Senior Vice President and Chief Financial Officer
    AMPLIFY ENERGY HOLDCO LLC,
    a Delaware limited liability company
    By:  

/s/ Martyn Willsher

    Name:   Martyn Willsher
    Title:   Senior Vice President and Chief Financial Officer
    BETA OPERATING COMPANY, LLC,
    a Delaware limited liability company
    By:  

/s/ Martyn Willsher

    Name:   Martyn Willsher
    Title:   Senior Vice President and Chief Financial Officer
    SAN PEDRO BAY PIPELINE COMPANY,
    a California corporation
    By:  

/s/ Martyn Willsher

    Name:   Martyn Willsher
    Title:   Senior Vice President and Chief Financial Officer

[SIGNATURE PAGE TO FIRST AMENDMENT TO CREDIT AGREEMENT

AMPLIFY ENERGY OPERATING LLC]


ADMINISTRATIVE AGENT:     BANK OF MONTREAL, as Administrative Agent,
    an L/C Issuer, and as a Lender
    By:  

/s/ James V. Ducote

    Name:   James V. Ducote
    Title:   Managing Director

[SIGNATURE PAGE TO FIRST AMENDMENT TO CREDIT AGREEMENT

AMPLIFY ENERGY OPERATING LLC]


LENDER:     BANK OF AMERICA, N.A., as a Lender
    By:  

/s/ Raza Jafferi

    Name:   Raza Jafferi
    Title:   Director

[SIGNATURE PAGE TO FIRST AMENDMENT TO CREDIT AGREEMENT

AMPLIFY ENERGY OPERATING LLC]


LENDER:     CITIBANK, N.A., as a Lender
    By:  

/s/ Cliff Vaz

    Name:   Cliff Vaz
    Title:   Vice President

[SIGNATURE PAGE TO FIRST AMENDMENT TO CREDIT AGREEMENT

AMPLIFY ENERGY OPERATING LLC]


LENDER:     REGIONS BANK, as a Lender
    By:  

/s/ Daniel G. Steele

    Name:   Daniel G. Steele
    Title:   Managing Director

[SIGNATURE PAGE TO FIRST AMENDMENT TO CREDIT AGREEMENT

AMPLIFY ENERGY OPERATING LLC]


LENDER:     U.S. BANK NATIONAL ASSOCIATION,
    as a Lender
    By:  

/s/ Mark E. Thompson

    Name:   Mark E. Thompson
    Title:   Senior Vice President

[SIGNATURE PAGE TO FIRST AMENDMENT TO CREDIT AGREEMENT

AMPLIFY ENERGY OPERATING LLC]


LENDER:    

CANADIAN IMPERIAL BANK OF COMMERCE,

NEW YORK BRANCH, as a Lender

    By:  

/s/ Megan Larson

    Name:   Megan Larson
    Title:   Authorized Signatory
    By:  

/s/ Donovan C. Broussard

    Name:   Donovan C. Broussard
    Title:   Authorized Signatory

[SIGNATURE PAGE TO FIRST AMENDMENT TO CREDIT AGREEMENT

AMPLIFY ENERGY OPERATING LLC]


LENDER:     KEYBANK, NATIONAL ASSOCIATION, as a Lender
    By:  

/s/ David M. Bornstein

    Name:   David M. Bornstein
    Title:   Senior Vice President

[SIGNATURE PAGE TO FIRST AMENDMENT TO CREDIT AGREEMENT

AMPLIFY ENERGY OPERATING LLC]


LENDER:     HANCOCK WHITNEY BANK, as a Lender
    By:  

/s/ Parker U. Mears

    Name:   Parker U. Mears
    Title:   Senior Vice President

[SIGNATURE PAGE TO FIRST AMENDMENT TO CREDIT AGREEMENT

AMPLIFY ENERGY OPERATING LLC]


LENDER:     UBS AG, STAMFORD BRANCH, as a Lender
    By:  

/s/ Houssem Daly

    Name:   Houssem Daly
    Title:   Associate Director
    By:  

/s/ Kenneth Chin

    Name:   Kenneth Chin
    Title:   Director

[SIGNATURE PAGE TO FIRST AMENDMENT TO CREDIT AGREEMENT

AMPLIFY ENERGY OPERATING LLC]


LENDER:     GOLDMAN SACHS BANK USA, as a Lender
    By:  

/s/ Jamie Minieri

    Name:   Jamie Minieri
    Title:   Authorized Signatory

[SIGNATURE PAGE TO FIRST AMENDMENT TO CREDIT AGREEMENT

AMPLIFY ENERGY OPERATING LLC]


EXHIBIT A

(See attached)


EXHIBIT A

CREDIT AGREEMENT

Dated as of November 2, 2018

among

AMPLIFY ENERGY OPERATING LLC

as the Borrower,

AMPLIFY ACQUISITIONCO INC.,

as Parent

BANK OF MONTREAL,

as Administrative Agent

and

an L/C Issuer,

BANK OF AMERICA, N.A. and CITIBANK, N.A.,

as Co-Syndication Agents

REGIONS BANK and U.S. BANK, NATIONAL ASSOCIATION,

as Co-Documentation Agents

and

The Other Lenders Party Hereto

 

 

BMO CAPITAL MARKETS CORP.,

MERRILL LYNCH, PIERCE, FENNER & SMITH, INCORPORATED,

CITIBANK N.A.

REGIONS CAPITAL MARKETS, a division of Regions Bank

U.S. BANK, NATIONAL ASSOCIATION,

as Joint Lead Arrangers

and

BMO CAPITAL MARKETS CORP.,

as Sole Bookrunner

 

 


TABLE OF CONTENTS

 

         Page  

ARTICLE I DEFINITIONS AND ACCOUNTING TERMS

     2  

Section 1.01

  Defined Terms      2  

Section 1.02

  Other Interpretive Provisions      38  

Section 1.03

  Accounting Terms      38  

Section 1.04

  Petroleum Terms      39  

Section 1.05

  Rounding      39  

Section 1.06

  Times of Day      39  

Section 1.07

  Letter of Credit Amounts      39  

ARTICLE II THE COMMITMENTS AND CREDIT EXTENSIONS

     39  

Section 2.01

  Committed Loans      39  

Section 2.02

  Committed Borrowings, Conversions and Continuations of Committed Loans      40  

Section 2.03

  Letters of Credit      41  

Section 2.04

  Increases of Aggregate Commitments      50  

Section 2.05

  Borrowing Base      51  

Section 2.06

  Prepayments      54  

Section 2.07

  Termination or Reduction of Commitments      56  

Section 2.08

  Repayment of Loans      57  

Section 2.09

  Interest      57  

Section 2.10

  Fees      58  

Section 2.11

  Computation of Interest and Fees      58  

Section 2.12

  Evidence of Debt      59  

Section 2.13

  Payments Generally; Administrative Agent’s Clawback      59  

Section 2.14

  Sharing of Payments by Lenders      61  

Section 2.15

  Defaulting Lenders      61  

ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY

     64  

Section 3.01

  Taxes      64  

Section 3.02

  Illegality      67  

Section 3.03

  Inability to Determine Rates      68  

Section 3.04

  Increased Costs; Reserves on Eurodollar Rate Loans      69  

Section 3.05

  Compensation for Losses      70  

Section 3.06

  Mitigation Obligations; Replacement of Lenders      71  

 

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Section 3.07

  Survival      71  

Section 3.08

  Availability of LIBOR Market Index Rate Loans      71  

ARTICLE IV CONDITIONS PRECEDENT TO CREDIT EXTENSIONS

     72  

Section 4.01

  Conditions to Initial Credit Extension      72  

Section 4.02

  Conditions to All Credit Extensions      76  

ARTICLE V REPRESENTATIONS AND WARRANTIES

     77  

Section 5.01

  Existence, Qualification and Power      77  

Section 5.02

  Authorization; No Contravention      77  

Section 5.03

  Governmental Authorization; Other Consents      77  

Section 5.04

  Binding Effect      78  

Section 5.05

  Financial Statements; No Material Adverse Effect      78  

Section 5.06

  Litigation      79  

Section 5.07

  No Default      79  

Section 5.08

  Ownership of Property; Liens      79  

Section 5.09

  Environmental Compliance      79  

Section 5.10

  Insurance      80  

Section 5.11

  Taxes      80  

Section 5.12

  ERISA Compliance      81  

Section 5.13

  Subsidiaries; Equity Interests; Loan Parties      81  

Section 5.14

  Margin Regulations; Investment Company Act      82  

Section 5.15

  Disclosure      82  

Section 5.16

  Compliance with Laws      82  

Section 5.17

  Solvency      82  

Section 5.18

  Casualty, Etc      83  

Section 5.19

  Labor Matters      83  

Section 5.20

  Security Instruments      83  

Section 5.21

  Engineered Oil and Gas Properties      83  

Section 5.22

  Sale of Production      84  

Section 5.23

  OFAC; Sanctions      84  

Section 5.24

  Anti-Corruption Laws      85  

Section 5.25

  PATRIOT Act      85  

ARTICLE VI AFFIRMATIVE COVENANTS

     85  

Section 6.01

  Financial Statements      85  

 

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Section 6.02

  Certificates; Other Information      87  

Section 6.03

  Notices      90  

Section 6.04

  Payment of Obligations      91  

Section 6.05

  Preservation of Existence, Etc      91  

Section 6.06

  Maintenance of Properties      91  

Section 6.07

  Maintenance of Insurance      91  

Section 6.08

  Compliance with Laws      92  

Section 6.09

  Books and Records      92  

Section 6.10

  Inspection Rights      92  

Section 6.11

  Use of Proceeds      92  

Section 6.12

  Covenant to Guarantee Obligations and Give Security      93  

Section 6.13

  Compliance with Environmental Laws      95  

Section 6.14

  Further Assurances      95  

Section 6.15

  Production Proceeds      95  

Section 6.16

  Anti-Corruption, Anti-Terrorism; Anti-Money Laundering Laws; and Sanctions      96  

Section 6.17

  Post-Closing Changes      96  

Section 6.18

  Deposit Accounts, Securities Accounts and Commodities Accounts      96  

Section 6.19

  Minimum Hedging Requirements      97  

Section 6.20

  Post-Closing Covenants - Supplemental Title Information      97  

ARTICLE VII NEGATIVE COVENANTS

     98  

Section 7.01

  Liens      98  

Section 7.02

  Investments      101  

Section 7.03

  Indebtedness      101  

Section 7.04

  Fundamental Changes      104  

Section 7.05

  Dispositions      105  

Section 7.06

  Restricted Payments      106  

Section 7.07

  Change in Nature of Business      108  

Section 7.08

  Transactions with Affiliates      108  

Section 7.09

  Burdensome Agreements      108  

Section 7.10

  Use of Proceeds      109  

Section 7.11

  Financial Covenants      109  

 

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(cont’d)

 

Section 7.12

  Hedge Transactions      109  

Section 7.13

  Sanctions      111  

Section 7.14

  Anti-Corruption Laws      111  

Section 7.15

  Prepayment of Restricted Debt      111  

Section 7.16

  Limitation on Leases      111  

Section 7.17

  Take-or-Pay or Other Prepayments      112  

Section 7.18

  Marketing Activities      112  

Section 7.19

  No Foreign Subsidiaries or Foreign Operations      112  

Section 7.20

  Amendments to Organization Documents      112  

Section 7.21

  Holding Company      112  

ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES

     113  

Section 8.01

  Events of Default      113  

Section 8.02

  Remedies Upon Event of Default      115  

Section 8.03

  Application of Funds      116  

ARTICLE IX ADMINISTRATIVE AGENT

     117  

Section 9.01

  Appointment and Authority      117  

Section 9.02

  Rights as a Lender      117  

Section 9.03

  Exculpatory Provisions      117  

Section 9.04

  Reliance by Administrative Agent      118  

Section 9.05

  Delegation of Duties      119  

Section 9.06

  Resignation of Administrative Agent      119  

Section 9.07

  Non-Reliance on Administrative Agent and Other Lenders      120  

Section 9.08

  No Other Duties, Etc      120  

Section 9.09

  Administrative Agent May File Proofs of Claim      120  

Section 9.10

  Collateral and Guaranty Matters      121  

Section 9.11

  Flood Insurance      122  

Section 9.12

  Intercreditor Agreements      122  

Section 9.13

  Enforcement      123  

Section 9.14

  Credit Bidding      123  

Section 9.15

  Certain ERISA Matters      124  

ARTICLE X MISCELLANEOUS

     125  

Section 10.01

  Amendments, Etc      125  

Section 10.02

  Notices; Effectiveness; Electronic Communication      127  

 

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Section 10.03

  No Waiver; Cumulative Remedies      129  

Section 10.04

  Expenses; Indemnity; Damage Waiver      129  

Section 10.05

  Payments Set Aside      131  

Section 10.06

  Successors and Assigns      132  

Section 10.07

  Treatment of Certain Information; Confidentiality      136  

Section 10.08

  Right of Setoff      137  

Section 10.09

  Interest Rate Limitation      138  

Section 10.10

  Counterparts; Integration; Effectiveness      138  

Section 10.11

  Survival of Representations and Warranties      138  

Section 10.12

  Severability      139  

Section 10.13

  Replacement of Lenders      139  

Section 10.14

  Governing Law; Jurisdiction; Etc      140  

Section 10.15

  Waiver of Jury Trial      140  

Section 10.16

  No Advisory or Fiduciary Responsibility      141  

Section 10.17

  USA PATRIOT Act Notice      141  

Section 10.18

  Electronic Execution of Assignments and Certain Other Documents      142  

Section 10.19

  Keepwell      142  

 

v


TABLE OF CONTENTS

(cont’d)

 

Schedules and Exhibits

 

Schedule 2.01    Commitments and Applicable Percentages
Schedule 5.03    Governmental Authorizations
Schedule 5.06    Litigation
Schedule 5.09    Environmental Matters
Schedule 5.13    Subsidiaries, Other Equity Investments and Loan Party Information
Schedule 5.22    Sale of Production
Schedule 7.01    Existing Liens
Schedule 7.02    Existing Investments
Schedule 7.03    Existing Indebtedness
Schedule 10.02    Administrative Agent’s Office; Certain Addresses for Notices
Exhibit A    Form of Committed Loan Notice
Exhibit B    Form of Prepayment Notice
Exhibit C    Form of Note
Exhibit D    Form of Compliance Certificate
Exhibit E    Form of Assignment and Assumption
Exhibit F    Form of Solvency Certificate
Exhibit G    Form of Guaranty
Exhibit H    Form of Mortgage
Exhibit I    Form of Security Agreement
Exhibit J    Form of Junior Lien Intercreditor Agreement
Exhibit K    Form of Public Parent Pledge Agreement
Exhibit L    Form of Commitment Increase Agreement
Exhibit M    Form of Additional Lender Agreement
Exhibit N    Form of Intermediate Parent Pledge Agreement

 

vi


CREDIT AGREEMENT

This CREDIT AGREEMENT is entered into as of November 2, 2018 among AMPLIFY ENERGY OPERATING LLC, a Delaware limited liability company (the “Borrower”), AMPLIFY ACQUISITIONCO INC., as Delaware corporation (the “Parent”), each LENDER from time to time party hereto (collectively, the “Lenders” and individually, a “Lender”) and BANK OF MONTREAL, as Administrative Agent and an L/C Issuer.

PRELIMINARY STATEMENTS:

WHEREAS, the Borrower, as borrower, and Parent have heretofore entered into that certain Amended and Restated Credit Agreement dated as of May 4, 2017, with Wells Fargo Bank, N.A., as administrative agent, and the other banks and financial institutions party thereto, pursuant to which the Borrower incurred certain Indebtedness as loans or reimbursement obligations in respect of letters of credit issued for its benefit or the benefit of one or more of its Subsidiaries;

WHEREAS, the Borrower has requested that (i) on the Closing Date, the Lenders provide Committed Loans to the Borrower (but subject to compliance with Section 4.01(k) regarding the minimum remaining Available Commitment) and (ii) at any time and from time to time after the Closing Date, the Lenders provide Committed Loans to the Borrower subject to the Available Commitment, and the Borrower has requested that each L/C Issuer issue Letters of Credit (subject to the Available Commitment) at any time and from time to time prior to the Letter of Credit Expiration Date (including on the Closing Date to back stop and/or replace any existing letter of credit, in an aggregate stated amount at any time outstanding not in excess of $50,000,000;

WHEREAS, on the Closing Date, the proceeds of the Committed Loans will be used by the Borrower to refinance the Indebtedness under the Existing Credit Agreement and following the Closing Date, the proceeds of the Committed Loans will be used by the Borrower for the acquisition, development and exploration of Oil and Gas Properties and for working capital and other general corporate purposes of the Borrower and the other Loan Parties and Restricted Subsidiaries and to make Investments and Restricted Payments (in each case, to the extent permitted under this Agreement), and the Letters of Credit will be used by the Borrower and the other Loan Parties and Restricted Subsidiaries for general corporate purposes, including to secure any surety and bonding requirements and to support deposits required under purchase agreements pursuant to which the Borrower and the other Loan Parties and Restricted Subsidiaries may acquire Oil and Gas Properties and other assets;

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

ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS

Section 1.01 Defined Terms . As used in this Agreement, the following terms shall have the meanings set forth below:

Administrative Agent” means Bank of Montreal in its capacity as administrative agent under any of the Loan Documents, or any successor administrative agent.

 

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Administrative Agent Fee Letter” means that certain Administrative Agent Fee Letter, dated as of October 12, 2018, among the Administrative Agent and the Borrower.

Administrative Agent’s Office” means the Administrative Agent’s address and, as appropriate, account as set forth on Schedule 10.02, or such other address or account as the Administrative Agent may from time to time notify to the Borrower and the Lenders.

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

Affiliate” means, with respect to any 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.

Agent Parties” has the meaning specified in Section 10.02(c).

Aggregate Commitments” means the Commitments of all the Lenders. As of the Closing Date, the amount of the Aggregate Commitments is $425,000,000.

Aggregate Exposure” means, with respect to any Lender, at any time, the sum of (a) the aggregate Outstanding Amount of the Committed Loans of such Lender plus (b) such Lender’s Applicable Percentage of the Outstanding Amount of all L/C Obligations.

Agreement” means this Credit Agreement, as the same may be further amended from time to time.

Anti-Corruption Laws” means all laws, rules, and regulations of any jurisdiction applicable to the Parent, the Borrower or its Subsidiaries from time to time concerning or relating to bribery or corruption.

Applicable Percentage” means with respect to any Lender at any time, the percentage (carried out to the ninth decimal place) of the Aggregate Commitments represented by such Lender’s Commitment at such time. If the commitment of each Lender to make Committed Loans and the obligation of each L/C Issuer to make L/C Credit Extensions have been terminated pursuant to Section 8.02 or if the Aggregate Commitments have expired, then the Applicable Percentage of each Lender shall be determined based on the Applicable Percentage of such Lender most recently in effect, giving effect to any subsequent assignments. The initial Applicable Percentage of each Lender is set forth opposite the name of such Lender on Schedule 2.01 or in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as applicable.

 

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Applicable Rate” means, at any date, the applicable percentage per annum set forth below, based upon the Borrowing Base Utilization Ratio at such date:

 

   

Applicable Rate

   

Borrowing Base

Utilization Ratio

 

Base Rate

 

Eurodollar Rate + LIBOR Market Index
Rate +

Letters of Credit

 

Commitment Fee

> 90%   2.000%   3.000%   0.500%
> 75% and < 90%   1.750%   2.750%   0.500%
> 50% and < 75%   1.500%   2.500%   0.500%
> 25% and < 50%   1.250%   2.250%   0.375%
< 25%   1.000%   2.000%   0.375%

Each change in the Applicable Rate 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 Parent or the Borrower fails to deliver an Engineering Report pursuant to Section 6.01(e) or (f) and such failure continues for more than 30 days from the date when such Engineering Report is due, then the “Applicable Rate” and the “Commitment Fee” means the rate per annum set forth on the applicable grid when the applicable Borrowing Base Utilization Ratio is at its highest level; provided further that the Applicable Rate and Commitment Fee shall revert to the previous Applicable Rate and Commitment Fee upon the delivery by the Parent or the Borrower of such Engineering Report.

Approved Counterparty” means (a) any Lender or any Affiliate of a Lender, (b) any other Person that has a long term senior unsecured debt rating of BBB+/Baa1 by S&P or Moody’s (or their equivalent) or higher at the time the relevant Hedge Transaction is entered into (including, for the sake of clarity, any other Person the obligations of which under Hedge Transactions with Loan Parties are guaranteed by a credit support provider that has a long term senior unsecured debt rating of BBB+/Baa1 by S&P or Moody’s (or their equivalent) or higher at the time such Hedge Transaction is entered into) or (c) any other Person that is a Lender Counterparty under the second prong of the definition thereof.

Approved Fund” means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.

Approved Petroleum Engineers” means (a) DeGolyer and MacNaughton, (b) Netherland, Sewell & Associates, Inc., (c) Ryder Scott Company, L.P., and (d) at the Borrower’s option, any other independent petroleum engineers selected by the Borrower and reasonably acceptable to the Administrative Agent.

Arranger” means each of BMO Capital Markets Corp., Merrill Lynch, Pierce, Fenner & Smith, Incorporated (or any other registered broker-dealer wholly-owned by Bank of America Corporation to which all or substantially all of Bank of America Corporation’s or any of its subsidiaries’ investment banking, commercial lending services or related businesses may be transferred following the Closing Date), Citibank N.A., Regions Capital Markets, a division of Regions Bank, and U.S. Bank, National Association, in the capacity of joint lead arranger in respect of this Agreement.

 

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Assignee Group” means two or more Eligible Assignees that are Affiliates of one another or two or more Approved Funds managed by the same investment advisor.

Assignment and Assumption” means an assignment and assumption entered into by a Lender and an Eligible Assignee (with the consent of any party whose consent is required by Section 10.06(b)), and accepted by the Administrative Agent, in substantially the form of Exhibit E or any other form approved by the Administrative Agent.

Attributable Indebtedness” means, on any date, (a) in respect of any Capital Lease of any Person, the capitalized amount thereof that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP and (b) in respect of any Synthetic Lease Obligation, the capitalized amount of the remaining lease payments under the relevant lease that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP if such lease were accounted for as a Capital Lease.

Auto-Extension Letter of Credit” has the meaning specified in Section 2.03(c)(iii).

Auto-Reinstatement Letter of Credit” has the meaning specified in Section 2.03(c)(iv).

Availability Period” means the period from and including the Closing Date to the earliest of (a) the Maturity Date, (b) the date of termination of the Aggregate Commitments pursuant to Section 2.07 and (c) the date of termination of the commitment of each Lender to make Committed Loans and of the obligation of the L/C Issuers to make L/C Credit Extensions pursuant to Section 8.02.

Available Commitment” means, at any time of determination, the remainder of (a) the Facility Limit at such time minus (b) the Total Outstandings.

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

Bail-In Legislation” means, with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law for such EEA Member Country from time to time that is described in the EU Bail-In Legislation Schedule.

Bankruptcy Code” means Title 11 of the United States Code, or any similar federal or state law for the relief of debtors.

Base Rate” means for any day a fluctuating rate per annum equal to the highest of (i) the Federal Funds Rate plus 1/2 of 1.00%, (ii) the rate of interest in effect for such day as publicly announced from time to time by the Administrative Agent as its “prime rate” and (iii) the Eurodollar Rate for a one month Interest Period on such day (after giving effect to clause (ii) of the final paragraph of the definition thereof) plus 1.00% per annum; provided that if at any time the Base Rate shall be less than 0%, such rate shall be deemed to be 0% for purposes of this

 

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Agreement. The “prime rate” is a rate set by the Administrative Agent based upon various factors including the Administrative Agent’s costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate. Any change in such prime rate announced by the Administrative Agent shall take effect at the opening of business on the day specified in the public announcement of such change.

Base Rate Loan” means a Committed Loan that bears interest based on the Base Rate.

Beneficial Ownership Certification” means a certification regarding beneficial ownership as required by the Beneficial Ownership Regulation.

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

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

Beta Decommissioning Trust” means that certain Supplemental Bond for Decommissioning Liabilities Trust Agreement (as the same has been amended or supplemented from time to time), dated as of March 1, 2007 among U.S. Bank National Association, as trustee, Rise Energy Beta, LLC, SP Beta Properties, LLC, and Beta Operating Company, LLC, as successor in interest to Pacific Energy Resources LTD., as settlor and Minerals Management Service of the United States Department of Interior, as beneficiary.

Beta Properties” means the Oil and Gas Properties comprising the three Pacific Outer Continental Shelf lease blocks (P-0300, P-0301 and P-0306), referred to as the Beta Unit, in the Beta Field located in federal waters approximately 11 miles offshore the Port of Long Beach, California.

Board” means the Board of Governors of the Federal Reserve System of the United States (or any successor thereto).

Borrower” has the meaning specified in the introductory paragraph hereto.

Borrower Materials” has the meaning specified in Section 6.02.

Borrowing Base” means, on any date, either the amount provided for in Section 2.05(a) or the amount determined in accordance with the provisions of Section 2.05(b), as the same may be reduced from time to time pursuant to Sections 2.05(c) and (d).

Borrowing Base Deficiency” means, as of any date, the amount, if any, by which the Total Outstandings on such date exceeds the Borrowing Base in effect on such date.

Borrowing Base Utilization Ratio” means at any time the ratio (expressed as a percentage) determined by taking the Total Outstandings and dividing by the Borrowing Base.

 

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Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the Laws of, or are in fact closed in, Houston, Texas and Chicago, Illinois, and, if such day relates to any Eurodollar Rate Loan, means any such day on which dealings in Dollar deposits are conducted by and between banks in the London interbank eurodollar market.

Capital Lease” means, as applied to any Person, any lease of any property (whether real, personal or mixed) by that Person as a lessee that, in conformity with GAAP, is, or is required to be, accounted for as a capital lease on the balance sheet of that Person; provided that leases that are recharacterized as Capital Leases due to a change in GAAP after the Closing Date shall not be treated as Capital Leases for any purposes under this Agreement but shall instead be treated as they would have been in accordance with GAAP as in effect on the Closing Date.

Cash Collateral” has the meaning specified in Section 2.03(h).

Cash Collateralize” has the meaning specified in Section 2.03(h).

Cash Equivalents” means, at any date of determination, any of the following types of Investments:

(a) readily marketable obligations issued or directly and fully guaranteed or insured by the United States or any state, territory or commonwealth of the United States or any political subsidizations of any such state, territory of commonwealth of the United States, including any agency or instrumentality thereof, in each case, having maturities of not more than 24 months from the date of acquisition thereof; provided that the full faith and credit of the United States is pledged in support thereof; provided, further, that, for the avoidance of doubt, treasury securities issued by the United States shall be deemed to be Cash Equivalents for purposes of this clause (a);

(b) time deposits with, or insured certificates of deposit or bankers’ acceptances of, any commercial bank that (A) is a Lender or (B)(i) is organized under the laws of the United States, any state thereof or the District of Columbia or is the principal banking subsidiary of a bank holding company organized under the laws of the United States, any state thereof or the District of Columbia, and is a member of the Federal Reserve System, (ii) issues (or the parent of which issues) commercial paper rated as described in clause (c) of this definition and (iii) has combined capital and surplus of at least $500,000,000;

(c) commercial paper issued by any Person organized under the laws of any state of the United States and rated at least “Prime-1” (or the then equivalent grade) by Moody’s or at least “A-1” (or the then equivalent grade) by S&P, in each case with maturities of not more than 12 months from the date of acquisition thereof;

(d) Investments, classified in accordance with GAAP as current assets of the Borrower or any of its Restricted Subsidiaries, in money market investment programs registered under the Investment Company Act of 1940, that are administered by financial institutions that have the highest rating assigned at that time from either Moody’s or S&P, and the portfolios of which are limited solely to Investments of the character, quality and maturity described in clauses (a), (b) and (c) of this definition;

 

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(e) readily marketable direct obligations issued by any foreign government or any political subdivision or public instrumentality thereof, in each case rated at least “Prime-1” (or the then equivalent grade) by Moody’s or at least “A-1” (or the then equivalent grade) by S&P, in each case with maturities of 24 months or less from the date of acquisition;

(f) repurchase obligations for underlying securities of the types described in clauses (a) and (b) entered into with any financial institution or recognized securities dealer meeting the qualifications specified in clause (b) above; and

(g) investment funds investing at least 90.0% of their assets in funds or securities of the types described in clauses (a) through (f) above.

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 Engineered Oil and Gas Property of the Borrower or any other Loan Party or Restricted Subsidiary.

CERCLIS” means the Comprehensive Environmental Response, Compensation and Liability Information System maintained by the U.S. Environmental Protection Agency.

Change in Law” means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking effect of any Law, rule, regulation or treaty; (b) any change in any Law, rule, regulation or treaty or in the administration, interpretation, implementation or application thereof by any Governmental Authority or (c) the making or issuance of any request, rule, guideline or directive (whether or not having the force of law) by any Governmental Authority or quasi-Governmental Authority; provided that notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines, orders, regulations and directives thereunder or issued in connection therewith and (y) all requests, rules, guidelines, orders, regulations or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted or issued.

Change of Control” means an event or series of events by which:

(a) (1) any Person (other than any Permitted Holder), or Persons (other than one or more of the Permitted Holders) constituting a “group” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, but excluding any employee benefit plan of such Person or its Subsidiaries, and any Person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan) becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, except that such Person or group shall be deemed to have “beneficial ownership” of all securities that such Person or group has the right to acquire, whether such right is exercisable immediately or only after the passage of time (such right, an “option right”)), directly or indirectly, of more than 35% of the Equity Interests of the Public Parent entitled to vote for members of the board of directors or equivalent governing body of the Public Parent, on a fully-diluted basis (and taking into account all such securities that such “Person” or “group” has the right to acquire pursuant to any option right); provided that the transactions contemplated by the Merger Agreement shall not constitute a Change of Control pursuant to this clause (a); or

 

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(b) during any period of 12 consecutive months, a majority of the seats (other than vacant seats) on (i) the Board of Directors of the Parent are occupied by individuals who were neither (A) nominated, appointed or approved by the Board of Directors of the Parent nor (B) appointed by directors so nominated, appointed or approved or (ii) the Board of Directors of the Public Parent are occupied by individuals who were neither (A) nominated, appointed or approved by the Board of Directors of the Public Parent nor (B) appointed by directors so nominated, appointed or approved; or

(c) the Public Parent shall at any time cease to own, directly or indirectly, 100% of the Equity Interests of the Parent; or

(d) the Parent shall at any time cease to own 100% of the Equity Interests of the Borrower; or

(e) the Borrower or another Loan Party ceases to own 100% of the Equity Interests of each Guarantor (other than the Parent); or

(f) a “change in control” (as such term or other similar term is defined in any indenture or other agreement evidencing any Junior Lien Debt or unsecured Indebtedness incurred by the Parent or the Borrower in accordance with Section 7.03(l)) shall have occurred.

Closing Date” means November 2, 2018.

Code” means the Internal Revenue Code of 1986, as amended.

Collateral” means all of the “Collateral” and “Mortgaged Property” referred to in the Security Instruments and all of the other property that is or is intended under the terms of the Security Instruments to be subject to Liens in favor of the Administrative Agent for the benefit of the Secured Parties.

Commitment” means, as to each Lender, its obligation to (a) make Committed Loans to the Borrower pursuant to Section 2.01 and (b) purchase participations in L/C Obligations, in an aggregate principal amount at any one time outstanding not to exceed the amount set forth opposite such Lender’s name on Schedule 2.01 or in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as applicable, as such amount may be adjusted from time to time in accordance with this Agreement.

Commitment Fee” means has the meaning specified in Section 2.10(a).

Committed Borrowing” means a borrowing consisting of simultaneous Committed Loans of the same Type and, in the case of Eurodollar Rate Loans, having the same Interest Period made by each of the Lenders pursuant to Section 2.02.

Committed Loan” has the meaning specified in Section 2.01.

 

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Committed Loan Notice” means a notice of (a) a Committed Borrowing, (b) a conversion of Committed Loans from one Type to the other, or (c) a continuation of Eurodollar Rate Loans, pursuant to Section 2.02(a), which shall be substantially in the form of Exhibit A or such other form as may be approved by the Administrative Agent (including any form on an electronic platform or electronic transmission system as shall be approved by the Administrative Agent), appropriately completed and signed by a Responsible Officer of the Borrower.

Commodity Account” has the meaning assigned to such term in the UCC.

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

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

Consolidated” refers to the consolidation of any Person, in accordance with GAAP, with its properly consolidated subsidiaries. References herein to a Person’s Consolidated financial statements, financial position, financial condition, liabilities, etc. refer to the consolidated financial statements, financial position, financial condition, liabilities, etc., of such Person and its properly consolidated subsidiaries.

Consolidated EBITDAX” means, with respect to the Parent and the Consolidated Restricted Subsidiaries, for any period, Consolidated Net Income for such period plus, without duplication and to the extent reflected as a charge in the statement of such Consolidated Net Income for such period, the sum of (a) interest expense (including realized and unrealized losses on interest rate derivative contracts); (b) income tax expense; (c) depreciation, depletion and amortization expense; (d) impairment of goodwill and long-lived assets (including Oil and Gas Properties); (e) accretion of asset retirement obligations; (f) unrealized losses on commodity derivative contracts; (g) realized losses upon the early termination or other monetization of commodity derivative contracts; (h) losses on sale of assets; (i) noncash stock-based compensation expenses; (j) exploration costs; (k) fees and expenses expensed and paid in cash in connection with any registered offering of Equity Interests in the Parent; and (l) one time transaction costs, fees and expenses paid or accrued in connection with debt financings, capital-raising transactions, acquisitions, investments, divestitures and other non-recurring corporate transactions, whether or not consummated, in an aggregate amount for this clause (l) not to exceed $5,000,000 during any period of four consecutive fiscal quarters; provided that clauses (a) through (j) shall exclude noncash items to the extent they represent an accrual of or reserve for cash expenditures in any future period; minus, without duplication and to the extent included in the statement of such Consolidated Net Income for such period, the sum of interest income (including realized and unrealized gains on interest rate derivative contracts); income tax benefit; unrealized gains on commodity derivative contracts; realized gains upon the early termination or other monetization of commodity derivative contracts; and gains on sales of assets. For the purposes of calculating Consolidated EBITDAX for any period of four consecutive fiscal quarters (each, a “Reference Period”) pursuant to any determination of the financial covenants contained in Section 7.11, (x) if during such Reference Period, the Parent or any Consolidated Restricted Subsidiary shall have made a Material Disposition or Material Acquisition, the Consolidated EBITDAX for such Reference Period shall be calculated after giving pro forma effect thereto as if such Material Disposition or (if elected by the Parent or the Borrower) such Material Acquisition, as applicable,

 

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occurred on the first day of such Reference Period and (y) notwithstanding the occurrence of a Hedge Liquidation in respect of any Hedge Transaction, the Consolidated EBITDAX for such Reference Period shall be calculated giving pro forma effect to any gain (or loss) that would be attributable during such Reference Period to the applicable Hedge Transaction in the event such Hedge Liquidation had not been consummated prior to the scheduled maturity of such Hedge Transaction. As used in this definition, “Material Acquisition” means any acquisition of property or series of related acquisitions of property that involves (x) the payment of consideration by the Parent and the Consolidated Restricted Subsidiaries or (y) the acquisition by the Parent and the Consolidated Restricted Subsidiaries of such property with a fair market value, in each case, in excess of (1) $20,000,000 in the aggregate during a fiscal quarter or (2) $20,000,000 for any single acquisition or series of related acquisitions of Property; and “Material Disposition” means any disposition of property or series of related dispositions of property that yields gross proceeds to the Parent or any of the Consolidated Restricted Subsidiaries in excess of (1) $20,000,000 in the aggregate during a fiscal quarter or (2) $20,000,000 for any single disposition or series of related dispositions of property.

Consolidated Net Debt” means, as of any date of determination, all Indebtedness of the Parent and the Consolidated Restricted Subsidiaries on a Consolidated basis other than (a) contingent obligations in respect of Indebtedness described in clause (b) of the definition of “Indebtedness” (excluding letters of credit), (b) Indebtedness described in clauses (d), (i), (j) and (k) of the definition of “Indebtedness”, and (c) Indebtedness described in clause (e) of the definition of “Indebtedness” in respect of Indebtedness of others described in clauses (a) or (b) of this definition, minus (b) up to $30,000,000 of the aggregate amount of cash and Cash Equivalents of the Parent, the Borrower and the other Loan Parties on such date.

Consolidated Net Income” means, with respect to the Parent and the Consolidated Restricted Subsidiaries, for any period, the aggregate of the net income (or loss) of the Parent and the Consolidated Restricted Subsidiaries for such period determined on a consolidated basis in accordance with GAAP; provided that there shall be excluded from such net income (to the extent otherwise included therein) the following: (a) the net income of any Person in which the Parent or any Consolidated Restricted Subsidiary has an interest (which interest does not cause the net income of such other Person to be consolidated with the net income of the Parent and the Consolidated Restricted Subsidiaries in accordance with GAAP), except to the extent of the amount of dividends or distributions actually paid in cash during such period by such other Person to the Parent or to a Consolidated Restricted Subsidiary, as the case may be; (b) 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 so long as the assets of such Person are not included in the calculation of the Borrowing Base; (c) any extraordinary gains or losses during such period; and (d) any gains or losses attributable to writeups or writedowns of assets, including ceiling test writedowns.

Contractual Obligation” means, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.

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.

 

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Control Agreement” means a control agreement, in form and substance reasonably satisfactory to Administrative Agent, providing for the Administrative Agent’s exclusive control of a Deposit Account, Securities Account or Commodity Account, as applicable, executed and delivered by the Parent, the Borrower or any Restricted Subsidiary, as applicable, and the applicable securities intermediary (with respect to a Securities Account), bank (with respect to a Deposit Account) or commodity intermediary (with respect to a Commodity Account), in each case, at which such relevant account is maintained.

COPAS” means the Council of Petroleum Accountants Societies.

Credit Extension” means each of the following: (a) a Committed Borrowing and (b) an L/C Credit Extension.

Debtor Relief Laws” means the Bankruptcy Code and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.

Default” means any event or condition that constitutes an Event of Default or that, with the giving of any notice, the passage of time, or both, would be an Event of Default.

Default Rate” means (a) when used with respect to Obligations other than Letter of Credit Fees, an interest rate equal to (i) the Base Rate plus (ii) the Applicable Rate, if any, applicable to Base Rate Loans plus (iii) 2.00% per annum; provided, however, that with respect to a Eurodollar Rate Loan, the Default Rate shall be an interest rate equal to the interest rate (including any Applicable Rate) otherwise applicable to such Committed Loan plus 2.00% per annum and (b) when used with respect to Letter of Credit Fees, a rate equal to the Applicable Rate plus 2.00% per annum.

Defaulting Lender” means any Lender that (a) has failed to fund any portion of (i) the Committed Loans within two Business Days of the date such Committed 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) the participations in L/C Obligations required to be funded by it hereunder within two Business Days of the date required to be funded by it hereunder unless such failure has been cured, (b) has otherwise failed to pay over to the Administrative Agent or any other Lender any other amount required to be paid by it hereunder within two Business Days of the date when due, unless the subject of a good faith dispute or unless such failure has been cured, (c) has notified the Borrower, the Administrative Agent or any L/C 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 Committed Loan hereunder and states that such position is based on such Lender’s determination that a condition precedent to funding (which

 

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condition precedent, together with any applicable default, shall be specifically identified in such writing or public statement) cannot be satisfied), (d) 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 (d) upon receipt of such written confirmation by the Administrative Agent and the Borrower) or (e) has, or has a direct or indirect parent company that has, (i) become the subject of a proceeding under any Debtor Relief Law, (ii) had appointed for it a receiver, custodian, conservator, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or assets, including the Federal Deposit Insurance Corporation or any other state or federal regulatory authority acting in such a capacity or (iii) become the subject of a Bail-In Action; provided that a Lender shall not be a Defaulting Lender solely by virtue of the ownership or acquisition of any equity interest in that Lender or any direct or indirect parent company thereof by a Governmental Authority so long as such 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 any one or more of clauses (a) through (e) above shall be conclusive and binding absent manifest error, and such Lender shall be deemed to be a Defaulting Lender (subject to Section 2.15(e)) upon delivery of written notice of such determination to the Borrower, each L/C Issuer and each Lender.

Deposit Account” has the meaning assigned to such term in the UCC.

Designated Jurisdiction” means any country, region or territory to the extent that such country, region or territory itself is the subject of any Sanction.

Determination Date” has the meaning specified in Section 2.05(b).

Disposition” or “Dispose” means the sale, transfer, license, lease or other disposition (including any sale and leaseback transaction but excluding all events described in the definition of “Casualty Event” regardless of the value thereof) of any property by any Person (or the granting of any option or other right to do any of the foregoing), including any sale, assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith. The issuance of Equity Interests by any Restricted Subsidiary to any Person other than the Borrower or a wholly-owned Restricted Subsidiary shall be deemed a Disposition by the Borrower of its direct or indirect Equity Interest in such Restricted Subsidiary to the extent of the resulting dilution.

Disqualified Stock” means any capital stock 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 (a) matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder thereof (other than customary offers to purchase upon a change in control, asset sale or casualty or condemnation event and customary acceleration rights after an event of default so long as any rights of the holders thereof upon the occurrence of a change of control or asset sale event shall be subject to the prior repayment in full of the Loans

 

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and all other Obligations (other than contingent indemnification obligations as to which no claim has been asserted)), in whole or in part, on or prior to the date that is 91 days after the Maturity Date, except to the extent that such capital stock is redeemable with, or solely exchangeable for, any capital stock of such Person that is not Disqualified Stock, (b) provide for the scheduled payment of dividends in cash or (c) is or becomes convertible into or exchangeable for Indebtedness or any Equity Interests that would constitute Disqualified Stock, in each case, prior to the date that is 91 days after the Maturity Date; provided that, if such capital stock is issued to any plan for the benefit of employees of the Public Parent, any Intermediate Parent, the Parent, the Borrower or its Subsidiaries or by any such plan to such employees, such capital stock shall not constitute Disqualified Stock solely because it may be required to be repurchased by the Public Parent, any Intermediate Parent, the Parent, the Borrower or its Subsidiaries in order to satisfy applicable statutory or regulatory obligations; provided, further, that any capital stock held by any future, present or former employee, director, manager or consultant of the Public Parent, any Intermediate Parent, the Parent, the Borrower, any of its Subsidiaries or any of its direct or indirect parent companies or any other entity in which the Public Parent, any Intermediate Parent, the Parent, the Borrower or a Subsidiary has an Investment and is designated in good faith as an “affiliate” by the board of directors or managers of the Parent or the Borrower, in each case pursuant to any equity holders’ agreement, management equity plan or stock incentive plan or any other management or employee benefit plan or agreement shall not constitute Disqualified Stock solely because it may be required to be repurchased by the Parent or the Borrower or its Subsidiaries.

Dollar” and “$” mean lawful money of the United States.

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

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

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

Election Notice” has the meaning specified in Section 2.06(b)(ii).

Eligible Assignee” means any Person that meets the requirements to be an assignee under Section 10.06(b)(iii), (v), (vi) and (vii) (subject to such consents, if any, as may be required under Section 10.06(b)(iii)).

Engineered Oil and Gas Property” means any Oil and Gas Property listed in the most recent Engineering Report other than any Oil and Gas Property that has been Disposed of as part of or in connection with any Disposition to a Person other than a Loan Party that is permitted hereunder or under any other Loan Document.

 

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Engineering Report” means the Initial Engineering Report and each engineering report delivered pursuant to Section 2.05 or Section 6.01 setting forth, as of each December 31 (or January 1) and June 30 (or July 1), as applicable, the Proved Reserves attributable to the Oil and Gas Properties of the Borrower, the other Loan Parties, together with a projection of the rate of production of future net income, taxes, operating expenses and capital expenditures with respect thereto as of such date, based upon the economic assumptions consistent with the Administrative Agent’s lending requirements at the time, and reflecting any Oil and Gas Hedge Transactions that are in place with respect to such production. To the extent that two or more engineering firms prepare reports as of the same date for portions of the properties required to be reported on, such reports will collectively constitute a single “Engineering Report” for the purposes hereof.

Environmental Laws” means any and all Federal, state, local and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions relating to pollution and the protection of the environment or the release of any materials into the environment, including those related to hazardous substances or wastes, air emissions and discharges to waste or public systems.

Environmental Liability” means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Borrower, any other Loan Party or any of their respective Subsidiaries directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

Environmental Permit” means any permit, approval, identification number, license or other authorization required under any Environmental Law.

Equity Interests” means, with respect to any Person, all of the shares of capital stock of (or other ownership or profit interests in) such Person, all of the warrants, options or other rights for the purchase or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, all of the securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or such other interests), and all of the other ownership or profit interests in such Person (including partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination. For the avoidance of doubt, debt instruments that are convertible into Equity Interests shall not be deemed to be Equity Interests until they are so converted.

ERISA” means the Employee Retirement Income Security Act of 1974.

 

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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).

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; (d) the filing of a notice of intent to terminate, the treatment of a Pension or Multiemployer 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 that 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; or (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.

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

Eurodollar Rate” means:

(a) for any Interest Period with respect to a Eurodollar Rate Loan, the rate per annum equal to the greater of (i) 0% and (b) the ICE Benchmark Administration Limited LIBOR rate (“LIBOR”) or a comparable or successor rate that rate is approved by the Administrative Agent, as published on the applicable Reuters screen page (or, if such Reuters screen page is not available, any successor or substitute page for such service providing such quotations comparable to those currently provided on such page of such service, as may be designated by the Administrative Agent from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London Interbank eurodollar market) at approximately 11:00 a.m., London time, two (2) Business Days prior to the commencement of such Interest Period, for Dollar Deposits (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, provided that if such rate is not available at such time for any reason, then the “Eurodollar Rate” with respect to such Eurodollar Rate Loan shall be the rate (rounded upwards, if necessary, to the next 1/100 of 1%) at which dollar deposits of an amount comparable to such Loan and for a term equivalent 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. on such day (or if such day is not a Business Day, then the immediately preceding Business Day); and

(b) for any interest calculation with respect to a Base Rate Loan on any date, the rate per annum equal to LIBOR, at or about 11:00 a.m., London time determined on such day (or if such day is not a Business Day, then the immediately preceding Business Day) prior to such date for Dollar deposits with a term of one month commencing that day.

 

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Notwithstanding the foregoing, (i) if the Eurodollar Rate shall be less than 0%, such rate shall be deemed to be 0% for purposes of this Agreement and (ii) if the circumstances described in Section 3.03(b) have occurred, each reference to the Eurodollar Rate shall be deemed to refer to the applicable alternative rate that is implemented in accordance with Section 3.03(b).

Eurodollar Rate Loan” means a Committed Loan that bears interest at a rate based on the Eurodollar Rate.

Event of Default” has the meaning specified in Section 8.01.

Excluded Accounts” means (a) each account in which all of the deposits consist solely of amounts utilized to fund payroll, employee benefits (including medical, dental and employee benefits claims) or tax obligations of the Parent, the Borrower or the Restricted Subsidiaries, (b) any segregated account to the extent such account consists solely of amounts in respect of oil and gas royalty interests held in a fiduciary, trust or similar capacity for one or more third parties and (c) other accounts with funds on deposit not to exceed $2,500,000 in the aggregate for all such accounts at any time; provided that in no event shall any of the principal operating accounts of the Parent, the Borrower or its Restricted Subsidiaries constitute an Excluded Account.

Excluded Subsidiary” shall mean (a) each Unrestricted Subsidiary, (b) each Immaterial Subsidiary, (c) any Restricted Subsidiary that is a captive insurance company, (d) each Subsidiary that is prohibited by any applicable Contractual Obligation (not entered into in contemplation of the exclusionary consequence afforded hereby) or requirement of Law from guaranteeing or granting Liens to secure the Obligations at the time such Subsidiary becomes a Restricted Subsidiary (and for so long as such restriction or any replacement or renewal thereof is in effect) or that would require consent, approval, license or authorization of a Governmental Authority to guarantee or grant Liens to secure the Obligations at the time such Subsidiary becomes a Restricted Subsidiary (unless such consent, approval, license or authorization has been received), and (e) any other Subsidiary with respect to which, (x) in the reasonable judgment of the Administrative Agent and the Parent or the Borrower (and confirmed in writing), the cost or other consequences of providing a Guarantee of the Obligations shall be excessive in view of the benefits to be obtained by the Lenders therefrom or (y) providing such a Guarantee would result in material adverse Tax consequences as reasonably determined by the Borrower; provided that notwithstanding anything herein to the contrary, no Subsidiary owning Oil and Gas Properties included in the Borrowing Base shall be an Excluded Subsidiary.

Excluded Swap Obligation” means, with respect to any Guarantor, (a) any Hedge Obligation in respect of a Hedge Transaction if, and to the extent that, and only for so long as, all or a portion of the guarantee of such Guarantor of, or the grant by such Guarantor of a security interest to secure, as applicable, such Hedge 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 Guarantor’s failure to constitute an “eligible contract participant”, as defined in the Commodity Exchange Act and the regulations thereunder, at the time the guarantee of (or grant of such security interest by, as applicable) such Guarantor becomes or would become effective with respect to such Hedge Obligation or (b) any other Hedge Obligation designated as an “Excluded Swap Obligation” of such Guarantor as specified in any agreement between the relevant Loan

 

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Parties and counterparty applicable to such Hedge Obligations, and agreed by the Administrative Agent. If a Hedge Obligation arises under a master agreement governing more than one Hedge Transaction, such exclusion shall apply only to the portion of such Hedge Obligation that is attributable to Hedge Transactions for which such Guarantee or security interest is or becomes illegal.

Excluded Taxes” means, with respect to the Administrative Agent, any Lender, any L/C Issuer or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (a) taxes imposed on or measured by its overall net income (however denominated), and franchise taxes imposed on it (in lieu of net income taxes), by the jurisdiction (or any political subdivision thereof) under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable Lending Office is located, (b) any branch profits taxes imposed by the United States or any similar tax imposed by any other jurisdiction in which the recipient is located, (c) in the case of a Foreign Lender (other than an assignee pursuant to a request by the Borrower under Section 10.13), any withholding tax that is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party hereto (or designates a new Lending Office) or is attributable to such Foreign Lender’s failure or inability (other than as a result of a Change in Law) to comply with Section 3.01(f), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new Lending Office (or assignment), to receive additional amounts from the Borrower with respect to such withholding tax pursuant to Section 3.01(a), and (d) any withholding Taxes imposed under FATCA.

Existing Credit Agreement” means the Amended and Restated Credit Agreement, dated as of May 4, 2017, among the Borrower, the Parent, each lender party thereto from time to time and Wells Fargo Bank, N.A., as administrative agent and L/C Issuer.

Facility Limit” means, at any time, the lesser of (a) the Aggregate Commitments at such time and (b) the Borrowing Base at such time.

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 Treasury Regulations promulgated thereunder or official interpretations thereof, any agreements entered into pursuant to Section 1471(b)(1) of the Code, any fiscal or regulatory legislation, rules or practices adopted pursuant to any of the foregoing, and any intergovernmental agreement, treaty or convention among Governmental Authorities entered into in connection with the implementation of any of the foregoing.

Federal Funds Rate” means, for any day, the rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate (rounded upward, if necessary, to a whole multiple of 1/100 of 1.00%) charged to the Administrative Agent on such day on such transactions as determined by the Administrative Agent.

 

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Flood Insurance Regulations” means, collectively, (i) the National Flood Insurance Act of 1968 as now or hereafter in effect or any successor statute thereto, (ii) the Flood Disaster Protection Act of 1973 as now or hereafter in effect or any successor statue thereto, (iii) the National Flood Insurance Reform Act of 1994 (amending 42 USC 4001, et seq.), as the same may be amended or recodified from time to time and (iv) the Flood Insurance Reform Act of 2004 and any regulations promulgated thereunder.

Foreign Lender” means any Lender that is organized under the laws of a jurisdiction other than that in which the Borrower is resident for tax purposes. For purposes of this definition, the United States, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.

Fronting Exposure” means, at any time there is a Defaulting Lender, with respect to any L/C Issuer, such Defaulting Lender’s Applicable Percentage of the outstanding L/C Obligations with respect to Letters of Credit issued by such L/C Issuer other than L/C Obligations as to which such Defaulting Lender’s participation obligation has been reallocated to other Lenders or Cash Collateralized in accordance with the terms hereof.

Fund” means any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business.

GAAP” means generally accepted accounting principles in the United States set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or such other principles as may be approved by a significant segment of the accounting profession in the United States, that are applicable to the circumstances as of the date of determination, consistently applied.

Governmental Authority” means the government of the United States or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).

Granting Lender” has the meaning specified in Section 10.06(g).

Guarantee” means, as to any Person, (a) any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness payable or performable by another Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of such Person, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness, (ii) to purchase or lease property, securities or services for the purpose of assuring the obligee in respect of such Indebtedness of the payment or performance of such Indebtedness, (iii) to maintain working

 

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capital, equity capital or any other financial statement condition or liquidity or level of income or cash flow of the primary obligor so as to enable the primary obligor to pay such Indebtedness or (iv) entered into for the purpose of assuring in any other manner the obligee in respect of such Indebtedness of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part) or (b) any Lien on any assets of such Person securing any Indebtedness of any other Person, whether or not such Indebtedness is assumed by such Person (or any right, contingent or otherwise, of any holder of such Indebtedness to obtain any such Lien). The amount of any Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the related primary obligation, or portion thereof, in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by the guaranteeing Person in good faith. The term “Guarantee” as a verb has a corresponding meaning.

Guarantors” means, collectively, the Parent, each Restricted Subsidiary on the Closing Date that is not an Excluded Subsidiary on such date, and each other Person that becomes a Guarantor after the Closing Date pursuant to Section 6.12.

Guaranty” means the Guaranty executed by the Parent, the Borrower and the Guarantors in favor of the Administrative Agent and the other Secured Parties in substantially the form attached hereto as Exhibit G, as the same may be amended, modified or supplemented from time to time in accordance with the terms hereof and thereof.

Hazardous Materials” means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos-containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law.

Hedge Liquidation” means the sale, assignment, novation (excluding novations between Lenders and/or affiliates of Lenders), liquidation, unwind or termination (other than at its scheduled expiry) of all or any part of any Hedge Transaction.

Hedge Obligation” means, with respect to any Person, any obligation to pay or perform under any Hedge Transaction.

Hedge Termination Value” means, in respect of any one or more Hedge Transactions, after taking into account the effect of any legally enforceable netting agreement relating to such Hedge Transactions, (a) for any date on or after the date such Hedge Transactions have been closed out and termination value(s) determined in accordance therewith, such termination value(s) and (b) for any date prior to the date referenced in clause (a), the amount(s) determined as the mark-to-market value(s) for such Hedge Transactions, as determined based upon one or more mid-market or other readily available quotations provided by any recognized dealer in such Hedge Transactions (which may include a Lender or any Affiliate of a Lender).

Hedge Transaction” means (a) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index

 

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swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, pursuant to which a Person hedges risks related to commodity prices, interest rates, currency exchange rates, securities prices or financial market conditions and (b) any and all transactions of any kind, and the related confirmations, that are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement (any such master agreement, together with any related schedules, a “Master Agreement”), including any such obligations or liabilities under any Master Agreement. Hedge Transactions expressly include Oil and Gas Hedge Transactions.

Honor Date” has the meaning specified in Section 2.03(d)(i).

Hydrocarbons” means oil, gas, casinghead gas, drip gasolines, natural gasoline, condensate, distillate and all other liquid and gaseous hydrocarbons produced or to be produced in conjunction therewith, and all products, by-products and all other substances derived therefrom or the processing thereof, and all other minerals and substances, including, but not limited to, sulphur, lignite, coal, uranium, thorium, iron, geothermal steam, water, carbon dioxide, helium and any and all other minerals, ores or substances of value, and the products and proceeds therefrom, including, without limitation, all gas resulting from the in situ combustion of coal or lignite.

Immaterial Subsidiary” means any Restricted Subsidiary of the Borrower with less than $5,000,000 in total assets on a Consolidated basis.

Immaterial Title Deficiencies” means, with respect to specified Engineered Oil and Gas Properties, defects or clouds on title, discrepancies in reported net revenue and working interest ownership percentages, inaccuracies of representations and warranties in Sections 5.21 and 5.22 that are qualified by reference to this definition, and other Liens, defects, discrepancies and similar matters that do not, in the aggregate, reduce the PV9 Value of all Engineered Oil and Gas Properties of the Borrower and the other Loan Parties by more than 2.5% of PV9 Value of all such Engineered Oil and Gas Properties.

Indebtedness” means, as to any Person at a particular time, without duplication, all of the following, whether or not included as indebtedness or liabilities in accordance with GAAP:

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

(b) all direct or contingent obligations of such Person arising under letters of credit (including standby and commercial), bankers’ acceptances, bank guaranties, surety bonds and similar instruments;

(c) net obligations of such Person under any Hedge Transaction;

 

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(d) all obligations of such Person to pay the deferred purchase price of property or services (other than trade accounts payable in the ordinary course of business and, in each case, not past due for more than 90 days after the date on which such trade account payable was created);

(e) indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse;

(f) Capital Leases and Synthetic Lease Obligations;

(g) the mandatory redemption price of all Disqualified Stock of such Person;

(h) all Guarantees of such Person in respect of any of the foregoing;

(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 even if such goods or services are not actually received or utilized by such Person; and

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

For all purposes hereof, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in which such Person is a general partner or a joint venturer, unless such Indebtedness is expressly made non-recourse to such Person. The amount of any net obligation under any Hedge Transaction on any date shall be deemed to be the Hedge Termination Value thereof as of such date. The amount of any Capital Lease or Synthetic Lease Obligation as of any date shall be deemed to be the amount of Attributable Indebtedness in respect thereof as of such date. The amount of any non-recourse Indebtedness described in clause (e) of this definition shall, for the purposes of this Agreement, be deemed to be equal to the lesser of (i) the aggregate unpaid amount of such Indebtedness and (ii) the fair market value of the property or asset encumbered, as determined by such Person in good faith.

Indemnified Taxes” means Taxes imposed on or with respect to any payment by or on account of any obligations of any Loan Party hereunder or under any other Loan Document other than Excluded Taxes.

Indemnitees” has the meaning specified in Section 10.04(b).

Information” has the meaning specified in Section 10.07.

Initial Engineering Report” means the engineering report concerning Oil and Gas Properties of Loan Parties dated as of July 1, 2018, prepared internally by the Borrower.

 

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Initial Financial Statements” means (a) audited consolidated balance sheet and related Consolidated income statements and statements of cash flows of the Public Parent, the Parent and its Subsidiaries as of, and for the fiscal year ended, December 31, 2017 and (b) the unaudited consolidated balance sheet and related consolidated income statements and statements of cash flows of the Public Parent, the Parent and its Subsidiaries as of, and for the fiscal quarter ended June 30, 2018.

Intermediate Parent” means, Amplify Energy Corp., a Delaware corporation, and its successors, together with any other Person (if any) that both (i) is owned directly or indirectly by Public Parent and (ii) directly or indirectly owns any Equity Interests of the Parent.

“Intermediate Parent Pledge Agreement” means a Non-Recourse Pledge Agreement between any Intermediate Parent and the Administrative Agent in substantially the form of Exhibit N (or otherwise in form and substance reasonably acceptable to the Administrative Agent) granting Liens on and a security interest in such Intermediate Parent’s personal property constituting Collateral (as defined therein) in favor of the Administrative Agent for the benefit of the Secured Parties to secure the Secured Obligations, as the same may be amended, modified, supplemented or restated from time to time.

Interest Payment Date” means, (a) as to any Committed Loan other than a Base Rate Loan and any LIBOR Market Index Rate Loan, the last day of each Interest Period applicable to such Committed Loan and the Maturity Date; provided, however, that if any Interest Period for a Eurodollar Rate Loan exceeds three months, the respective dates that fall every three months after the beginning of such Interest Period shall also be Interest Payment Dates; and (b) as to any Base Rate Loan and any LIBOR Market Index Rate Loan, the last Business Day of each March, June, September and December and the Maturity Date.

Interest Period” means, as to each Eurodollar Rate Loan, the period commencing on the date such Eurodollar Rate Loan is disbursed or converted to or continued as a Eurodollar Rate Loan and ending on the date one, two, three or six months thereafter, as selected by the Borrower in its Committed Loan Notice, or such other period that is twelve months or less requested by the Borrower and commercially available to all the Lenders; provided that:

(i) any Interest Period that would otherwise end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day;

(ii) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and

(iii) no Interest Period shall extend beyond the Maturity Date.

Investment” means, as to any Person, any direct or indirect acquisition or investment by such Person, whether by means of (a) the purchase or other acquisition of capital stock or other securities of another Person, (b) a loan, advance or capital contribution to, Guarantee or assumption of debt of, or purchase or other acquisition of any other debt or equity participation or interest in,

 

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another Person, including any partnership or joint venture interest in such other Person and any arrangement pursuant to which the investor Guarantees Indebtedness of such other Person or (c) the purchase or other acquisition (in one transaction or a series of transactions) of assets of another Person that constitute a business unit. For purposes of covenant compliance, the amount of any Investment shall be the amount actually invested, without adjustment for subsequent increases or decreases in the value of such Investment.

ISP” means, with respect to any Letter of Credit, the “International Standby Practices 1998” published by the Institute of International Banking Law & Practice (or such later version thereof as may be in effect at the time of issuance).

Issuer Documents” means with respect to any Letter of Credit, the Letter of Credit Application, and any other document, agreement and instrument entered into by the applicable L/C Issuer and the Borrower (or any other Loan Party) or in favor the applicable L/C Issuer and relating to such Letter of Credit.

Junior Lien Debt” means Indebtedness (i) of the Public Parent, any Intermediate Parent, the Borrower and the other Loan Parties secured by the Collateral on a junior lien basis on the terms and conditions set forth in (and with a Junior Lien Representative at all times party to) a Junior Lien Intercreditor Agreement and not secured by any property or assets of the Borrower or any of its Subsidiaries other than the Collateral (on such junior basis) and (ii) as to which a representative of the holders of such Indebtedness, acting on behalf of such holders, shall have become party to the Junior Lien Intercreditor Agreement as a Junior Lien Representative (or, to the extent no Junior Lien Intercreditor Agreement exists at the time of the incurrence of such Junior Lien Debt, shall have entered into a Junior Lien Intercreditor Agreement with the Administrative Agent).

Junior Lien Financing Documentation” means any documentation governing any Junior Lien Debt including, without limitation, any Junior Lien Intercreditor Agreement.

Junior Lien Intercreditor Agreement” means an Intercreditor Agreement executed by representative for the holders of the Junior Lien Debt (the “Junior Lien Representative”), the Administrative Agent and the Parent, the Borrower and the Guarantors, in substantially the form attached hereto as Exhibit J, as the same may be amended, restated, amended and restated, modified or supplemented from time to time in accordance with the terms hereof and thereof.

Junior Lien Representative” has the meaning set forth in the definition of “Junior Lien Intercreditor Agreement”.

L/C Advance” means, with respect to each Lender, such Lender’s funding of its participation in any L/C Borrowing in accordance with its Applicable Percentage.

L/C Borrowing” means an extension of credit resulting from a drawing under any Letter of Credit that has not been reimbursed on the date when made or refinanced as a Committed Borrowing.

L/C Credit Extension” means, with respect to any Letter of Credit, the issuance thereof or extension of the expiry date thereof, or the increase of the amount thereof.

 

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L/C Issuer” means (a) Bank of Montreal and (b) any other Lender satisfactory to the Borrower and the Administrative Agent that may agree to issue Letters of Credit hereunder pursuant to an instrument in form reasonably satisfactory to such L/C Issuer and the Borrower, in the case of clauses (a) and (b), in their respective capacities as issuers of Letters of Credit hereunder, or any successor issuers of Letters of Credit hereunder.

L/C Obligations” means, as at any date of determination, the aggregate amount available to be drawn under all outstanding Letters of Credit plus the aggregate of all Unreimbursed Amounts, including all L/C Borrowings. For purposes of computing the amount available to be drawn under any Letter of Credit, the amount of such Letter of Credit shall be determined in accordance with Section 1.07. For all purposes of this Agreement, if on any date of determination a Letter of Credit has expired by its terms but any amount may still be drawn thereunder by reason of the operation of Rule 3.14 of the ISP, such Letter of Credit shall be deemed to be “outstanding” in the amount so remaining available to be drawn.

Laws” means, collectively, all international, foreign, Federal, state and local statutes, treaties, rules, regulations, ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, licenses, authorizations and permits of, and agreements with, any Governmental Authority.

Lender” or “Lenders” has the meaning specified in the introductory paragraph hereto.

Lender Counterparty” means (i) any counterparty under a Hedge Transaction that was a Lender (or an Affiliate of a Lender) at the time such Hedge Transaction was entered into or became a Lender (or an Affiliate of a Lender) after the time such Hedge Transaction was entered into, (ii) with respect to any Hedge Transaction in existence on the Closing Date, ING Capital Markets LLC, JPMorgan Chase Bank, N.A. and Natixis, and/or (iii) any counterparty under a Treasury Management Services Agreement that was a Lender (or an Affiliate of a Lender) at the time such Treasury Management Services Agreement was entered into or became a Lender (or an Affiliate of a Lender) after the time such Treasury Management Services Agreement was entered into.

Lending Office” means, as to any Lender, the office or offices of such Lender described as such in such Lender’s Administrative Questionnaire, or such other office or offices as a Lender may from time to time notify the Borrower and the Administrative Agent.

Letter of Credit” means any standby letter of credit issued hereunder providing for the payment of cash upon the honoring of a presentation thereunder.

Letter of Credit Application” means an application and agreement for the issuance or amendment of a Letter of Credit in the form from time to time in use by the applicable L/C Issuer. In the event of any inconsistency between the provisions of any Letter of Credit Application and the provisions of this Agreement, the provisions of this Agreement shall prevail.

Letter of Credit Expiration Date” means the day that is five (5) Business Days prior to the Maturity Date then in effect (or, if such day is not a Business Day, the next preceding Business Day).

 

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Letter of Credit Fee” has the meaning specified in Section 2.03(j).

Letter of Credit Sublimit” means an amount equal to $50,000,000. The Letter of Credit Sublimit is part of, and not in addition to, the Aggregate Commitments.

LIBOR” has the meaning set forth in the definition of “Eurodollar Rate”.

LIBOR Market Index Rate” for any day with respect to any LIBOR Market Index Rate Loan, a rate per annum equal to the greater of (i) 0% and (ii) the rate determined by reference to the ICE Benchmark Administration Limited or a comparable or successor rate that rate is approved by the Administrative Agent, as published on the applicable Reuters screen page (or, if such Reuters screen page is not available, any successor or substitute page for such service providing such quotations comparable to those currently provided on such page of such service, as may be designated by the Administrative Agent from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London Interbank eurodollar market) at approximately 11:00 a.m., London time on such day (or if such day is not a Business day, then the immediately preceding Business Day), as the rate for dollar deposits with one-month maturity. In the event that such rate is not available at such time for any reason, then the “LIBOR Market Index Rate” with respect to such LIBOR Market Index Rate Loan shall be the rate (rounded upwards, if necessary, to the next 1/100 of 1%) at which dollar deposits of an amount comparable to such Loan and for a one-month maturity 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. on such day (or if such day is not a Business Day, then the immediately preceding Business Day).

Lien” means any interest in property securing an obligation owed to, or a claim by, a Person other than the owner of the property, including the lien or security arising from any mortgage, pledge, hypothecation, assignment, encumbrance, lien (statutory or other), charge, or other security interest or preferential arrangement in the nature of a security interest of any kind or nature whatsoever (including any conditional sale or other title retention agreement, any easement, right of way or other encumbrance on title to real property, and any financing lease having substantially the same economic effect as any of the foregoing).

Loan” means an extension of credit by a Lender to the Borrower under Article II in the form of a Committed Loan.

Loan Documents” means this Agreement, each Note, each Issuer Document, the Guaranty, the Security Instruments and any Junior Lien Intercreditor Agreement; provided that for the avoidance of doubt, neither any agreement evidencing a Hedge Transaction (including any Master Agreement) between a Loan Party and a Lender Counterparty, nor any Treasury Management Services Agreement with a Lender Counterparty shall constitute a Loan Document.

Loan Parties” means, collectively, the Parent, the Borrower and each Guarantor.

Majority Lenders” means, as of any date of determination, Lenders having more than 50% of the Aggregate Commitments or, if the commitment of each Lender to make Loans and the obligation of the L/C Issuers to make L/C Credit Extensions have been terminated pursuant to Section 8.02, Lenders holding in the aggregate more than 50% of the Total Outstandings (with the aggregate amount of each Lender’s risk participation and funded participation in L/C Obligations being deemed “held” by such Lender for purposes of this definition); provided that the Commitment of, and the portion of the Total Outstandings held or deemed held by, any Defaulting Lender shall be excluded for purposes of making a determination of Majority Lenders.

 

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Master Agreement” has the meaning set forth in the definition of “Hedge Transaction”.

Material Acquisition” has the meaning set forth in the definition of “Consolidated EBITDAX”.

Material Adverse Effect” means (a) a material adverse change in, or a material adverse effect upon, the operations, business, assets, properties, liabilities or condition (financial or otherwise) of the Borrower, the other Loan Parties or the Restricted Subsidiaries taken as a whole; (b) a material impairment of (i) the rights and remedies of the Administrative Agent or the Lenders under the Loan Documents or (ii) the ability of the Loan Parties to perform their obligations under the Loan Documents; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability against the Loan Parties of the Loan Documents.

Material Disposition” has the meaning set forth in the definition of “Consolidated EBITDAX”.

Maturity Date” means November 2, 2023; provided that if such date is not a Business Day, the Maturity Date shall be the next preceding Business Day.

Maximum Rate” has the meaning set forth in Section 10.09.

Merger Agreement” means that certain Agreement and Plan of Merger dated on or about May 5, 2019 by and among Amplify Energy Corp., a Delaware corporation, Midstates Holdings, Inc., a Delaware corporation and wholly owned Subsidiary of the Public Parent, and the Public Parent, substantially in the form provided to the Administrative Agent on May 2, 2019, together with any amendments or other modifications thereto not materially adverse to the interests of the Administrative Agent or the Lenders, taken as a whole.

Minimum Required Conditions” means, with respect to any applicable transaction to which the Minimum Required Conditions apply in accordance with this Agreement, that (a) no Default or Event of Default shall have occurred and be continuing immediately prior to such applicable transaction or shall result from the applicable transaction; (b) the Parent’s (or, if the financial statements delivered pursuant to Section 6.01(a) or Section 6.01(b) for such fiscal quarter is in respect of the Public Parent, the Public Parent’s) ratio of Consolidated Net Debt after giving effect to such transaction to Consolidated EBITDAX for the four fiscal quarter period ended most recently ended on or prior to such date for which financial statements have been, or were required to be, delivered pursuant to Section 6.01(a) or (b), as applicable, as adjusted to give pro forma effect (if any) to such transaction, does not exceed 3.00 to 1.00; and (c) after giving effect to such transaction, the Available Commitment shall not be less than 20.0% of the Facility Limit.

Moody’s” means Moody’s Investors Service, Inc. and any successor thereto.

 

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Mortgage” means a mortgage or a deed of trust, deed to secure debt, trust deed, assignment of as-extracted collateral, fixture filing or other security documented entered into by the owner of Mortgaged Property and the Administrative Agent for the benefit of the Secured Parties in respect of that Mortgaged Property, substantially in the form of Exhibit H hereto (with such changes as may be necessary to account for local law matters) or otherwise in such form as agreed between the Borrower and the Administrative Agent, as the same may be amended, modified or supplemented from time to time in accordance with the terms hereof and thereof.

Mortgaged Property” means real property (including Oil and Gas Properties that constitute real property under applicable Law) and improvements thereto with respect to which a Mortgage is required to be granted pursuant to Section 4.01(b)(iv), Section 6.12 or Section 6.14 hereof.

Multiemployer Plan” means any employee benefit plan of the type described in Section 4001(a)(3) of ERISA, to which the Borrower or any ERISA Affiliate makes or is obligated to make contributions, or during the preceding five plan years has made or been obligated to make contributions.

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

Non-Extension Notice Date” has the meaning set forth in Section 2.03(c)(iii).

Non-Reinstatement Deadline” has the meaning set forth in Section 2.03(c)(iv).

Note” means a promissory note made by the Borrower in favor of a Lender evidencing Committed Loans made by such Lender, substantially in the form of Exhibit C.

Obligations” means all advances to, and debts, liabilities, obligations, covenants and duties of, any Loan Party arising under any Loan Document or otherwise with respect to any Committed Loan or Letter of Credit, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against any the Public Parent, any Intermediate Parent, the Borrower, any other Loan Party or any Restricted Subsidiary thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding; provided that the term “Obligations” shall not, with respect to any Guarantor, include any Excluded Swap Obligation with respect to such Guarantor.

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

Oil and Gas Business” means the business of acquiring, exploring, or developing and operating Oil and Gas Properties and the production, marketing, processing and transporting of Hydrocarbons therefrom, and providing services to the oil and gas upstream and midstream segments.

Oil and Gas Hedge Transaction” means a Hedge Transaction pursuant to which any Person hedges the price (including the price basis or any other basis element related to price) to be received by it for future sales of production of Hydrocarbons.

 

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Oil and Gas Properties” means all oil, gas and/or mineral leases, oil, gas or mineral properties, mineral servitudes and/or mineral rights of any kind (including, without limitation, mineral fee interests, lease interests, farm-out interests, overriding royalty and royalty interests, net profits interests, oil payment interests, production payment interests and other types of mineral interests), and all oil and gas gathering, treating, storage, processing, monitoring and handling assets and all other assets directly related thereto.

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

Other Taxes” means all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or under any other Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document; provided that such term shall not include Taxes resulting from an assignment, grant of a participation pursuant to Section 10.06(d) or transfer or assignment to or designation of a new lending office or other office for receiving payments under any Loan Document (“Assignment Taxes”) to the extent such Assignment Taxes are imposed as a result of a present or former connection between the assignor/participating Lender and/or the assignee/Participant and the taxing jurisdiction (other than a connection arising solely from such assignee/Participant 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), unless any action described in this proviso is requested or required by the Borrower.

Outstanding Amount” means (i) with respect to Committed Loans, on any date, the aggregate outstanding principal amount thereof after giving effect to any borrowings and prepayments or repayments of Committed Loans occurring on such date; and (ii) with respect to any L/C Obligations on any date, the amount by which such L/C Obligations exceed the Cash Collateral held by the Administrative Agent on such date after giving effect to any L/C Credit Extension occurring on such date and any other changes in the aggregate amount of the L/C Obligations as of such date, including as a result of any reimbursements by the Borrower of Unreimbursed Amounts.

Parent” has the meaning specified in the introductory paragraph hereto.

Participant” has the meaning specified in Section 10.06(d).

Participant Register” has the meaning specified in Section 10.06(d).

 

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Passive Holding Company” means a holding company that does not (a) incur, create, assume or suffer to exist any Indebtedness or other liabilities (other than liabilities arising from (i) those incidental to its ownership in, and status as a parent company of, its Subsidiaries (and, in the case of the Public Parent, its ownership of any Intermediate Parent, the Parent and itstheir respective Subsidiaries only), (ii) the maintenance of its legal existence (including the ability to incur fees, costs and expenses relating to such maintenance) and status as a public company, (iii) any public offering of its common stock or any other issuance of its Equity Interests; provided that, the net cash proceeds from such offerings or issuances are contributed to the Parent, (iv) the contributions to the capital of its Subsidiaries, (v) participating in tax, accounting and other administrative matters as a member of the consolidated group of the Public Parent, any Intermediate Parent, the Parent and the Borrower and (vi) providing compensation and indemnification to officers and directors); (b) create, incur, assume or suffer to exist any Lien upon any of its property, whether now owned or hereafter acquired, except, in the case of the Public Parent or any Intermediate Parent, Liens created pursuant to the Public Parent Pledge Agreement or the Intermediate Parent Pledge Agreement, as applicable, and Liens permitted thereunder; (c) have any income other than income incidental to its ownership in its Subsidiaries; (d) own, lease, manage or otherwise operate any properties or assets other than its ownership in its Subsidiaries; and (e) conduct, transact or otherwise engage in, or commit, transact or otherwise engage in, any business, operations or activities other than those permitted by clauses (a) through (d) above.

PATRIOT Act” has the meaning specified in Section 5.25.

PBGC” means the Pension Benefit Guaranty Corporation.

PCAOB” means the Public Company Accounting Oversight Board.

Pension Plan” means any “employee pension benefit plan” (as such term is defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA or Section 412 of the Code and is sponsored or maintained by the Borrower or any ERISA Affiliate or to which the Borrower or any ERISA Affiliate contributes or has an obligation to contribute, or in the case of a multiple employer or other plan described in Section 4064(a) of ERISA, has made contributions at any time during the immediately preceding five plan years.

Permitted Debt Restrictions” means, an instrument or instruments governing indebtedness that imposes limitations on or requirements with respect to Indebtedness, Restricted Payments or Liens of the type described in Section 7.09 that are substantially the same as or less restrictive than the corresponding limitations or requirements, if any, with respect to such matters contained in any of the Principal Debt Obligations.

Permitted Holders” means any of Brigade Capital Management LP, Citadel Advisors LLC, Fir Tree Inc., Trust Asset Management LLC, York Capital Management Global Advisors, LLC, their respective Affiliates or any funds or partnerships managed or advised by any of the foregoing (including those funds or partnerships managed or advised by the Affiliates of any of the foregoing).

 

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Permitted Refinancing” means, in respect of any Indebtedness otherwise permitted hereunder (the “Refinanced Indebtedness”), any refinancing, refunding, renewal or extension (any of the foregoing, a “Refinancing “, and any such new Indebtedness, “Refinancing Indebtedness”) of such Refinanced Indebtedness; provided that (i) the amount of such Refinanced Indebtedness is not increased at the time of such Refinancing except by an amount equal to a reasonable premium or other reasonable amount paid, and fees and expenses reasonably incurred, in connection with such refinancing and by an amount equal to any existing commitments unutilized thereunder and the direct or any contingent obligor with respect thereto is not changed, as a result of or in connection with such Refinancing, (ii) the terms relating to principal amount, amortization, collateral (if any) and subordination (if any), and other material terms taken as a whole, of any such Refinancing Indebtedness, and of any agreement entered into and of any instrument issued in connection therewith, are no less favorable taken as a whole in any material respect to the Loan Parties, as reasonably determined by the Borrower in good faith, than the terms of any agreement or instrument governing the Refinanced Indebtedness, (iii) no Event of Default would result from such Refinancing after giving effect thereto and (iv) such Refinancing Indebtedness does not mature and requires no scheduled amortization prior to 91 days following the Maturity Date.

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

Petroleum Industry Standards” means the Definitions for Oil and Gas Reserves promulgated by the Society of Petroleum Engineers (or any generally recognized successor thereto) as in effect at the time in question.

Plan” means any “employee benefit plan” (as such term is defined in Section 3(3) of ERISA) established by the Borrower or, with respect to any such plan that is subject to Section 412 of the Code or Title IV of ERISA, any ERISA Affiliate, and including any Pension Plan.

Platform” has the meaning specified in Section 6.02.

Pledged Equity” has the meaning specified in the Security Agreement, each Intermediate Parent Pledge Agreement or the Public Parent Pledge Agreement, as applicable.

Principal Debt Obligations” means all long-term debt issued by the Parent or the Borrower including, without limitation, any Junior Lien Debt or unsecured Indebtedness incurred by the Parent or the Borrower in accordance with Section 7.03(l).

Proceeding” has the meaning specified in Section 10.04(b).

Proved Developed Producing Reserves” means, oil and gas reserves that, in accordance with Petroleum Industry Standards, are classified as both “proved reserves” and “developed producing reserves”.

Proved Reserves” means, collectively, oil and gas reserves that, in accordance with Petroleum Industry Standards, are classified as “proved developed nonproducing reserves”, “proved developed producing reserves” and/or “proved undeveloped reserves”.

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

 

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Public Parent” means Amplify Energy CorpMidstates Petroleum Company, Inc., a Delaware corporation.

Public Parent Pledge Agreement” means Non-Recourse Pledge Agreement between the Public Parent and the Administrative Agent in substantially the form of Exhibit K (or otherwise in form and substance reasonably acceptable to the Administrative Agent) granting Liens on and a security interest onin the Public Parent’s personal property constituting Collateral (as defined therein) in favor of the Administrative Agent for the benefit of the Secured Parties to secure the Secured Obligations, as the same may be amended, modified, supplemented or restated from time to time.

PV9 Value” means, with respect to any Engineered Oil and Gas Properties or other Oil and Gas Properties becoming Engineered Oil and Gas Properties, the net present value, discounted at 9% per annum, of the future net revenues expected to accrue to the Borrower’s and the other Loan Parties’ collective interests in such reserves expected to be produced from such Oil and Gas Properties during the remaining expected economic lives of such reserves made in accordance with the then existing standards of the Society of Petroleum Engineers (with appropriate adjustments made for hedging operations) as follows:

(a) for anticipated sales of oil and gas that are fixed in a firm fixed price sales contract with an investment grade counterparty or a counterparty guaranteed, or for whom a letter of credit has been issued, by an investment grade party (or another counterparty approved by the Administrative Agent), the fixed price or prices provided for in such sales contract during the term thereof; and

(b) for anticipated sales of oil and gas, if such sales are not under a sales contract that is described in clause (a) above, for the date of calculation (or, if such date is not a Business Day, for the first Business Day thereafter), the prices provided in the most recent price deck provided to the Borrower by the Administrative Agent, adjusted in each case for historical location and quality differentials during the twelve months preceding such date of determination.

Qualified ECP Guarantor” means, in respect of any Hedge Obligation, each Loan Party that has total assets exceeding $10,000,000 at the time the relevant Guarantee or grant of the relevant security interest becomes effective with respect to such Hedge Obligation or such other person as constitutes an “eligible contract participant” under the Commodity Exchange Act or any regulations promulgated thereunder and can cause another person to qualify as an “eligible contract participant” at such time by entering into a keepwell under Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

Qualified Stock” means Equity Interests that are not Disqualified Stock.

Reference Period” has the meaning specified in the definition of “Consolidated EBITDAX”.

Refinanced Indebtedness” has the meaning set forth in the definition of “Permitted Refinancing”.

Refinancing” has the meaning set forth in the definition of “Permitted Refinancing”.

 

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Refinancing Indebtedness” has the meaning set forth in the definition of “Permitted Refinancing”.

Register” has the meaning specified in Section 10.06(c).

Regulation T” means Regulation T of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.

Regulation U” means Regulation U of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.

Regulation X” means Regulation X of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.

Related Parties” means, with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents, trustees, administrators and advisors of such Person and of such Person’s Affiliates.

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.

Request for Credit Extension” means (a) with respect to a Committed Borrowing, conversion or continuation of Committed Loans, a Committed Loan Notice and (b) with respect to an L/C Credit Extension, a Letter of Credit Application.

Required Lenders” means, as of any date of determination, Lenders having at least 66-2/3% of the Aggregate Commitment or, if the commitment of each Lender to make Committed Loans and the obligation of the L/C Issuers to make L/C Credit Extensions have been terminated pursuant to Section 8.02, Lenders holding in the aggregate at least 66-2/3% of the Total Outstandings (with the aggregate amount of each Lender’s risk participation and funded participation in L/C Obligations being deemed “held” by such Lender for purposes of this definition); provided that the Commitment of, and the portion of the Total Outstandings held or deemed held by, any Defaulting Lender shall be excluded for purposes of making a determination of Required Lenders.

Responsible Officer” means the chief executive officer, president, chief financial officer, treasurer, assistant treasurer or controller of a Loan Party, and solely for purposes of the delivery of incumbency certificates pursuant to Section 4.01, the secretary or any assistant secretary of a Loan Party and, solely for purposes of notices given pursuant to Article II, any other officer or employee of the applicable Loan Party so designated by any of the foregoing officers in a notice to the Administrative Agent or any other officer of employee of the applicable Loan Party designated in or pursuant to an agreement between the applicable Loan Party and the Administrative Agent. Any document delivered hereunder that is signed by a Responsible Officer of a Loan Party shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of such Loan Party and such Responsible Officer shall be conclusively presumed to have acted on behalf of such Loan Party.

Restricted Debt” has the meaning set forth in Section 7.15(a).

 

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Restricted Debt Documentation” means any documentation governing any Restricted Debt (including, in the case of Junior Lien Debt, Junior Lien Financing Documentation).

Restricted Payment” means any dividend or other distribution (whether in cash, securities or other property) with respect to any capital stock or other Equity Interest of the Borrower or any Restricted Subsidiary, 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 capital stock or other Equity Interest, or on account of any return of capital to the Borrower’s stockholders, partners or members (or the equivalent Person thereof). For the avoidance of doubt, any payment of interest (including payment-in-kind interest) made in respect of any Indebtedness convertible into Equity Interests of the Borrower permitted hereunder shall not constitute a Restricted Payment.

Restricted Subsidiary” means any Subsidiary of the Parent or the Borrower that is not an Unrestricted Subsidiary.

S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. and any successor thereto.

Sanctions” means any economic or financial sanction or trade embargoes imposed, administered or enforced from time to time by the United States Government (including without limitation, OFAC or the United States Department of State), the United Nations Security Council, the European Union, Her Majesty’s Treasury of the United Kingdom or other relevant sanctions authority.

Sarbanes-Oxley” means the Sarbanes-Oxley Act of 2002.

Scheduled Determination” has the meaning specified in Section 2.05(b)(i).

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

Secured Obligations” means all Obligations and all advances to, and debts, liabilities, obligations, covenants and duties of, any Loan Party or any Restricted Subsidiary arising under any Hedge Transaction or Treasury Management Services Agreement with a Lender Counterparty, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against the Public Parent, any Intermediate Parent, the Borrower, any other Loan Party or any Restricted Subsidiary thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding; provided that the term “Secured Obligations” shall not, with respect to any Guarantor, include any Excluded Swap Obligation with respect to such Guarantor.

Secured Parties” means, collectively, the Administrative Agent, the Lenders, the L/C Issuers, the Lender Counterparties, each co-agent or sub-agent appointed by the Administrative Agent from time to time pursuant to Section 9.05, and the other Persons the Secured Obligations owing to which are or are purported to be secured by the Collateral under the terms of the Security Instruments.

 

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Securities Account” has the meaning assigned to such term in the UCC.

Security Agreement” means the Pledge and Security Agreement entered into by the Parent, the Borrower, the other Loan Parties party thereto as grantors and the Administrative Agent, for the benefit of the Secured Parties, substantially in the form of Exhibit I hereto, as the same may be amended, modified or supplemented from time to time in accordance with the terms hereof and thereof.

Security Agreement Supplement” has the meaning specified in the Security Agreement.

Security Instruments” means, collectively, the Guaranty, the Security Agreement, the Public Parent Pledge Agreement, any Intermediate Parent Pledge Agreement, the Mortgages, each Control Agreement, each of the mortgages, collateral assignments, Security Agreement Supplements, security agreements, pledge agreements or other similar agreements delivered to the Administrative Agent pursuant to the Security Agreement or Sections 4.01, 6.12 or 6.14 hereof, and each of the other agreements, instruments or documents that creates or purports to create a Lien in favor of the Administrative Agent for the benefit of the Secured Parties, as such agreements may be amended, modified, supplemented or restated from time to time.

Solvent” means, with respect to any Person on any date of determination, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including contingent liabilities, of such Person, (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay such debts and liabilities as they mature, (d) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person’s property would constitute an unreasonably small capital and (e) such Person is able to pay its debts and liabilities, contingent obligations and other commitments as they mature in the ordinary course of business. The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

South Texas Properties” means the Oil and Gas Properties of the Borrower and the other Loan Parties as of the Closing Date located in South Texas.

SPC” has the meaning specified in Section 10.06(g).

Special Determination” has the meaning specified in Section 2.05(b)(ii).

Subsidiary” of a Person means a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise controlled, directly, or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise specified, all references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of the Borrower.

 

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Subsidiary Redesignation” has the meaning set forth in the definition of “Unrestricted Subsidiary”.

Synthetic Lease Obligation” means the monetary obligation of a Person under (a) a so called synthetic, off—balance sheet or tax retention lease or (b) an agreement for the use or possession of property creating obligations that do not appear on the balance sheet of such Person but that, upon the insolvency or bankruptcy of such Person, would be characterized as the indebtedness of such Person (without regard to accounting treatment).

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

Threshold Amount” means $20,000,000.

Total Outstandings” means the aggregate Outstanding Amount of all Committed Loans and all L/C Obligations.

Transactions” means, collectively, (a) the entering into and effectiveness of the senior credit facility under this Agreement (including in respect of any amendment, restatement, amendment and restatement, supplement or modification of this Agreement), (b) the other transactions related to each of the foregoing and (c) the payment of the fees and expenses incurred in connection with the consummation of the foregoing.

Treasury Management Services Agreement” means any agreement to provide cash management services, including treasury, depository, overdraft, credit, debit or purchasing card, electronic funds transfer and other cash management arrangements to the Parent, the Borrower or any Restricted Subsidiary.

Type” means, with respect to a Committed Loan, its character as a Base Rate Loan, LIBOR Market Index Rate Loan or a Eurodollar Rate Loan.

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.

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

 

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United States” and “U.S.” mean the United States of America.

Unreimbursed Amount” has the meaning specified in Section 2.03(d)(i).

Unrestricted Subsidiary” means (1) any Subsidiary of the Parent or the Borrower designated by the Parent or the Borrower, respectively, as an Unrestricted Subsidiary hereunder by written notice to the Administrative Agent; provided that the Parent and the Borrower shall only be permitted to so designate a Subsidiary as an Unrestricted Subsidiary so long as (a) no Event of Default has occurred or is continuing after giving effect to such designation, (b) such Unrestricted Subsidiary shall be capitalized (to the extent capitalized by the Parent, the Borrower or any of its Restricted Subsidiaries) through Investments as permitted by, and in compliance with, Section 7.02(h), (c) for purposes of clause (b) such designation shall be deemed an Investment in an amount equal to the fair market value of the total investment of the Parent, the Borrower and the Restricted Subsidiaries in such Unrestricted Subsidiary, (d) if the Subsidiary that is designated as an Unrestricted Subsidiary owns any Oil and Gas Properties with Proved Reserves that are included in the Borrowing Base, such designation shall constitute a Disposition of such Oil and Gas Properties for purposes of Section 2.05(d) and (e) the Parent or the Borrower shall have delivered to the Administrative Agent an officer’s certificate executed by a Responsible Officer of the Parent or the Borrower, certifying compliance with the requirements of preceding clauses (a) through (d), and containing the calculations and information required by the preceding clause (b) and (2) any Subsidiary of an Unrestricted Subsidiary. The Borrower may designate any Unrestricted Subsidiary to be a Restricted Subsidiary for purposes of this Agreement (each, a “Subsidiary Redesignation”); provided that (i) no Event of Default has occurred and is continuing or would result therefrom, (ii) immediately after giving effect to such Subsidiary Redesignation, the Parent and the Borrower shall be in compliance on a pro forma basis with each financial covenant set forth in Section 7.11 and (iii) the Parent and the Borrower shall have delivered to the Administrative Agent an officer’s certificate executed by a Responsible Officer of the Parent and the Borrower, certifying compliance with the requirements of preceding clauses (i) and (ii), and containing the information required by the preceding clause (ii).

Write-Down and Conversion Powers” means, with respect to any EEA Resolution Authority, the write down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write down and conversion powers are described in the EU Bail-In Legislation Schedule.

Section 1.02 Other Interpretive Provisions. With reference to this Agreement and each other Loan Document, unless otherwise specified herein or in such other Loan Document:

(a) 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, (i) any definition of or reference to any agreement, instrument or other document (including any Organization Document) 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

 

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set forth herein or in any other Loan Document), (ii) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (iii) the words “herein”, “hereof” and “hereunder”, and words of similar import when used in any Loan Document, shall be construed to refer to such Loan Document in its entirety and not to any particular provision thereof, (iv) all references in a Loan Document to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, the Loan Document in which such references appear, (v) any reference to any law shall include all statutory and regulatory provisions consolidating, amending, replacing or interpreting such law and any reference to any law or regulation shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time, and (vi) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.

(b) In the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including”, the words “to” and “until” each mean “to but excluding”, and the word “through” means “to and including”.

(c) Section headings herein and in the other Loan Documents are included for convenience of reference only and shall not affect the interpretation of this Agreement or any other Loan Document.

Section 1.03 Accounting Terms.

(a) Generally. All accounting terms not specifically or completely defined herein shall be construed in conformity with, and all financial data (including financial ratios and other financial calculations) required to be submitted pursuant to this Agreement shall be prepared in conformity with, GAAP applied on a consistent basis, as in effect from time to time, applied in a manner consistent with that used in preparing the audited financial statements described in clause (a) of the definition of “Initial Financial Statements”, except as otherwise specifically prescribed herein.

(b) Changes in GAAP. If at any time any change in GAAP would affect the computation of any financial ratio or requirement set forth in any Loan Document, and either the Parent or the Majority Lenders shall so request, the Administrative Agent, the Lenders and the Parent shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP (subject to the approval of the Majority Lenders); provided that, until so amended, (i) such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and (ii) the Parent shall provide to the Administrative Agent and the Lenders financial statements and other documents required under this Agreement or as reasonably requested hereunder setting forth a reconciliation between calculations of such ratio or requirement made before and after giving effect to such change in GAAP; provided, further, that all terms of an accounting or financial nature used herein shall be construed, and all computations of amounts and ratios referred to herein shall be made without giving effect to (i) any election under Accounting Standards Codification 825-10-25 (previously referred to as Statement of Financial Accounting Standards 159) (or any other Accounting Standards Codification or Financial Accounting Standard having a similar result or effect) to value any Indebtedness or other liabilities of the Borrower or any Subsidiary at “fair value”, as defined

 

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therein and (ii) any treatment of Indebtedness in respect of convertible debt instruments under Accounting Standards Codification 470-20 (or any other Accounting Standards Codification or Financial Accounting Standard having a similar result or effect) to value any such Indebtedness in a reduced or bifurcated manner as described therein, and such Indebtedness shall at all times be valued at the full stated principal amount thereof.

Section 1.04 Petroleum Terms. As used herein, the terms “proved reserves”, “proved developed reserves”, “proved developed producing reserves”, “proved developed nonproducing reserves” and “proved undeveloped reserves” shall be determined in accordance with Petroleum Industry Standards.

Section 1.05 Rounding. Any financial ratios required to be maintained by the Parent or the Borrower, as applicable, pursuant to this Agreement shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio is expressed herein and rounding the result up or down to the nearest number (with a rounding-up if there is no nearest number).

Section 1.06 Times of Day. Unless otherwise specified, all references herein to times of day shall be references to Eastern time (daylight or standard, as applicable).

Section 1.07 Letter of Credit Amounts. Unless otherwise specified herein, the amount of a Letter of Credit at any time shall be deemed to be the stated amount of such Letter of Credit in effect at such time; provided, however, that with respect to any Letter of Credit that, by its terms or the terms of any Issuer Document related thereto, provides for one or more automatic increases in the stated amount thereof, the amount of such Letter of Credit shall be deemed to be the maximum stated amount of such Letter of Credit after giving effect to all such increases, whether or not such maximum stated amount is in effect at such time.

ARTICLE II

THE COMMITMENTS AND CREDIT EXTENSIONS

Section 2.01 Committed Loans. Subject to the terms and conditions set forth herein, each Lender severally, but not jointly, agrees to make loans denominated in Dollars (each such loan, a “Committed Loan”) to the Borrower from time to time, on any Business Day during the Availability Period, in an aggregate amount not to exceed at any time outstanding the amount of such Lender’s Commitment; provided, however, that after giving effect to any Committed Borrowing and the application by the Administrative Agent of the proceeds thereof, (i) the Total Outstandings shall not exceed the Facility Limit and (ii) the Aggregate Exposure of any Lender shall not exceed the lesser of such Lender’s (A) Commitment and (B) Applicable Percentage of the Facility Limit. Within the limits of each Lender’s Commitment, and subject to the other terms and conditions hereof, the Borrower may borrow under this Section 2.01, repay under Section 2.06, and reborrow under this Section 2.01. Committed Loans may be Base Rate Loans, LIBOR Market Index Rate Loans or Eurodollar Rate Loans, as further provided herein.

 

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Section 2.02 Committed Borrowings, Conversions and Continuations of Committed Loans.

(a) Each Committed Borrowing, each conversion of Committed Loans from one Type to the other, and each continuation of Eurodollar Rate Loans shall be made upon the Borrower’s irrevocable notice to the Administrative Agent in the form of a Committed Loan Notice. Each such Committed Loan Notice must be received by the Administrative Agent not later than 11:00 a.m. (i) three Business Days prior to the requested date of any Committed Borrowing of, conversion to or continuation of Eurodollar Rate Loans or of any conversion of Eurodollar Rate Loans to Base Rate Loans and (ii) on the Business Day prior to any Committed Borrowing of Base Rate Loans or LIBOR Market Index Rate Loans. Each Committed Borrowing of, conversion to or continuation of Eurodollar Rate Loans shall be in a principal amount of $5,000,000 or a whole multiple of $1,000,000 in excess thereof. Except as provided in Section 2.03(d), each Committed Borrowing of or conversion to Base Rate Loans shall be in a principal amount of $1,000,000 or a whole multiple of $100,000 in excess thereof. Each Committed Loan Notice shall specify (i) whether the Borrower is requesting a Committed Borrowing, a conversion of Committed Loans from one Type to the other, or a continuation of Eurodollar Rate Loans, (ii) the requested date of the Committed Borrowing, conversion or continuation, as the case may be (which shall be a Business Day), (iii) the principal amount of Committed Loans to be borrowed, converted or continued, (iv) the Type of Committed Loans to be borrowed or to which existing Committed Loans are to be converted and (v) if applicable, the duration of the Interest Period with respect thereto. If the Borrower fails to specify a Type of Committed Loan in a Committed Loan Notice or if the Borrower fails to give a timely notice requesting a conversion or continuation, then the applicable Committed Loans shall be made as, or converted to, Base Rate Loans. Any such automatic conversion to Base Rate Loans shall be effective as of the last day of the Interest Period then in effect with respect to the applicable Eurodollar Rate Loans. If the Borrower requests a Committed Borrowing of, conversion to, or continuation of Eurodollar Rate Loans in any such Committed Loan Notice, but fails to specify an Interest Period, it will be deemed to have specified an Interest Period of one month.

(b) Following receipt of a Committed Loan Notice, the Administrative Agent shall promptly notify each Lender of the amount of its Applicable Percentage of the applicable Committed Loans, and if no timely notice of a conversion or continuation is provided by the Borrower, the Administrative Agent shall notify each Lender of the details of any automatic conversion to Base Rate Loans described in the preceding clause (a). In the case of a Committed Borrowing, each Lender shall make the amount of its Committed Loan available to the Administrative Agent in immediately available funds at the Administrative Agent’s Office not later than 1:00 p.m. on the Business Day specified in the applicable Committed Loan Notice. Upon satisfaction of the applicable conditions set forth in Section 4.02, the Administrative Agent shall make all funds so received available to the Borrower in like funds as received by the Administrative Agent either by (i) crediting the account of the Borrower on the books of the Administrative Agent with the amount of such funds or (ii) wire transfer of such funds, in each case in accordance with instructions provided to (and reasonably acceptable to) the Administrative Agent by the Borrower.

(c) Except as otherwise provided herein, a Eurodollar R