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EXECUTION
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CREDIT AGREEMENT
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WRT ENERGY CORPORATION
and
ING (U.S.) CAPITAL CORPORATION
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$15,000,000
July 10, 1997
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TABLE OF CONTENTS
Page
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CREDIT AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I - Definitions and References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1. Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2. Exhibits and Schedules; Additional Definitions . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 1.3. Amendment of Defined Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 1.4. References and Titles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 1.5. Calculations and Determinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE II - The Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 2.1. Making the Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 2.2. Requesting the Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 2.3. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2.4. Rate Elections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2.5. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.6. Optional Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.7. Mandatory Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.8. Regular Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.9. Payments to Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.10. Capital Reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.11. Increased Cost of Fixed Rate Portions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 2.12. Availability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 2.13. Funding Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 2.14. Reimbursable Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE III - Conditions Precedent to Lending . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.1. Documents to be Delivered . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.2. Additional Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE IV - Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 4.1. Borrower's Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 4.2. Representation by Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE V - Covenants of Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 5.1. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 5.2. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE VI - Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 6.1. The Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 6.2. Agreement to Deliver Security Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 6.3. Perfection and Protection of Security Interests and Liens . . . . . . . . . . . . . . . . . . 41
Section 6.4. Bank Accounts; Offset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 6.5. Guaranties of Borrower's Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 6.6. Production Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 6.7. Agreement to Release Earned Sands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE VII - Events of Default and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 7.1. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
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Section 7.2. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 7.3. Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE VIII - Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 8.1. Waivers and Amendments; Acknowledgments . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 8.2. Survival of Agreements; Cumulative Nature . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 8.3. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 8.4. Joint and Several Liability; Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 8.5. GOVERNING LAW; SUBMISSION TO PROCESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 8.6. Limitation on Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 8.7. Termination; Limited Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 8.8. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 8.9. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 8.10. Waiver of Jury Trial, Punitive Damages, etc. . . . . . . . . . . . . . . . . . . . . . . . . 51
SCHEDULE 1 - Disclosure Schedule
SCHEDULE 2 - Security Schedule
SCHEDULE 3 - Insurance Schedule
EXHIBIT A -- Promissory Note
EXHIBIT B -- Request For Loan
EXHIBIT C -- Rate Election
EXHIBIT D -- Certificate Accompanying Financial Statements
EXHIBIT E -- Environmental Compliance Certificate
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CREDIT AGREEMENT
THIS CREDIT AGREEMENT is made as of July 10, 1997, by and between WRT
Energy Corporation, a Delaware corporation (herein called "Borrower"), and ING
(U.S.) Capital Corporation, a Delaware corporation (herein called "Lender").
In consideration of the mutual covenants and agreements contained herein the
parties hereto agree as follows:
ARTICLE I - Definitions and References
Section 1.1. Defined Terms. As used in this Agreement, each of the
following terms has the meaning given it in this Section 1.1 or in the sections
and subsections referred to below:
"Adjusted Base Rate" means the fluctuating rate of interest which is
one and one-quarter percent (1.25%) above the Base Rate; provided that during
the continuance of any Event of Default under Section 7.1(a) (regardless of
whether or not notice thereof has been given to Borrower) or during the
continuance of any other Event of Default of which written notice has been
delivered to Borrower, the Adjusted Base Rate shall be the fluctuating rate of
interest which is five and one-quarter percent (5.25%) above the Base Rate.
The Adjusted Base Rate shall in no event, however, exceed the Highest Lawful
Rate.
"Administrative Services Agreement" means that certain Administrative
Services Agreement of even date herewith between Borrower and DLB.
"Affiliate" means, as to any Person, each other Person that directly
or indirectly (through one or more intermediaries or otherwise) controls, is
controlled by, or is under common control with, such Person. A Person shall be
deemed to be "controlled by" any other Person if such other Person possesses,
directly or indirectly, power
(a) to vote 20% or more of the securities (on a fully
diluted basis) having ordinary voting power for the election of
directors or managing general partners; or
(b) to direct or cause the direction of the management
and policies of such Person whether by contract or otherwise.
"Agreement" means this Credit Agreement.
"Bankruptcy Case" means Old WRT's Chapter 11 case styled "In Re: WRT
Energy Corporation, Debtor, Case No. 96BK-50212 (Chapter 11)" in the
Bankruptcy Court.
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"Bankruptcy Court" means the United States Bankruptcy Court for the
Western District of Louisiana, Lafayette - Opelousas Division.
"Base Rate" means the fluctuating rate of interest which is the
arithmetic average of the rates of interest publicly announced by The Chase
Manhattan Bank, Citibank, N.A. and ▇▇▇▇▇▇ Guaranty Trust Company of New York
(or their respective successors) as their respective prime commercial lending
rates (or, as to any such bank that does not announce such a rate, such bank's
'base' or other rate determined by Lender to be the equivalent rate announced
by such bank), except that, if any such bank shall, for any period, cease to
announce publicly its prime commercial lending (or equivalent) rate, Lender
shall, during such period, determine the "Base Rate" based upon the prime
commercial lending (or equivalent) rates announced publicly by the other such
banks.
"Base Rate Portion" means that portion of the unpaid principal balance
of the Loan which is not made up of Fixed Rate Portions.
"Borrower" means WRT Energy Corporation, a Delaware corporation.
Borrower is the successor by merger to Old WRT, and references herein to the
properties, acts, liabilities, financial condition, etc. of Borrower at times
prior to the date hereof refer to the properties, acts, liabilities, financial
condition, etc. of Old WRT at such times.
"Business Day" means a day, other than a Saturday or Sunday, on which
commercial banks are open for business with the public in New York, New York
and in Houston, Texas. Any Business Day in any way relating to Fixed Rate
Portions (such as the day on which an Interest Period begins or ends) must also
be a day on which, in the judgment of Lender, significant transactions in
dollars are carried out in the interbank eurocurrency market.
"Collateral" means all property of any kind which is subject to a Lien
in favor of Lender or which, under the terms of any Security Document, is
purported to be subject to such a Lien.
"Confirmation Order" means the order of the Bankruptcy Court entitled
"Order Confirming Debtor's and DLBW's Second Amended Joint Plan of
Reorganization," as entered on May 2, 1997 and filed on May 5, 1997 and as
amended from time to time with the consent of Lender.
"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.
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"Debt" means, as to any Person, all indebtedness, liabilities and
obligations of such Person, whether matured or unmatured, liquidated or
unliquidated, primary or secondary, direct or indirect, absolute, fixed or
contingent, and whether or not required to be included pursuant to GAAP on a
balance sheet of such Person.
"Default" means any Event of Default and any default, event or
condition which would, with the giving of any requisite notices and the passage
of any requisite periods of time, constitute an Event of Default.
"Depository Institution" means Bank One, Oklahoma City, N.A.
"Disclosure Materials" means the Disclosure Statement, the Disclosure
Schedule, and the Disclosure Reports.
"Disclosure Report" means either a notice given by Borrower under
Section 5.1(d) or a certificate given by Borrower's chief financial officer
under Section 5.1(b)(ii).
"Disclosure Schedule" means Schedule 1 hereto.
"Disclosure Statement" means Old WRT's and DLBW's Second Amended
Disclosure Statement (including all schedules and exhibits thereto) dated March
11, 1997, in support of the Plan of Reorganization.
"DLB" means DLB Oil & Gas, Inc., an Oklahoma corporation.
"DLBW" means, collectively, DLB and Wexford Management LLC, acting on
behalf of its affiliated investment funds.
"Engineering Report" means the Initial Engineering Report and each
engineering report delivered pursuant to Section 5.1(b)(v) or 5.1(b)(vi).
"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
other governmental restrictions relating to the environment or to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals, or industrial, toxic or hazardous substances or wastes into the
environment including ambient air, surface water, ground water, or land, or
otherwise relating to the manufacture, processing, distribution use, treatment,
storage, disposal, transport, or handling of pollutants, contaminants,
chemicals, or industrial, toxic or hazardous substances or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, together with all rules and regulations promulgated
with respect thereto.
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"ERISA Plan" means any employee pension benefit plan subject to Title
IV of ERISA maintained by any Related Person or any Affiliate thereof with
respect to which any Related Person has a fixed or contingent liability.
"Eurodollar Rate" means, with respect to each particular Fixed Rate
Portion and the related Interest Period, the rate per annum (rounded upwards,
if necessary, to the nearest 1/16 of 1%) reported, on the date two Business
Days prior to the first day of such Interest Period, on Telerate Access Service
Page 3750 (British Bankers Association Settlement Rate) as the London Interbank
Offered Rate for dollar deposits having a term comparable to such Interest
Period and in an amount of $1,000,000 or more (or, if such Page shall cease to
be publicly available or if the information contained on such Page, in Lender's
sole judgment, shall cease to accurately reflect such London Interbank Offered
Rate, the London Interbank Offered Rate as reported by any publicly available
source of similar market data selected by Lender that, in Lender's sole
judgment, accurately reflects such London Interbank Offered Rate).
"Event of Default" has the meaning given to such term in Section 7.1.
"Fiscal Quarter" means a three-month period ending on March 31, June
30, September 30, or December 31 of any year.
"Fiscal Year" means a twelve-month period ending on December 31 of any
year.
"Fixed Rate" means, with respect to each particular Fixed Rate Portion
and the associated Eurodollar Rate and Reserve Percentage, the rate per annum
calculated by Lender (rounded upwards, if necessary, to the next higher 0.01%)
determined on a daily basis pursuant to the following formula:
Fixed Rate =
Eurodollar Rate + A
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100.0% - Reserve Percentage
where A equals three percent (3.0%) while no Event of Default is continuing and
seven percent (7.0%) during the continuance of any Event of Default under
Section 7.1(a) (regardless of whether or not notice thereof has been given to
Borrower) or during the continuance of any other Event of Default of which
written notice has been delivered to Borrower. If the Reserve Percentage
changes during the Interest Period for a Fixed Rate Portion, Lender may, at its
option, either change the Fixed Rate for such Fixed Rate Portion or leave it
unchanged for the duration of such Interest Period. The Fixed Rate shall in no
event, however, exceed the Highest Lawful Rate.
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"Fixed Rate Portion" means any portion of the unpaid principal balance
of the Loan which Borrower designates as such in a Rate Election.
"GAAP" means those generally accepted accounting principles and
practices which are recognized as such by the Financial Accounting Standards
Board (or any generally recognized successor) and which, in the case of
Borrower and its Consolidated subsidiaries, are applied for all periods after
the date hereof in a manner consistent with the manner in which such principles
and practices were applied to Old WRT's audited 1995 financial statements. If
any change in any accounting principle or practice is required by the Financial
Accounting Standards Board (or any such successor) in order for such principle
or practice to continue as a generally accepted accounting principle or
practice, all reports and financial statements required hereunder with respect
to Borrower or with respect to Borrower and its Consolidated subsidiaries may
be prepared in accordance with such change, but all calculations and
determinations to be made hereunder may be made in accordance with such change
only after notice of such change is given to Lender and Lender agrees to such
change insofar as it affects the accounting of Borrower or of Borrower and its
Consolidated subsidiaries.
"Guarantor" means any Person who has guaranteed some or all of the
Obligations pursuant to a guaranty listed on the Security Schedule or any other
Person who has guaranteed some or all of the Obligations and who has been
accepted by Lender as a Guarantor or any Subsidiary of Borrower which now or
hereafter executes and delivers a guaranty to Lender pursuant to Section 6.5.
"Hazardous Materials" means any substances regulated under any
Environmental Law, whether as pollutants, contaminants, or chemicals, or as
industrial, toxic or hazardous substances or wastes, or otherwise.
"Highest Lawful Rate" means the maximum nonusurious rate of interest
that Lender is permitted under applicable law to contract for, take, charge, or
receive with respect to the Loan.
"Initial Engineering Report" means the engineering report concerning
oil and gas properties of Borrower dated January 1, 1997, prepared by
Netherland, ▇▇▇▇▇▇ & Associates.
"Initial Draft Financial Statements" means the draft annual
Consolidated financial statements of Old WRT for the year ended December 31,
1996, together with the pro forma balance sheet included in the notes thereto
(the "Initial Draft Pro Forma Balance Sheet").
"Interest Period" means, with respect to each particular Fixed Rate
Portion, a period of 1, 2, or 3 months, as specified in the Rate Election
applicable thereto, beginning on and including the date specified in such Rate
Election (which must be
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a Business Day), and ending on but not including the numerically corresponding
day of the calendar month in which it ends (e.g., a period beginning on the
third day of one month shall end on but not include the third day of another
month), provided that each Interest Period which would otherwise end on a day
which is not a Business Day shall end on the next succeeding Business Day
(unless such next succeeding Business Day is the first Business Day of a
calendar month, in which case such Interest Period shall end on the immediately
preceding Business Day) and that each Interest Period which 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 in which such Interest Period ends)
shall end on the last Business Day of the last calendar month in such Interest
Period. No Interest Period may be elected which would extend past the date on
which the Note is due and payable in full.
"Lender" means ING (U.S.) Capital Corporation, and its successors and
assigns.
"Lender's Bankruptcy Claim" means Lender's "Allowed Secured Claim" as
described in the Plan of Reorganization, which Borrower and Lender hereby agree
is in the following amount:
principal and prepetition
interest and expenses $15,367,257.56
interest during the pendency
of the Bankruptcy Case $ 2,088,625.80
reimbursable fees, expenses
and other amounts $ 625,706.86
TOTAL of Lender's Bankruptcy Claim $18,081,590.22
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"Lien" means, with respect to any property or assets, any right or
interest therein of a creditor to secure Debt owed to him or any other
arrangement with such creditor which provides for the payment of such Debt out
of such property or assets or which allows him to have such Debt satisfied out
of such property or assets prior to the general creditors of any owner thereof,
including any lien, mortgage, security interest, pledge, deposit, production
payment, rights of a vendor under any title retention or conditional sale
agreement or lease substantially equivalent thereto, tax lien, mechanic's or
materialman's lien, or any other charge or encumbrance for security purposes,
whether arising by law or agreement or otherwise, but excluding any right of
offset which arises without agreement in the ordinary course of business.
"Lien" also means any filed financing statement, any registration of a pledge
(such as with an issuer of uncertificated securities), or any other arrangement
or action which would serve to perfect a Lien described in the preceding
sentence, regardless of whether such financing statement is filed, such
registration is made, or such arrangement or action is undertaken before or
after such Lien exists.
"Loan" has the meaning given to such term in Section 2.1.
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"Loan Documents" means this Agreement, the Note, the Security
Documents, and all other agreements, certificates, documents, instruments and
writings at any time delivered in connection herewith or therewith (exclusive
of term sheets, commitment letters, correspondence and similar documents used
in the negotiation hereof).
"Maturity Date" means July 10, 1999.
"Note" has the meaning given to such term in Section 2.1.
"NPV" means, with respect to any Proved Developed Producing Reserves
expected to be produced from the oil and gas properties owned by Borrower, the
net present value, discounted at 10% per annum, of the future net revenues
expected to accrue to Borrower's interests in such reserves during the
remaining expected economic lives of such reserves. Each calculation of such
expected future net revenues shall be made in accordance with the then existing
standards of the Society of Petroleum Engineers, provided that in any event (a)
the pricing assumptions will be based on the average of the prices on the New
York Mercantile Exchange (or any successor organization), as reported in the
Wall Street Journal for the date of calculation (or if such date is not a
Business Day, for the first Business Day thereafter) under the twelve forward
contracts which are listed therein as the first to mature after such date of
calculation, without any escalation but with any necessary adjustment for
quality and geographical differentiations based on the average price received
by Borrower for crude oil, natural gas or other liquid or gaseous hydrocarbons
of such kind during the three months preceding the date of calculation, and (b)
appropriate deductions will be made for severance taxes, ad valorem taxes,
operating, gathering, transportation and marketing costs required for the
production and sale of such reserves, as determined based on Borrower's then
current taxes and costs in accordance with the standard practices of
Netherland, ▇▇▇▇▇▇ & Associates but in all cases without any escalation.
"Obligations" means all Debt from time to time owing by any of the
Related Persons to Lender under or pursuant to any of the Loan Documents.
"Obligation" means any part of the Obligations.
"Old WRT" means WRT Energy Corporation, a Texas corporation which is
the debtor in the Bankruptcy Case.
"Permitted Investments" means investments:
(a) in open market commercial paper, maturing within 270
days after acquisition thereof, which has the highest or second
highest credit rating given by either Rating Agency.
(b) in marketable obligations, maturing within 12 months
after acquisition thereof, issued or unconditionally guaranteed by the
United States of America or an
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instrumentality or agency thereof and entitled to the full faith and
credit of the United States of America.
(c) in mutual funds which invest solely in investments of the
types referred to in subsections (a) and (b) of this definition.
(d) in demand deposits, and time deposits (including
certificates of deposit and short term notes) maturing within 12
months from the date of deposit thereof, with (i) Lender, (ii)
Depository Institution, or (iii) from the date hereof until and
including August 10, 1997, any other commercial bank with which Old
WRT was authorized to have deposits during the pendency of the
Bankruptcy Case.
As used in the foregoing definition (and elsewhere herein), "Rating Agency"
means either Standard & Poor's Ratings Group (a division of McGraw Hill, Inc.)
or ▇▇▇▇▇'▇ Investors Service, Inc., or their respective successors.
"Person" means an individual, corporation, partnership, limited
liability company, association, joint stock company, trust or trustee thereof,
estate or executor thereof, unincorporated organization or joint venture, court
or governmental unit or any agency or subdivision thereof, or any other legally
recognizable entity.
"Plan of Reorganization" means Old WRT's and DLBW's Second Amended
Joint Plan of Reorganization, as confirmed by the Confirmation Order and as
amended from time to time with the consent of Lender.
"Prohibited Lien" means any Lien not expressly allowed under Section
5.2(b).
"Proved Developed Producing Reserves" means "Proved Reserves", as
defined in the Definitions for Oil and Gas Reserves (the "Definitions")
promulgated by the Society of Petroleum Engineers (or any generally recognized
successor) as in effect at the time in question, which are categorized as both
"Developed" and "Producing" in the Definitions.
"Rate Election" has the meaning given to such term in Section 2.4.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System as from time to time in effect.
"Related Persons" means Borrower, Old WRT, each Subsidiary
of Borrower, if any, and each Guarantor, if any.
"Request for Loan" means a written request, made by Borrower which
meets the requirements of Section 2.2.
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"Reserve Percentage" means, on any day with respect to each particular
Fixed Rate Portion, the maximum reserve requirement, as determined by Lender
(including without limitation any basic, supplemental, marginal, emergency or
similar reserves), expressed as a percentage and rounded to the next higher
0.01%, which would then apply under Regulation D with respect to "Eurocurrency
liabilities" (as such term is defined in Regulation D) equal in amount to such
Fixed Rate Portion. If such reserve requirement shall change after the date
hereof, the Reserve Percentage shall be automatically increased or decreased,
as the case may be, from time to time as of the effective time of each such
change in such reserve requirement.
"Restricted Debt" of any Person means Debt in any of the following
categories:
(a) Debt for borrowed money,
(b) Debt constituting an obligation to pay the deferred
purchase price of property,
(c) Debt evidenced by a bond, debenture, note or similar
instrument,
(d) Debt which (i) would under GAAP be shown on such Person's
balance sheet as a liability, and (ii) is payable more than one year
from the date of creation thereof (other than reserves for taxes and
reserves for contingent obligations),
(e) Debt arising under futures contracts, swap contracts, or
similar agreements (other than option contracts giving such Person the
right - and not the duty - to buy or sell goods expected to be bought
or sold by such Person in the ordinary course of its business, so long
as such Person has no obligation other than the initial payment in
full of the purchase price for the option),
(f) Debt constituting principal under leases capitalized in
accordance with GAAP,
(g) Debt arising under conditional sales or other title
retention agreements,
(h) Debt owing under direct or indirect guaranties of Debt of
any other Person or constituting obligations to purchase or acquire or
to otherwise protect or insure a creditor against loss in respect of
Debt of any other Person (such as obligations under working capital
maintenance agreements, agreements to keep-well, or agreements to
purchase Debt, assets, goods, securities or services), including Debt
owed by any other Person which is secured by a Lien on any property or
assets of such specified Person, whether or not such specified Person
has assumed or is otherwise personally liable therefor, but excluding
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endorsements in the ordinary course of business of negotiable
instruments in the course of collection,
(i) Debt (for example, repurchase agreements) consisting of
an obligation to purchase securities or other property, if such Debt
arises out of or in connection with the sale of the same or similar
securities or property,
(j) Debt with respect to letters of credit or applications or
reimbursement agreements therefor,
(k) Debt with respect to payments received in consideration
of oil, gas, or other minerals yet to be acquired or produced at the
time of payment (including obligations under "take-or-pay" contracts
to deliver oil or gas in return for payments already received and the
undischarged balance of any production payment created by such Person
or for the creation of which such Person directly or indirectly
received payment), or
(l) Debt with respect to other obligations to deliver goods
or services in consideration of payments therefor made more than 60
days prior to the date on which such goods are or services are to be
delivered,
provided, however, that the "Restricted Debt" of any Person shall not include
Debt that was incurred by such Person on ordinary trade terms to vendors,
suppliers, or other Persons providing goods and services for use by such Person
in the ordinary course of its business, unless and until such Debt is
outstanding more than 120 days after the incurrence thereof (provided that such
Debt, if outstanding for more than such period, shall nonetheless not be
considered Restricted Debt for such reason for so long as such Person is in
good faith contesting the validity of such Debt by appropriate proceedings and
has set aside on its books adequate reserves therefor).
"Security Documents" means the instruments listed in the Security
Schedule and all other security agreements, deeds of trust, mortgages, chattel
mortgages, pledges, guaranties, financing statements, continuation statements,
extension agreements and other agreements or instruments now, heretofore, or
hereafter delivered by any Related Person to Lender in connection with this
Agreement or any transaction contemplated hereby to secure or guarantee the
payment of any part of the Obligations or the performance of any Related
Person's other duties and obligations under the Loan Documents.
"Security Schedule" means Schedule 2 hereto.
"Subsidiary" means, with respect to any Person, any corporation,
association, partnership, joint venture, or other business or corporate entity,
enterprise or organization which is directly or indirectly (through one or more
intermediaries) controlled by or owned fifty percent or more by such Person,
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provided that associations, joint ventures or other relationships (a) which are
established pursuant to a standard form operating agreement or similar
agreement or which are partnerships for purposes of federal income taxation
only, (b) which are not corporations or partnerships (or subject to the Uniform
Partnership Act) under applicable state law, and (c) whose businesses are
limited to the exploration, development and operation of oil, gas or mineral
properties and interests owned directly by the parties in such associations,
joint ventures or relationships, shall not be deemed to be "Subsidiaries" of
such Person.
"Termination Event" means (a) the occurrence with respect to any ERISA
Plan of (i) a reportable event described in Sections 4043(b)(5) or (6) of ERISA
or (ii) any other reportable event described in Section 4043(b) of ERISA other
than a reportable event not subject to the provision for 30-day notice to the
Pension Benefit Guaranty Corporation pursuant to a waiver by such corporation
under Section 4043(a) of ERISA, or (b) the withdrawal of any Related Person or
of any Affiliate of any Related Person from an ERISA Plan during a plan year in
which it was a "substantial employer" as defined in Section 4001(a)(2) of
ERISA, or (c) the filing of a notice of intent to terminate any ERISA Plan or
the treatment of any ERISA Plan amendment as a termination under Section 4041
of ERISA, or (d) the institution of proceedings to terminate any ERISA Plan by
the Pension Benefit Guaranty Corporation under Section 4042 of ERISA, or (e)
any other event or condition which might constitute grounds under Section 4042
of ERISA for the termination of, or the appointment of a trustee to administer,
any ERISA Plan.
"Texaco Security Agreements" means that certain Security Agreement and
Assignment of Production Proceeds dated March 11, 1997 between DLB and Texaco
Exploration and Production, Inc., that certain Escrow Agreement dated the same
date among the same parties and The Chase Manhattan Bank, and that certain
Security Agreement and Assignment of Production Proceeds dated as of July 10,
1997, between Texaco Exploration and Production, Inc. and Borrower.
Section 1.2. Exhibits and Schedules; Additional Definitions. All
Exhibits and Schedules attached to this Agreement are a part hereof for all
purposes. Reference is hereby made to the Security Schedule for the meaning of
certain terms defined therein and used but not defined herein, which
definitions are incorporated herein by reference.
Section 1.3. Amendment of Defined Instruments. Unless the context
otherwise requires or unless otherwise provided herein the terms defined in
this Agreement which refer to a particular agreement, instrument or document
also refer to and include all renewals, extensions, modifications, amendments
and restatements of such agreement, instrument or document, provided that
nothing contained in this section shall be construed to authorize any such
renewal, extension, modification, amendment or restatement.
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Section 1.4. References and Titles. All references in this Agreement
to Exhibits, Schedules, articles, sections, subsections and other subdivisions
refer to the Exhibits, Schedules, articles, sections, subsections and other
subdivisions of this Agreement unless expressly provided otherwise. Titles
appearing at the beginning of any subdivisions are for convenience only and do
not constitute any part of such subdivisions and shall be disregarded in
construing the language contained in such subdivisions. The words "this
Agreement", "this instrument", "herein", "hereof", "hereby", "hereunder" and
words of similar import refer to this Agreement as a whole and not to any
particular subdivision unless expressly so limited. The phrases "this section"
and "this subsection" and similar phrases refer only to the sections or
subsections hereof in which such phrases occur. The word "or" is not
exclusive, and the word "including" (in its various forms) means "including
without limitation". Pronouns in masculine, feminine and neuter genders shall
be construed to include any other gender, and words in the singular form shall
be construed to include the plural and vice versa, unless the context otherwise
requires.
Section 1.5. Calculations and Determinations. All calculations under
the Loan Documents of fees and of interest shall be made on the basis of actual
days elapsed (including the first day but excluding the last) and a year of 360
days. Each determination by Lender of amounts to be paid under Sections 2.10
through 2.14 or any other matters which are to be determined hereunder by
Lender (such as any Eurodollar Rate, Fixed Rate, Business Day, Interest Period,
or Reserve Percentage) shall, in the absence of manifest error, be conclusive
and binding. Unless otherwise expressly provided herein or unless Lender
otherwise consents all financial statements and reports furnished to Lender
hereunder shall be prepared and all financial computations and determinations
pursuant hereto shall be made in accordance with GAAP.
ARTICLE II - The Loan
Section 2.1. Making the Loan. Subject to the terms and conditions
hereof, Lender agrees to make a single advance to Borrower on or before July
11, 1997, in the amount of $15,000,000. The obligation of Borrower to repay to
Lender the amount of such advance (herein called the "Loan"), together with
interest accruing in connection therewith, shall be evidenced by a single
promissory note (herein called the "Note") made by Borrower payable to the
order of Lender in the form of Exhibit A with appropriate insertions. Interest
on the Note shall accrue and be due and payable as provided herein and therein.
Section 2.2. Requesting the Loan. Before the Loan is made Borrower
must give Lender a written request therefor in the form and substance of the
"Request for Loan" attached hereto as Exhibit B, duly completed. If all
conditions precedent to the Loan have been met, Lender will on the date
requested make the
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Loan available to Borrower in immediately available funds in New York, New
York.
Section 2.3. Use of Proceeds. Borrower shall use all funds from the
Loan to repay a portion of Lender's Bankruptcy Claim. In no event shall the
funds from the Loan be used directly or indirectly by any Person for personal,
family, household or agricultural purposes or for the purpose, whether
immediate, incidental or ultimate, of purchasing, acquiring or carrying any
"margin stock" or any "margin securities" (as such terms are defined
respectively in Regulation U and Regulation G promulgated by the Board of
Governors of the Federal Reserve System) or to extend credit to others directly
or indirectly for the purpose of purchasing or carrying any such margin stock
or margin securities. Borrower represents and warrants to Lender that Borrower
is not engaged principally, or as one of Borrower's important activities, in
the business of extending credit to others for the purpose of purchasing or
carrying such margin stock or margin securities.
Section 2.4. Rate Elections. Borrower may from time to time
designate all or any portion of the Loan (excluding any portion of the Loan
which is required to be repaid prior to the end of the designated Interest
Period) as a Fixed Rate Portion; provided that without the consent of Lender
Borrower may make no such election during the continuance of a Default and that
Borrower may make such an election with respect to an already existing Fixed
Rate Portion only if such election will take effect at or after the termination
of the Interest Period applicable to such already existing Fixed Rate Portion.
Each election by Borrower of a Fixed Rate Portion shall:
(a) Be made in writing in the form and substance of the "Rate
Election" attached hereto as Exhibit C, duly completed;
(b) Specify the amount of the Loan which Borrower desires to
designate as a Fixed Rate Portion, the first day of the Interest
Period which is to apply thereto, and the length of such Interest
Period; and
(c) Be received by Lender not later than 10:00 a.m., New
York, New York time, on the third Business Day preceding the first day
of the specified Interest Period.
Each election which meets the requirements of this section (herein called a
"Rate Election") shall be irrevocable. Borrower may make no Rate Election
which does not specify an Interest Period complying with the definition of
"Interest Period" in Section 1.1, and the amount of the Fixed Rate Portion
elected in any Rate Election must $1,000,000 or more and be an integral
multiple of $100,000. Upon the termination of each Interest Period the portion
of the Loan theretofore constituting the related Fixed Rate Portion shall,
unless the subject of a new Rate Election then taking effect, automatically
become a part of
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the Base Rate Portion and become subject to all provisions of the Loan
Documents governing the Base Rate Portion. Borrower shall have no more than
three (3) Fixed Rate Portions in effect at any time.
Section 2.5. Fees.
(a) Initial Commitment Fees. In consideration of Lender's
commitment to make the Loan which was given to DLB under a commitment letter
dated March 15, 1997, Borrower will on the date hereof pay to Lender a facility
commitment fee in the amount of $93,750, which fee represents the remaining
$93,750 of the $187,500 fee referred to in such letter.
(b) Delayed Commitment Fees. In further consideration of Lender's
commitment to make the Loan, Borrower will pay to Lender two delayed commitment
fees in the amount of $100,000 each, payable on December 31, 1997 and December
31, 1998 respectively (or, if earlier, on the date on which the Loan is paid in
full).
Section 2.6. Optional Prepayments. Borrower may, upon one (1)
Business Day's notice to Lender, from time to time and without premium or
penalty prepay the Note, in whole or in part, so long as each partial
prepayment of principal on the Note is greater than or equal to $100,000, so
long as any prepayment in full is accompanied by the fees described in the
preceding Section 2.5(b), and so long as any prepayment of any Fixed Rate
Portion is accompanied by all reimbursement amounts payable pursuant to Section
2.13. Each partial prepayment of principal shall be applied to the regular
installments of principal due under the Note in the inverse order of their
maturities. Each prepayment of principal under this section shall be
accompanied by all interest then accrued and unpaid on the principal so
prepaid. Any principal or interest prepaid pursuant to this section shall be
in addition to, and not in lieu of, all payments otherwise required to be paid
under the Loan Documents at the time of such prepayment.
Section 2.7. Mandatory Prepayments. Borrower shall immediately
prepay the Loan in the amount of any cash proceeds, (net of expenses) hereafter
received by Borrower, directly or indirectly, from (a) the sale, assignment or
other disposition of any Collateral (other than produced oil, gas and other
hydrocarbons sold in the ordinary course of business) or (b) the issuance of
additional common or preferred stock of Borrower or warrants or other rights to
acquire such stock (other than the common stock of Borrower issued in
accordance with the terms of the Plan of Reorganization). Each partial
prepayment of principal shall be applied to the regular installments of
principal due under the Note in the inverse order of their maturity. Each
prepayment of principal under this section shall be accompanied by all interest
then accrued and unpaid on the principal so prepaid. Any principal or interest
prepaid pursuant to this section shall be in addition to, and not in lieu of,
all payments otherwise required to be paid under the Loan Documents
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at the time of such prepayment. This section does not constitute a waiver of
any requirement in the Loan Documents that Lender's consent must be obtained in
order to sell, assign, dispose of or issue any Collateral, stock, warrants or
other rights.
Section 2.8. Regular Payments. On the last Business Day of
September, 1998, December, 1998, and March, 1999, Borrower will, in addition to
paying any interest then due on the Loan, make a principal payment in the
amount of $1,000,000. Any remaining principal owing on the Note will be due
and payable in full on the Maturity Date.
Section 2.9. Payments to Lender. Borrower will make each payment
which it owes under the Loan Documents not later than 1:00 p.m., New York, New
York time, on the date such payment becomes due and payable, in lawful money of
the United States of America, without set-off, deduction or counterclaim, and
in immediately available funds wired to such bank account in New York City as
Lender may from time to time designate. Any payment received by Lender after
such time will be deemed to have been made on the next following Business Day.
Should any such payment become due and payable on a day other than a Business
Day, the maturity of such payment shall be extended to the next succeeding
Business Day, and, in the case of a payment of principal or past due interest,
interest shall accrue and be payable thereon for the period of such extension
as provided in the Loan Document under which such payment is due. Each payment
under a Loan Document shall be due and payable at the place provided therein
and, if no specific place of payment is provided, shall be due and payable at
the place of payment specified in the Note. When Lender collects or receives
money on account of the Obligations which is insufficient to pay all
Obligations then due and payable, Lender may apply such money as it elects to
the various Obligations which are then due and payable.
Section 2.10. Capital Reimbursement. If after the date hereof (a)
any law, rule or regulation (or any interpretation thereof by any central bank
or other governmental authority) is introduced, implemented or changed, or (b)
any central bank or other governmental authority introduces or implements or
demands compliance with any request, directive or guideline (whether or not
having the force of law), and the result thereof is to affect the amount of
capital required or expected to be maintained by Lender or any corporation
controlling Lender, then, upon demand by Lender, Borrower will pay to Lender,
from time to time as specified by Lender, such additional amount or amounts
which Lender shall determine to be appropriate to compensate Lender or any
corporation controlling Lender in light of such circumstances, to the extent
that Lender reasonably determines that the amount of any such capital would be
increased or the rate of return on any such capital would be reduced by or in
whole or in part based on the existence of the face amount of Lender's Loan or
commitments under this Agreement.
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Section 2.11. Increased Cost of Fixed Rate Portions. If any
applicable domestic or foreign law, treaty, rule or regulation (whether now in
effect or hereinafter enacted or promulgated, including Regulation D) or any
interpretation or administration thereof by any governmental authority charged
with the interpretation or administration thereof (whether or not having the
force of law):
(a) shall change the basis of taxation of payments to
Lender of any principal, interest, or other amounts attributable to
any Fixed Rate Portion or otherwise due under this Agreement in
respect of any Fixed Rate Portion (other than taxes imposed on the
overall net income of Lender or any lending office of Lender by any
jurisdiction in which Lender or any such lending office is located);
or
(b) shall change, impose, modify, apply or deem
applicable any reserve, special deposit or similar requirements in
respect of any Fixed Rate Portion (excluding those for which Lender is
fully compensated pursuant to adjustments made in the definition of
Fixed Rate) or against assets of, deposits with or for the account of,
or credit extended by, Lender; or
(c) shall impose on Lender or the interbank eurocurrency
deposit market any other condition affecting any Fixed Rate Portion
(other than a condition referred to in Section 2.10), the result of
which is to increase the cost to Lender of funding or maintaining any
Fixed Rate Portion or to reduce the amount of any sum receivable by
Lender in respect of any Fixed Rate Portion by an amount deemed by
Lender to be material,
then Lender shall promptly notify Borrower in writing of the happening of such
event and of the amount required to compensate Lender for such event (on an
after-tax basis, taking into account any taxes on such compensation), whereupon
(i) Borrower shall pay such amount to Lender and (ii) Borrower may elect, by
giving to Lender not less than three Business Days' notice, to convert all (but
not less than all) of any such Fixed Rate Portion into a part of the Base Rate
Portion.
Section 2.12. Availability. If (a) any change in applicable laws,
treaties, rules or regulations or in the interpretation or administration
thereof of or in any jurisdiction whatsoever, domestic or foreign, shall make
it unlawful or impracticable for Lender to fund or maintain Fixed Rate
Portions, or shall materially restrict the authority of Lender to purchase or
take offshore deposits of dollars (i.e., "eurodollars"), or (b) Lender
determines that matching deposits appropriate to fund or maintain any Fixed
Rate Portion are not available to it, or (c) Lender determines that the formula
for calculating the Adjusted Eurodollar Rate does not fairly reflect the cost
to Lender of making or maintaining loans based on such rate, then Borrower's
right to elect Fixed Rate Portions shall be
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suspended to the extent and for the duration of such illegality,
impracticability or restriction and all Fixed Rate Portions (or portions
thereof) which are then outstanding or are then the subject of any Rate
Election and which cannot lawfully or practicably be maintained or funded shall
immediately become or remain part of the Base Rate Portion. Borrower agrees to
indemnify Lender and hold it harmless against all costs, expenses, claims,
penalties, liabilities and damages which may result from any such change in
law, treaty, rule, regulation, interpretation or administration to the extent
the same are incurred as a result of or in connection with any Fixed Rate
Portion. Such indemnification shall be on an after-tax basis, taking into
account any taxes imposed on the amounts paid as indemnity.
Section 2.13. Funding Losses. In addition to its other obligations
hereunder, Borrower will indemnify Lender against, and reimburse Lender on
demand for, any loss or expense incurred or sustained by Lender (including any
loss or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by Lender to fund or maintain Fixed Rate
Portions or the Loan), as a result of (a) any payment or prepayment (whether
authorized or required hereunder or otherwise) of all or a portion of a Fixed
Rate Portion on a day other than the day on which the applicable Interest
Period ends, (b) any payment or prepayment, whether required hereunder or
otherwise, of the Loan made after the delivery, but before the effective date,
of a Rate Election, if such payment or prepayment prevents such Rate Election
from becoming fully effective, (c) the failure of the Loan to be made or of any
Rate Election to become effective due to any condition precedent not being
satisfied or due to any other action or inaction of any Related Person, or (d)
any conversion (whether authorized or required hereunder or otherwise) of all
or any portion of any Fixed Rate Portion into the Base Rate Portion or into a
different Fixed Rate Portion on a day other than the day on which the
applicable Interest Period ends. Such indemnification shall be on an after-tax
basis, taking into account any taxes imposed on the amounts paid as indemnity.
Section 2.14. Reimbursable Taxes. Borrower covenants and agrees
that:
(a) Borrower will indemnify Lender against and reimburse Lender
for all present and future income, stamp and other taxes, levies, costs and
charges whatsoever imposed, assessed, levied or collected on or in respect of
this Agreement or any Fixed Rate Portions (whether or not legally or correctly
imposed, assessed, levied or collected), excluding, however, any taxes imposed
on or measured by the overall net income of Lender or any lending office of
Lender by any jurisdiction in which Lender or any such lending office is
located (all such non-excluded taxes, levies, costs and charges being
collectively called "Reimbursable Taxes" in this section). Such
indemnification shall be on an after-tax
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basis, taking into account any taxes imposed on the amounts paid as indemnity.
(b) All payments on account of the principal of, and interest on,
the Loan and the Note, and all other amounts payable by Borrower to Lender
hereunder, shall be made in full without set-off or counterclaim and shall be
made free and clear of and without deductions or withholdings of any nature by
reason of any Reimbursable Taxes, all of which will be for the account of
Borrower. In the event of Borrower being compelled by law or other regulations
to make any such deduction or withholding from any payment to Lender, Borrower
shall pay on the due date of such payment, by way of additional interest, such
additional amounts as are needed to cause the amount receivable by Lender after
such deduction or withholding to equal the amount which would have been
receivable in the absence of such deduction or withholding. If Borrower should
make any deduction or withholding as aforesaid, Borrower shall within 60 days
thereafter forward to Lender an official receipt or other official document
evidencing payment of such deduction or withholding.
(c) If Borrower is ever required to pay any Reimbursable Tax with
respect to any Fixed Rate Portion Borrower may elect, by giving to Lender not
less than three Business Days' notice, to convert all (but not less than all)
of any such Fixed Rate Portion into a part of the Base Rate Portion, but such
election shall not diminish Borrower's obligation to pay all Reimbursable
Taxes.
ARTICLE III - Conditions Precedent to Lending
Section 3.1. Documents to be Delivered. Lender has no obligation to
make the Loan unless Lender shall have received all of the following, at
Lender's office in New York, New York, duly executed and delivered and in form,
substance and date satisfactory to Lender:
(a) The Note.
(b) An "Omnibus Certificate" of both the Secretary (or
Assistant Secretary) and the Chairman of the Board (or President) of
Borrower, which shall contain the names and signatures of the officers
of Borrower authorized to execute Loan Documents and which shall
certify to the truth, correctness and completeness of the following
exhibits attached thereto: (i) a copy of resolutions duly adopted by
the Board of Directors of Borrower and in full force and effect at the
time this Agreement is entered into, authorizing the execution of this
Agreement and the other Loan Documents delivered or to be delivered in
connection herewith and the consummation of the transactions
contemplated herein and therein, (ii) a copy of the charter documents
of Borrower and all amendments thereto, certified
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by the Secretary of State of Delaware, and (iii) a copy of the by-laws
of Borrower.
(c) A long-form good standing certificate (or certificates)
of Borrower, issued by the Secretary of State of the State of
Delaware.
(d) A "Compliance Certificate" of the Chairman of the Board
(or President) and of the chief financial officer of Borrower, of even
date with the Loan, in which such officers certify to the satisfaction
of the conditions set out in subsections (f), (g), (h) and (i) of
Section 3.2.
(e) Favorable opinions of counsel for Borrower and DLB and of
their special Louisiana counsel.
(f) Each Security Document listed in the Security Schedule.
(g) Certificates of Borrower's good standing and due
qualification to do business, issued by appropriate officials in
Louisiana and Texas.
(h) Title opinions in form, substance and authorship
satisfactory to Lender, concerning not less than ninety (90%) of the
aggregate value of the oil and gas properties of Borrower.
(i) A favorable report of ▇.▇. ▇▇▇▇▇▇ & Co., Inc. regarding
their assessment of the insurance maintained by the Related Persons,
in scope and results acceptable to Lender and confirming, among other
matters, that Borrower has obtained the insurance coverages set out in
Schedule 3.
(j) A favorable report of Pilko & Associates regarding their
environmental assessment of the material properties of the Related
Persons, in scope and results acceptable to Lender.
(k) The Administrative Services Agreement.
(l) An Acknowledgment executed by Depository Institution
acknowledging Lender's Lien on all deposit accounts of Borrower and
waiving any rights of offset or other claims Depository Institution
may have against such deposit accounts.
Section 3.2. Additional Conditions Precedent. Lender has no
obligation to make the Loan unless the following conditions precedent are
satisfied at the time the Loan is made:
(a) Borrower shall have paid to Lender, in good and
immediately available funds, all of Lender's Bankruptcy Claim and the
fee owing under Section 2.5(a), and Borrower shall have paid to
Lender's counsel, in good and immediately
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available funds, estimated legal fees in the amount of $72,250 which
are owing under Section 5.2(i).
(b) The Confirmation Order shall have become final and
non-appealable.
(c) At least $13,300,000 in cash from the "Rights
Offering" referred to in the Plan of Reorganization shall have been
applied to expenses of DLB which are authorized under the Commitment
Agreement (as defined in the Plan of Reorganization) and the Plan of
Reorganization or deposited with Disbursing Agent (as defined in the
Plan of Reorganization) to be distributed as described in the Plan of
Reorganization.
(d) All conditions precedent to the effectiveness of the
Plan of Reorganization shall be met (without giving effect to any
waivers or amendments of such conditions made without the consent of
Lender).
(e) DLB shall have contributed to Borrower, as an equity
contribution, all of DLB's interests in the West ▇▇▇▇ ▇▇▇▇▇▇▇ Bay
Field which DLB acquired from Texaco Exploration and Production, Inc.
("TEPI") pursuant to that certain Assignment, Conveyance and ▇▇▇▇ of
Sale dated March 11, 1997, effective January 1, 1997 between DLB and
TEPI, and Borrower shall have become the operator of the West ▇▇▇▇
▇▇▇▇▇▇▇ Bay Field.
(f) All representations and warranties made by any Related
Person in any Loan Document shall be true on and as of the date of the
Loan (except to the extent that the facts upon which such
representations are based have been changed by the extension of credit
hereunder) as if such representations and warranties had been made as
of the date of the Loan.
(g) No Default shall exist at the date of the Loan.
(h) The description in the Initial Draft Financial Statements
of Borrower's financial condition, operations and properties shall be
true and correct in all material respects as of the date of the
Initial Draft Financial Statements, subject to final auditor's
adjustments, and no material adverse change shall have occurred to
Borrower's financial condition, operations or properties since such
date.
(i) Each Related Person shall have performed and complied
with all agreements and conditions required in the Loan Documents to
be performed or complied with by it on or prior to the date of the
Loan.
(j) The making of the Loan shall not be prohibited by any law
or any regulation or order of any court or
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governmental agency or authority and shall not subject Lender to any
penalty or other onerous condition under or pursuant to any such law,
regulation or order.
(k) Lender shall have received all documents and instruments
which Lender has then requested, in addition to those described in
Section 3.1 (including opinions of legal counsel for the Related
Persons; corporate documents and records; documents evidencing
governmental authorizations, consents, approvals, licenses and
exemptions; and certificates of public officials and of officers and
representatives of Borrower and other Persons), as to (i) the accuracy
and validity of or compliance with all representations, warranties and
covenants made by any of the Related Persons in this Agreement and the
other Loan Documents, (ii) the satisfaction of all conditions
contained herein or therein, and (iii) all other matters pertaining
hereto and thereto. All such additional documents and instruments
shall be reasonably satisfactory to Lender in form, substance and
date.
(l) All legal matters relating to the Loan Documents and the
consummation of the transactions contemplated thereby shall be
reasonably satisfactory to ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C., counsel to Lender.
ARTICLE IV - Representations and Warranties
Section 4.1. Borrower's Representations and Warranties. To confirm
Lender's understanding concerning Borrower and Borrower's business, properties
and obligations and to induce Lender to enter into this Agreement and to make
the Loan, Borrower represents and warrants to Lender that:
(a) No Default. Borrower is not in default in the performance of any
of the covenants and agreements contained herein. No event has occurred and is
continuing which constitutes a Default.
(b) Organization and Good Standing. Each Related Person which is a
corporation or partnership is duly organized, validly existing and in good
standing under the laws of its state of organization, having all corporate or
partnership powers required to carry on its business and enter into and carry
out the transactions contemplated hereby. Each such Related Person is duly
qualified, in good standing, and authorized to do business in all other
jurisdictions within the United States wherein the character of the properties
owned or held by it or the nature of the business transacted by it makes such
qualification necessary except where the failure to obtain such qualification
would not have a material adverse effect on Borrower. Each such Related Person
has taken all actions and procedures customarily taken in order to enter, for
the purpose of conducting business or owning property, each jurisdiction
outside the United States wherein the
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character of the properties owned or held by it or the nature of the business
transacted by it makes such actions and procedures necessary and where failure
to take such actions and follow such procedures would have a material adverse
effect upon Borrower individually or on a Consolidated basis.
(c) Authorization. Each Related Person which is a corporation or
partnership has duly taken all corporate or partnership action necessary to
authorize the execution and delivery by it of the Loan Documents to which it is
a party and to authorize the consummation of the transactions contemplated
thereby and the performance of its obligations thereunder. Borrower is duly
authorized to borrow funds hereunder.
(d) No Conflicts or Consents. The execution and delivery by the
various Related Persons of the Loan Documents to which each is a party, the
performance by each of its obligations under such Loan Documents, and the
consummation of the transactions contemplated by the various Loan Documents, do
not and will not (i) conflict with any provision of (1) any domestic or (to
Borrower's knowledge) any foreign law, statute, rule or regulation, (2) the
articles or certificate of incorporation, bylaws, charter, or partnership
agreement or certificate of any Related Person, or (3) any agreement, judgment,
license, order or permit applicable to or binding upon any Related Person, (ii)
result in the acceleration of any Debt owed by any Related Person, or (iii)
result in or require the creation of any Lien upon any assets or properties of
any Related Person except as expressly contemplated in the Loan Documents.
Except as expressly contemplated in the Loan Documents no consent, approval,
authorization or order of, and no notice to or filing with, any court or
governmental authority or third party (other than the Confirmation Order, which
has been entered) is required in connection with the execution, delivery or
performance by any Related Person of any Loan Document or to consummate any
transactions contemplated by the Loan Documents.
(e) Enforceable Obligations. This Agreement is, and the other Loan
Documents when duly executed and delivered will be, legal, valid and binding
obligations of each Related Person which is a party hereto or thereto,
enforceable in accordance with their terms except as such enforcement may be
limited by bankruptcy, insolvency or similar laws of general application
relating to the enforcement of creditors' rights or by general equitable
principles.
(f) Initial Draft Financial Statements. The Initial Draft Financial
Statements fairly present Borrower's Consolidated financial position at
December 31, 1996 and the Consolidated results of Borrower's operations and
Borrower's Consolidated cash flows for the year then ended, subject to final
auditor's adjustments. Except for matters described in the Disclosure
Schedule, matters beneficial to Borrower, and immaterial matters, the Initial
Draft Pro Forma Balance Sheet is a fair summary of Borrower's financial
position after giving effect to the
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consummation of the Plan of Reorganization. The description in the Initial
Draft Financial Statements of Borrower's financial condition, operations and
properties is true and correct in all material respects as of the date of the
Initial Draft Financial Statements, and no material adverse change has occurred
to Borrower's financial condition, operations or properties since such date.
(g) Other Obligations and Restrictions. No Related Person has any
outstanding Debt of any kind other than the Obligations (including contingent
obligations, tax assessments, and unusual forward or long-term commitments)
which has been incurred outside of the ordinary course of business and is, in
the aggregate, material to Borrower or material with respect to Borrower's
Consolidated financial condition and not shown in the Disclosure Materials.
Except as shown in the Disclosure Materials, no Related Person is subject to or
restricted by any franchise, contract, deed, charter restriction, or other
instrument or restriction which is likely in the foreseeable future to
materially and adversely affect the businesses, properties, prospects,
operations, or financial condition of Borrower individually or on a
Consolidated basis. After giving effect to all payments pursuant to the Plan
of Reorganization by Borrower on or before the date hereof of all claims which
constitute "Allowed Claims" under (and as defined in) the Plan of
Reorganization on the date hereof and after giving effect to all discharges of
claims provided to Borrower under the Plan of Reorganization:
(i) the amount of all cash payments (excluding future interest
on Allowed Claims for taxes) to be made by Borrower pursuant to the
Plan of Reorganization on account of such "Allowed Claims" which
remains to be paid after the date hereof is not greater than
$2,075,000, and such "Allowed Claims" are listed in Section 4.1(g) of
the Disclosure Schedule.
(ii) Except for the "Disputed Claim" of Tricore Energy
Venture, L.P. (the maximum amount of which is described in the
Disclosure Schedule) and the "Disputed Claim" of LLOG Exploration
Company (which is described in the Disclosure Schedule), Borrower's
maximum liability to make cash payments with respect to any "Disputed
Claims" in the Bankruptcy Case does not exceed $3,700,000, and
Borrower has at least $1,450,000 on deposit on the date hereof in
various "Disputed Claims Reserve Accounts" under the Plan of
Reorganization which are available to pay such "Disputed Claims". All
"Disputed Claims" that may be entitled to receive a cash distribution
on account of such "Disputed Claims" (including those "Disputed
Claims" to be paid from the "Disputed Claims Reserve Accounts") are
listed in Section 4.1(g) of the Disclosure Schedule. Except for
transfers of equity interests in Borrower or in the "Litigation
Entity" referred to in the Plan of Reorganization, there are no
"Disputed Claims" which are
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required to be paid by any means other than in cash (provided that if
Tricore Energy Venture, L.P. has a secured claim that is allowed by
the Bankruptcy Court, such claim may with Lender's consent be
satisfied by the conveyance of the collateral securing such claim).
(h) Full Disclosure. No certificate, statement or other information
delivered herewith or heretofore by any Related Person to Lender in connection
with the negotiation of this Agreement or in connection with any transaction
contemplated hereby contains any untrue statement of a material fact or omits
to state any material fact known to any Related Person (other than
industry-wide risks normally associated with the types of businesses conducted
by the Related Persons) necessary to make the statements contained herein or
therein not misleading as of the date made or deemed made. There is no fact
known to any Related Person (other than industry-wide risks normally associated
with the types of businesses conducted by the Related Persons) that has not
been disclosed to Lender in writing which could materially and adversely affect
Borrower's properties, business, prospects or condition (financial or
otherwise) or Borrower's Consolidated properties, businesses, prospects or
condition (financial or otherwise). There are no statements or conclusions in
any Engineering Report which are based upon or include misleading information
or fail to take into account material information regarding the matters
reported therein, it being understood that each Engineering Report is
necessarily based upon professional opinions, estimates and projections and
that Borrower does not warrant that such opinions, estimates and projections
will ultimately prove to have been accurate. Borrower has heretofore delivered
to Lender true, correct and complete copies of the Initial Engineering Report.
(i) Litigation. Except as disclosed in the Disclosure Materials: (i)
there are no actions, suits or legal, equitable, arbitrative or administrative
proceedings pending, or to the knowledge of any Related Person threatened,
against any Related Person before any federal, state, municipal or other court,
department, commission, body, board, bureau, agency, or instrumentality,
domestic or foreign, which do or may materially and adversely affect Borrower
or, on a Consolidated basis, Borrower and its properly Consolidated
subsidiaries, their ownership or use of any of their assets or properties,
their businesses or financial condition or prospects, or the right or ability
of any Related Person to enter into the Loan Documents to which it is a party
or to consummate the transactions contemplated thereby or to perform its
obligations thereunder and (ii) there are no outstanding judgments,
injunctions, writs, rulings or orders by any such governmental entity against
any Related Person or, to Borrower's knowledge, against any Related Person's
stockholders, partners, directors or officers which have or have a material
probability of having any such effect. The Disclosure Schedule lists all
appeals taken from any portion of the Confirmation Order, any stays granted to
the effectiveness of any part of the Confirmation Order, and the maximum
amounts
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Borrower might be required to pay in connection with such appeals or stays.
(j) ERISA Liabilities. All currently existing ERISA Plans are listed
in the Disclosure Materials. Except as disclosed in the Disclosure Materials,
no Termination Event has occurred with respect to any ERISA Plan and the
Related Persons are in compliance with ERISA in all material respects. No
Related Person is required to contribute to, or has any other absolute or
contingent liability in respect of, any "multiemployer plan" as defined in
Section 4001 of ERISA. Except as set forth in the Disclosure Materials: (i)
no "accumulated funding deficiency" (as defined in Section 412(a) of the
Internal Revenue Code of 1986, as amended) exists with respect to any ERISA
Plan, whether or not waived by the Secretary of the Treasury or his delegate,
and (ii) the current value of each ERISA Plan's benefits does not exceed the
current value of such ERISA Plan's assets available for the payment of such
benefits by more than $500,000.
(k) Environmental and Other Laws. As used in this subsection:
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, "CERCLIS" means the Comprehensive
Environmental Response, Compensation and Liability Information System List of
the Environmental Protection Agency, and "Release" has the meaning given such
term in 42 U.S.C. Section 9601(22). Except as set forth in the Disclosure
Materials:
(i) The Related Persons are conducting their businesses in
material compliance with all applicable federal, state and local laws,
including Environmental Laws, and have all permits, licenses and
authorizations required in connection with the conduct of their
businesses. Each Related Person is in compliance with the terms and
conditions of all such permits, licenses and authorizations, and is
also in compliance with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in any applicable Environmental Law
or in any regulation, code, plan, order, decree, judgment, injunction,
notice or demand letter issued, entered, promulgated or approved
thereunder, except to the extent failure to comply would not have a
material adverse effect on the financial condition, operations,
business or prospects of any Related Person.
(ii) No notice, notification, demand, request for
information, citation, summons or order has been issued, no complaint
has been filed, no penalty has been assessed, and no investigation or
review is pending or threatened by any governmental agency or entity
or any other Person with respect to (1) any alleged generation,
treatment, storage, recycling, transportation, disposal, or Release of
any Hazardous Materials, either by any Related Person or on any
property owned by any Related Person, (2) any material
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remedial action which might be needed to respond to any such alleged
generation, treatment, storage, recycling, transportation, disposal,
or Release, or (3) any alleged failure by any Related Person to have
any permit, license or authorization required in connection with the
conduct of its business or with respect to any such generation,
treatment, storage, recycling, transportation, disposal, or Release.
(iii) No Related Person otherwise has any known material
contingent liability in connection with any alleged generation,
treatment, storage, recycling, transportation, disposal, or Release of
any Hazardous Materials.
(iv) No Related Person has handled any Hazardous Materials,
other than as a generator, on any properties now or previously owned
or leased by any Related Person to an extent that such handling has,
or may reasonably be expected to have, a material adverse effect on
the financial condition, operations, business or prospects of any
Related Person; and
(1) no PCBs are or have been present at any properties
now or previously owned or leased by any Related
Person;
(2) no asbestos is or has been present at any properties
now or previously owned or leased by any Related
Person;
(3) there are no underground storage tanks for Hazardous
Materials, active or abandoned, at any properties now
or previously owned or leased by any Related Person;
(4) no Hazardous Materials have been Released, in a
reportable quantity, where such a quantity has been
established by statute, ordinance, rule, regulation
or order, at, on or under any properties now or
previously owned or leased by any Related Person;
(5) no Hazardous Materials have been otherwise Released
at, on or under any properties now or previously
owned or leased by any Related Person to an extent
that such release has, or may reasonably be expected
to have, a material adverse effect on the financial
condition, operations, business or prospects of any
Related Person.
(v) No Related Person has transported or arranged for the
transportation of any Hazardous Material to any location which is
listed on the National Priorities List under CERCLA, listed for
possible inclusion on the National Priorities List by the
Environmental Protection Agency in CERCLIS, or listed on any similar
state list or which is the
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subject of federal, state or local enforcement actions or other
investigations which may lead to claims against any Related Person for
clean-up costs, remedial work, damages to natural resources or for
personal injury claims, including, but not limited to, claims under
CERCLA.
(vi) No Hazardous Material generated by any Related Person
has been recycled, treated, stored, disposed of or released by any
Related Person at any location other than those listed in Disclosure
Materials other than disposal, in full compliance with Environmental
Laws, of oil field wastes which do not constitute "hazardous
substances" under CERCLA.
(vii) No oral or written notification of a Release of a
Hazardous Material has been filed by or on behalf of any Related
Person (and to the best knowledge of Borrower, no such notification
has been filed with respect to any Related Person by any other
Person), and no property now or previously owned or leased by any
Related Person is listed or proposed for listing on the National
Priority list promulgated pursuant to CERCLA, in CERCLIS, or on any
similar state list of sites requiring investigation or clean-up.
(viii) There are no Liens arising under or pursuant to any
Environmental Laws on any of the real properties or properties owned
or leased by any Related Person, and no government actions have been
taken or are in process which could subject any of such properties to
such Liens; nor would any Related Person be required to place any
notice or restriction relating to the presence of Hazardous Materials
at any properties owned by it in any deed to such properties.
(ix) There have been no environmental investigations,
studies, audits, tests, reviews or other analyses conducted by or
which are in the possession of any Related Person in relation to any
properties or facility now or previously owned or leased by any
Related Person which have not been made available to Lender.
(l) Names and Places of Business. Borrower has not, during the
preceding five years, had, been known by, or used any other corporate, trade,
or fictitious name, except as disclosed in the Disclosure Schedule. Except as
otherwise indicated in the Disclosure Schedule or a Disclosure Report, the
chief executive office and principal place of business of Borrower and each of
its Subsidiaries are (and for the preceding five years have been) located at
the address of Borrower set out in Section 8.3 or (if different) the address of
each such Related Person set out in the Disclosure Schedule. Except as
indicated in the Disclosure Schedule or a Disclosure Report, no Related Person
has any other office or place of business.
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(m) Borrower's Subsidiaries. Borrower does not presently have any
Subsidiary or own any stock in any other corporation or association. Old WRT's
previous subsidiary, WRT Technology Corporation, has been dissolved. Borrower
in not a member of any general or limited partnership, joint venture or
association of any type whatsoever except those listed in the Disclosure
Schedule or a Disclosure Report and associations, joint ventures or other
relationships (i) which are established pursuant to a standard form operating
agreement or similar agreement or which are partnerships for purposes of
federal income taxation only, (ii) which are not corporations or partnerships
(or subject to the Uniform Partnership Act) under applicable state law, and
(iii) whose businesses are limited to the exploration, development and
operation of oil, gas or mineral properties and interests owned directly by the
parties in such associations, joint ventures or relationships.
(n) Title to Properties. Borrower is making various
representations and warranties in the Mortgage concerning its title to the
properties subject thereto.
(o) Government Regulation. Neither Borrower nor any other Related
Person owing Obligations is subject to regulation under the Public Utility
Holding Company Act of 1935, the Federal Power Act, the Investment Company Act
of 1940 (as any of the preceding acts have been amended) or any other statute,
law, regulation or decree which regulates the incurring by such Person of Debt,
including statutes, laws, regulations or decrees relating to common contract
carriers or the sale of electricity, gas, steam, water or other public utility
services but excluding federal and state securities laws of general application
which do not restrict in any way the incurrence of the Obligations by the
Related Persons.
Section 4.2. Representation by Lender. Lender hereby represents that
it will acquire the Note for its own account in the ordinary course of its
commercial lending business; however, the disposition of Lender's property
shall at all times be and remain within its control and, in particular and
without limitation, Lender may sell or otherwise transfer the Note, any
participation interest or other interest in the Note, or any of its other
rights and obligations under the Loan Documents.
ARTICLE V - Covenants of Borrower
Section 5.1. Affirmative Covenants. To conform with the terms and
conditions under which Lender is willing to have credit outstanding to
Borrower, and to induce Lender to enter into this Agreement and make the Loan,
Borrower warrants, covenants and agrees that until the full and final payment
of the Obligations and the termination of this Agreement, unless Lender has
previously agreed otherwise:
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(a) Payment and Performance. Borrower will pay all amounts due under
the Loan Documents in accordance with the terms thereof and will observe,
perform and comply with every covenant, term and condition expressed or implied
in the Loan Documents. Borrower will cause all other Related Persons to
observe, perform and comply with every such term, covenant and condition.
(b) Books, Financial Statements and Reports. Each Related Person
will at all times maintain full and accurate books of account and records.
Borrower will maintain and will cause its Subsidiaries to maintain a standard
system of accounting and will furnish the following statements and reports to
Lender at Borrower's expense:
(i) As soon as available, and in any event within ninety (90)
days after the end of each Fiscal Year, complete Consolidated
financial statements of Borrower together with all notes thereto,
prepared in reasonable detail in accordance with GAAP, together with
an opinion, based on an audit using generally accepted auditing
standards, by KPMG Peat Marwick or other independent certified public
accountants selected by Borrower and reasonably acceptable to Lender,
stating that such Consolidated financial statements have been so
prepared. These financial statements shall contain a Consolidated
balance sheet as of the end of such Fiscal Year and Consolidated
statements of earnings, of cash flows, and of changes in owners'
equity for such Fiscal Year, each setting forth in comparative form
the corresponding figures for the preceding Fiscal Year. In addition,
within ninety (90) days after the end of each Fiscal Year Borrower
will furnish a report signed by such accountants stating that they
have read this Agreement, containing calculations showing compliance
(or non-compliance) at the end of such Fiscal Year with the
requirements of Sections 5.2(l), (m) and (n) and further stating that
in making the examination and reporting on the Consolidated financial
statements described above they did not conclude that any Default
existed at the end of such Fiscal Year or at the time of their report,
or, if they did conclude that a Default existed, specifying its nature
and period of existence.
(ii) As soon as available, and in any event within forty-five
(45) days after the end of each Fiscal Quarter commencing with the
Fiscal Quarter ending September 30, 1997: (1) Borrower's Consolidated
balance sheet as of the end of such Fiscal Quarter and Consolidated
statements of Borrower's earnings and cash flows for the period from
the beginning of the then current Fiscal Year to the end of such
Fiscal Quarter and (2) Borrower's and each of its Subsidiaries'
individual balance sheet as of the end of such Fiscal Quarter and
individual statements of Borrower's and each of its Subsidiaries'
earnings for the period from the beginning of the then current Fiscal
Year to the end of such Fiscal Quarter, all in reasonable detail and
prepared in
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33
accordance with GAAP, subject to changes resulting from normal
year-end adjustments. In addition Borrower will, together with each
such set of financial statements and each set of financial statements
furnished under subsection (b)(i) of this section, furnish a
certificate in the form of Exhibit D signed by the chief financial
officer of Borrower stating that such financial statements are
accurate and complete in all material respects, stating that he has
reviewed the Loan Documents, containing calculations showing
compliance (or non-compliance) at the end of such Fiscal Quarter with
the requirements of Sections 5.2(l), (m) and (n), and stating that no
Default exists at the end of such Fiscal Quarter or at the time of
such certificate or specifying the nature and period of existence of
any such Default. Each certificate delivered with respect to the
Fiscal Year ending December 31, 1997, shall also set forth a
comparison of the financial statements to the projections in the
Disclosure Statement and an explanation of any differences between the
financial statements and such projection. Each certificate delivered
with respect to any Fiscal Year ending after December 31, 1997, shall
set forth a comparison of the financial statements to the business and
financial plan furnished under subsection (b)(iv) of this section for
such Fiscal Year and an explanation of any differences between the
financial statements and such business and financial plan.
(iii) Promptly upon their becoming available, copies of all
financial statements, reports, notices and proxy statements sent by
any Related Person to its stockholders and all registration
statements, periodic reports and other statements and schedules filed
by any Related Person with any securities exchange, the Securities and
Exchange Commission or any similar governmental authority.
(iv) As soon as available, and in any event within
forty-five (45) days after the end of each Fiscal Year, a business and
financial plan for Borrower (in form reasonably satisfactory to
Lender), prepared by a senior financial officer of Borrower and
setting forth yearly financial projections and budgets. Borrower will
also deliver to Lender, as soon as available, any material amendments
or supplements to such business and financial plans during any Fiscal
Year.
(v) As soon as available, and in any event within ninety (90)
days after the end of each Fiscal Year, an engineering report dated as
of December 31 of such Fiscal Year prepared by Netherland, ▇▇▇▇▇▇ &
Associates or other independent petroleum engineers chosen by Borrower
and reasonably acceptable to Lender, concerning all oil and gas
properties and interests owned by any Related Person which have
attributable to them proved oil or gas reserves. This report shall be
in form and substance reasonably satisfactory to Lender, shall contain
sufficient information
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34
to enable Borrower to meet the reporting requirements concerning oil
and gas reserves contained in Regulations S-K and S-X promulgated by
the Securities and Exchange Commission, shall take into account any
"over-produced" status under gas balancing arrangements, and shall
contain information and analysis comparable in scope to that contained
in the Initial Engineering Report. This report shall distinguish (or
shall be delivered together with a certificate from an appropriate
officer of Borrower which distinguishes) those properties treated in
the report which are Collateral from those properties treated in the
report which are not Collateral.
(vi) As soon as available, and in any event within
forty-five days after the end of the second Fiscal Quarter of each
Fiscal Year, an engineering report dated as of June 30 of such Fiscal
Year, prepared by in-house petroleum engineers employed by Borrower,
concerning all oil and gas properties owned by any Related Person
which have attributable to them proved oil or gas reserves. This
report shall be substantially in the form and substance as the report
delivered under Section 5.1(b)(v) and otherwise be reasonably
satisfactory to Lender.
(vii) As soon as available, and in any event within thirty
(30) days after the end of each month, a report of any "over-produced"
or "under-produced" status under gas balancing arrangements.
(viii) As soon as available, and in any event within thirty
(30) days after the end of each month, a report describing by unit or
field the gross volume of production and sales attributable to
production during such month from properties of the kind described in
subsection (b)(v) above and describing the related severance taxes,
other taxes, leasehold operating expenses, and capital costs
attributable thereto and incurred during such month.
(ix) As soon as available, and in any event within thirty (30)
days after the end of each month, a schedule of, and aging information
with respect to, the accounts receivable of Borrower.
(x) As soon as available, and in any event within thirty (30)
days after the end of each month, a report of the capital expenditures
made, or to be made by Borrower, during the then current Fiscal Year
together with preliminary estimates (both before and after such
capital expenditures) of the oil or gas reserve enhancements
anticipated to be realized as a result of such capital expenditures.
(xi) As soon as available, and in any event within thirty
(30) days after the end of each Fiscal Year, an environmental
compliance certificate signed by the President
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or Chief Executive Officer of Borrower in the form attached hereto as
Exhibit E. Further, if requested by Lender, Borrower shall permit and
cooperate with an environmental and safety review made in connection
with the operations of Borrower's oil and gas properties one time
during each Fiscal Year beginning with Fiscal Year 1998, by Pilko &
Associates or other consultants selected by Lender which review shall,
if requested by Lender, be arranged and supervised by environmental
legal counsel for Lender, all at Borrower's cost and expense. The
consultant shall render an oral or written report, as specified by
Lender, based upon such review at Borrower's cost and expense.
(xii) Concurrently with the annual renewal of the Borrower's
insurance policies, certificates from Borrower's insurance brokers
describing the coverages that have been put in place, and, if
requested by Lender in writing, a certificate or report issued by ▇.▇.
▇▇▇▇▇▇ & Co., Inc. or other insurance consultants satisfactory to
Lender certifying that Borrower's insurance for the next succeeding
year after such renewal (or for such longer period for which such
insurance is in effect) complies with the provisions of this Agreement
and the Security Documents.
(c) Other Information and Inspections. Each Related Person will
furnish to Lender any information which Lender may from time to time reasonably
request concerning any covenant, provision or condition of the Loan Documents
or any matter in connection with the Related Persons' businesses and
operations. Each Related Person will permit representatives appointed by
Lender (including independent accountants, agents, attorneys, appraisers and
any other Persons) to visit and inspect any of such Related Person's property
during normal business hours, including its books of account, other books and
records, and any facilities or other business assets, and to make extra copies
therefrom and photocopies and photographs thereof, and to write down and record
any information such representatives obtain, and each Related Person shall
permit Lender or its representatives to investigate and verify the accuracy of
the information furnished to Lender in connection with the Loan Documents and
to discuss all such matters with its officers, employees and representatives.
Lender agrees that, until the occurrence of an Event of Default, it will take
all reasonable steps to keep confidential any proprietary information given to
it by any Related Person, provided, however, that this restriction shall not
apply to information which (i) has at the time in question entered the public
domain, (ii) is required to be disclosed by law or by any order, rule or
regulation (whether valid or invalid) of any court or governmental agency, or
authority, (iii) is disclosed to Lender's Affiliates, auditors, attorneys, or
agents, or (iv) is furnished to any purchaser or prospective purchaser of
participations or other interests in the Loan or any Loan Document.
(d) Notice of Material Events and Change of Address. Borrower will
promptly notify Lender:
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(i) of any material adverse change in Borrower's financial
condition or Borrower's Consolidated financial condition or in the
aggregate value of the Collateral,
(ii) of the occurrence of any Default,
(iii) of the acceleration of the maturity of any Restricted
Debt owed by any Related Person or of any default by any Related
Person under any indenture, mortgage, agreement, contract or other
instrument to which any of them is a party or by which any of them or
any of their properties is bound, if such acceleration or default
might have a material adverse effect upon Borrower's individual or
Consolidated financial condition or on the value of any material part
of the Collateral,
(iv) of the occurrence of any Termination Event,
(v) of any claim of $100,000 or more, any notice of potential
liability under any Environmental Laws which might exceed such amount,
or any other material adverse claim asserted against any Related
Person or with respect to any Related Person's properties,
(vi) of the filing of any suit or proceeding against any
Related Person in which an adverse decision could have a material
adverse effect upon any Related Person's financial condition, business
or operations or on the value of any Collateral.
Upon the occurrence of any of the foregoing the Related Persons will take all
necessary or appropriate steps to remedy promptly any such material adverse
change, Default, acceleration, default or Termination Event, to protect against
any such adverse claim, to defend any such suit or proceeding, and to resolve
all controversies on account of any of the foregoing. Borrower will also
notify Lender and Lender's counsel in writing: (1) at least twenty Business
Days prior to the date that any Related Person changes its name or the location
of its chief executive office or principal place of business or the place where
it keeps its books and records concerning the Collateral, furnishing with such
notice any necessary financing statement amendments or requesting Lender and
its counsel to prepare the same, and (2) within five Business Days after the
filing by any Related Person of any application for a patent in any domestic or
foreign jurisdiction.
(e) Maintenance of Properties. Each Related Person will maintain,
preserve, protect, and keep all Collateral and all other property used or
useful in the conduct of its business in good operating condition (ordinary
wear and tear excepted) and in compliance with all applicable laws, rules and
regulations, and will from time to time make all repairs, renewals and
replacements needed to enable the business and operations carried on in
connection therewith to be promptly and advantageously conducted at all times.
In particular, Borrower will commence
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the activities described in either clause (v)(a) or clause (v)(b) on page 24 of
the Confirmation Order within the time period set forth therein in order to
avoid the release of nonproducing acreage described in clause (v)(c) on such
page.
(f) Maintenance of Existence and Qualifications. Each Related Person
which is a corporation or partnership will maintain and preserve its corporate
or partnership existence and its rights and franchises in full force and effect
and will qualify to do business as a foreign corporation or partnership in all
states or jurisdictions where required by applicable law, except where the
failure so to qualify will not have any material adverse effect on Borrower or
any other Related Person. Borrower will use its best efforts to become listed
on the NASDAQ National Market System (or its successor) or any other national
securities exchange, and once Borrower is so listed, Borrower shall remain
listed and in good standing on such national securities exchange.
(g) Payment of Trade Debt, Taxes, etc. Each Related Person will (i)
timely file all required tax returns; (ii) timely pay all taxes, assessments,
and other governmental charges or levies imposed upon it or upon its income,
profits or property; (iii) within 120 days after the same was incurred pay all
Debt owed by it to vendors, suppliers and other Persons providing goods and
services used by it in the ordinary course of its business; (iv) pay and
discharge when due all other Debt now or hereafter owed by it; and (v) maintain
appropriate accruals and reserves for all of the foregoing in accordance with
GAAP. Each Related Person may, however, delay paying or discharging any of the
foregoing so long as it is in good faith contesting the validity thereof by
appropriate proceedings and has set aside on its books adequate reserves
therefor.
(h) Insurance. Each Related Person will keep or cause to be kept
insured by financially sound and reputable insurers its property in accordance
with Schedule 3. Upon demand by Lender any insurance policies covering
Collateral shall be endorsed (i) to provide for payment of losses to Lender as
its interests may appear, (ii) to provide that such policies may not be
cancelled or reduced or affected in any material manner for any reason without
fifteen days prior notice to Lender, (iii) to provide for any other matters
specified in any applicable Security Document or which Lender may reasonably
require; and (iv) to provide for insurance against fire, casualty and any other
hazards normally insured against, in the amount of the full value (less a
reasonable deductible not to exceed amounts customary in the industry for
similarly situated businesses and properties) of the property insured. Each
Related Person shall at all times maintain insurance against its liability for
injury to persons or property in accordance with Schedule 3, which insurance
shall be by financially sound and reputable insurers. Without limiting the
foregoing, each Related Person shall at all times maintain liability insurance
in the amounts set out on Schedule 3.
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(i) Payment of Expenses. Whether or not the transactions
contemplated by this Agreement are consummated, Borrower will promptly (and in
any event, within thirty (30) days after any invoice or other statement or
notice) pay (i) all reasonable costs and expenses incurred by or on behalf of
Lender (including attorneys' fees, consultants fees and engineering fees) in
connection with (1) the negotiation, preparation, execution and delivery of the
Loan Documents, and any and all consents, waivers or other documents or
instruments relating thereto, (2) the filing, recording, refiling and
re-recording of any Loan Documents and any other documents or instruments or
further assurances required to be filed or recorded or refiled or re-recorded
by the terms of any Loan Document, (3) the borrowings hereunder and other
action reasonably required in the course of administration hereof, (4)
monitoring or confirming (or preparation or negotiation of any document related
to) Borrower's compliance with any covenants or conditions contained in this
Agreement or in any Loan Document, and (5) the defense or enforcement of the
Loan Documents (including this section) or the defense of Lender's exercise of
its rights under any of the Loan Documents; and (ii) all transfer, stamp,
mortgage, documentary or other similar taxes, assessments or charges levied by
any governmental or revenue authority in respect of this Agreement or any of
the other Loan Documents or any other document referred to herein or therein.
In addition to the foregoing, until all Obligations have been paid in full,
Borrower will also pay or reimburse Lender for all reasonable out-of-pocket
costs and expenses of Lender or its agents or employees in connection with the
continuing administration of the Loans and the related due diligence of Lender,
including travel and miscellaneous expenses and fees and expenses of Lender's
outside counsel, reserve engineers and consultants engaged in connection with
the Loan Documents.
(j) Performance on Borrower's Behalf. If any Related Person fails to
pay any taxes, insurance premiums, expenses, attorneys' fees or other amounts
it is required to pay under any Loan Document, Lender may pay the same.
Borrower shall immediately reimburse Lender for any such payments and each
amount paid by Lender shall constitute an Obligation owed hereunder which is
due and payable on the date such amount is paid by Lender.
(k) Interest. Borrower hereby promises to pay interest to Lender at
the Adjusted Base Rate on all Obligations which Borrower has in this Agreement
promised to pay (including Obligations to pay fees or to reimburse or indemnify
Lender) and which are not paid when due. Such interest shall accrue from the
date such Obligations become due until they are paid.
(l) Compliance with Confirmation Order, Agreements and Law. Each
Related Person will perform all of its obligations under the Confirmation Order
and the Bankruptcy Plan and all of its material obligations under the terms of
each indenture, mortgage, deed of trust, security agreement, lease, franchise,
agreement,
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contract or other instrument or obligation to which it is a party or by which
it or any of its properties is bound. Each Related Person will conduct its
business and affairs in compliance with all laws, regulations, and orders
applicable thereto.
(m) Environmental Matters; Environmental Reviews.
(i) Each Related Person will comply in all material respects
with all Environmental Laws now or hereafter applicable to such
Related Person and shall obtain, at or prior to the time required by
applicable Environmental Laws, all environmental, health and safety
permits, licenses and other authorizations necessary for its
operations and will maintain such authorizations in full force and
effect.
(ii) Borrower will promptly furnish to Lender all written
notices of violation, orders, claims, citations, complaints, penalty
assessments, suits or other proceedings received by Borrower, or of
which it has notice, pending or threatened against Borrower, by any
governmental authority with respect to any alleged violation of or
non-compliance with any Environmental Laws or any permits, licenses or
authorizations in connection with its ownership or use of its
properties or the operation of its business.
(iii) Borrower will promptly furnish to Lender all requests
for information, notices of claim, demand letters, and other
notifications, received by Borrower in connection with its ownership
or use of its properties or the conduct of its business, relating to
potential responsibility with respect to any investigation or clean-up
of Hazardous Material at any location.
(n) Evidence of Compliance. Each Related Person will furnish to
Lender at such Related Person's or Borrower's expense all evidence which Lender
from time to time reasonably requests as to the accuracy and validity of or
compliance with all representations, warranties and covenants made by any
Related Person in the Loan Documents, the satisfaction of all conditions
contained therein, and all other matters pertaining thereto.
(o) Bank Accounts. At all times after August 10, 1997, Borrower
shall maintain with Depository Institution all of its bank accounts, money
market accounts, and similar accounts as security for the Obligations, and
Borrower shall not hereafter purchase any certificate of deposit from any
Person issuing the same other than Depository Institution.
Section 5.2. Negative Covenants. To conform with the terms and
conditions under which Lender is willing to have credit outstanding to
Borrower, and to induce Lender to enter into this Agreement and make the Loan,
Borrower warrants, covenants and agrees that until the full and final payment
of the Obligations and the termination of this Agreement, unless Lender has
previously agreed otherwise:
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(a) Restricted Debt. No Related Person will in any manner owe or be
liable for Restricted Debt except:
(i) the Obligations.
(ii) letters of credit, not in excess of $500,000 at any one
time, obtained by the Related Persons to secure their plugging,
abandonment and site restoration obligations with respect to oil and
gas properties.
(iii) liabilities under law or leases for plugging,
abandonment and site restoration on Borrower's properties.
(iv) the various items of Restricted Debt described in detail
in the Disclosure Schedule and representing "Allowed Priority Tax
Claims" or the "Allowed Secured Claims" of General Motors Acceptance
Corporation, MC Bank & Trust Company, or Woodforest National Bank
under the Plan of Reorganization.
(v) miscellaneous items of Restricted Debt not described
above in this subsection (a) which do not in the aggregate (taking
into account all such Restricted Debt of all Related Persons) exceed
$500,000 at any one time outstanding.
(vi) Debt outstanding under the Texaco Security Agreements, as
in effect on the date hereof and as hereafter modified with Lender's
consent.
(b) Limitation on Liens. No Related Person will create, assume or
permit to exist any Lien upon any of its properties or assets except for:
(i) Liens which secure Obligations only.
(ii) Liens which are "Permitted Encumbrances" under the
Mortgage.
(iii) Liens which are contemplated under the Plan of
Reorganization which (1) encumber certain trucks and secure the
Restricted Debt permitted under Section 5.2(a)(iv) that is owing to
General Motors Acceptance Corporation or MC Bank & Trust Company, or
(2) encumber an office complex in Lafayette, Louisiana and secure the
Restricted Debt permitted under Section 5.2(a)(iv) that is owing to
Woodforest National Bank.
(iv) the Liens of Texaco Exploration and Production, Inc.
under the Texaco Security Agreements, as in effect on the date hereof
and as hereafter modified with Lender's consent.
(v) inchoate statutory Liens for taxes or for obligations
under ERISA, provided that such taxes and ERISA
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obligations are not past due or are being contested as provided in
Section 5.1(g).
(vi) statutory or contractual operators', mechanics',
materialmen's and similar Liens incurred in the ordinary course of
business, provided such Liens do not secure Restricted Debt and secure
only Debt which is not outstanding for more than 120 days after the
incurrence thereof or which is being contested as provided in Section
5.1(g).
(vii) deposits or pledges of cash or cash equivalents (not in
the aggregate to exceed $500,000 at any time): (1) to secure the
payment of workmen's compensation, unemployment insurance or other
social security benefits or obligations; (2) required by law to secure
statutory obligations; (3) to secure appeal bonds or to secure
plugging and abandonment and site restoration obligations or similar
obligations incurred in the ordinary course of the oil and gas
production business; or (4) to secure reimbursement obligations for
letters of credit permitted under Section 5.2(a)(vi).
(c) Hedging Contracts. No Related Person will be a party to or in
any manner be liable on any forward, future, swap or hedging contract.
(d) Limitation on Mergers, Issuances of Securities. No Related
Person will merge or consolidate with or into any other business entity.
Borrower will not issue any securities other than shares of its common stock
and options or warrants giving the holders thereof only the right to acquire
such shares. No Subsidiary of Borrower which may at any time exist will issue
any shares of its capital stock or other securities or any options, warrants or
other rights to acquire such additional shares or other securities except to
Borrower and only to the extent not otherwise forbidden under the terms hereof.
No Subsidiary of Borrower which is a partnership will allow any diminution of
Borrower's interest (direct or indirect) therein.
(e) Limitation on Sales of Property. No Related Person will sell,
transfer, lease, exchange, alienate or dispose of any of its properties or
assets (including among others those subject to the Security Documents) or any
material interest therein except:
(i) interests in oil and gas leases, or portions thereof (if
released or abandoned but not otherwise sold or transferred), so long
as no well situated on the property transferred, or located on any
unit containing all or any part thereof, is capable (or is subject to
being made capable through commercially feasible operations) of
producing oil, gas or other hydrocarbons or minerals in commercial
quantities.
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(ii) sales of produced oil, gas and other hydrocarbons in the
ordinary course of business.
Neither Borrower nor any of Borrower's Subsidiaries will sell, transfer or
otherwise dispose of capital stock of any of Borrower's Subsidiaries. No
Related Person will discount, sell, pledge or assign any notes payable to it,
accounts receivable or future income except to the extent expressly permitted
under the Loan Documents.
(f) Limitation on Dividends and Redemptions. Except for the
dividends and the distributions made to Borrower by its Subsidiaries, no
Related Person will declare or pay any dividends on, or make any other
distribution in respect of, any class of its capital stock or any partnership
or other interest in it, nor will any Related Person directly or indirectly
make any capital contribution to or purchase, redeem, acquire, acquire or
retire any shares of the capital stock of or partnership interests in any
Related Person (whether such interests are now or hereafter issued, outstanding
or created), or cause or permit any reduction or retirement of the capital
stock of any Related Person.
(g) Limitation on Investments and New Businesses. No Related Person
will (i) make any expenditure or commitment or incur any obligation or enter
into or engage in any transaction except in the ordinary course of business or
as expressly permitted hereby, (ii) engage directly or indirectly in any
business or conduct any operations except in connection with or incidental to
its present businesses and operations, (iii) make any acquisitions or
investments in any properties other than capital expenditures on Collateral
properties, or (iv) make any acquisitions of or capital contributions to or
other investments in any Person other than Permitted Investments.
(h) Limitation on Credit Extensions. Except for Permitted
Investments, no Related Person will extend credit, make advances or make loans
other than normal and prudent extensions of credit to customers buying goods
and services in the ordinary course of business, which extensions shall not be
for longer periods than those extended by similar businesses operated in a
normal and prudent manner.
(i) Transactions with Affiliates. Neither Borrower nor any of its
Subsidiaries will engage in any material transaction with any of its
Affiliates, DLB or Wexford Management LLC, or any of their respective
Affiliates, on terms which are less favorable to it than those which would have
been obtainable at the time in arm's-length dealing with Persons other than its
Affiliates, DLB or Wexford Management LLC, and their respective Affiliates,
provided that such restriction shall not apply to transactions among Borrower
and any wholly owned Subsidiaries of Borrower which are hereafter created or
acquired with the consent of Lender. Except for payments to DLB of general and
administrative expenses which are both (i) required to be paid under the
Administrative Services Agreement and (ii) permitted to be paid
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under Section 5.2(m), no Related Person will make any payment of any kind
(whether in cash or properties) for any purpose (other than payments made in
common stock of Borrower or warrants or rights to acquire such stock) to DLB,
Wexford Management LLC, any of their respective Affiliates, or any Affiliate of
Borrower which directly or indirectly owns any interest in Borrower.
(j) Certain Contracts; Amendments; Multiemployer ERISA Plans. Except
as expressly provided for in the Loan Documents, no Related Person will,
directly or indirectly, enter into, create, or otherwise allow to exist any
contract or other consensual restriction on the ability of any Subsidiary of
Borrower to: (i) pay dividends or make other distributions to Borrower, (ii) to
redeem equity interests held in it by Borrower, (iii) to repay loans and other
indebtedness owing by it to Borrower, or (iv) to transfer any of its assets to
Borrower. No Related Person will enter into any "take-or-pay" contract or
other contract or arrangement for the purchase of goods or services which
obligates it to pay for such goods or services regardless of whether they are
delivered or furnished to it. No Related Person will amend or permit any
amendment to any contract or lease which releases, qualifies, limits, makes
contingent or otherwise detrimentally affects the rights and benefits of Lender
under or acquired pursuant to any Security Document, except as expressly
permitted under such Security Document. Borrower will not amend or permit any
amendment to the Administrative Services Agreement, the Texaco Security
Agreements or any agreement secured by the Texaco Security Agreements. No
Related Person will incur any obligation to contribute to any "multiemployer
plan" as defined in Section 4001 of ERISA.
(k) Fiscal Year. No Related Person will change its fiscal year.
(l) Current Ratio. The ratio of Borrower's Consolidated current
assets to Borrower's Consolidated current liabilities will never be less than
1.1 to 1.0. For purposes of this subsection, Borrower's Consolidated current
liabilities will be calculated without including any payments of principal on
the Obligations which would otherwise be considered current liabilities.
(m) General and Administrative Expenses. The Related Persons will
not incur Consolidated general and administrative expenses (whether under the
Administrative Services Agreement or otherwise) in excess of $1,000,000 during
any Fiscal Quarter or in excess of $3,000,000 during any Fiscal Year.
(n) Coverage Ratio. As of each December 31, and June 30,
beginning with December 31, 1997, and continuing regularly thereafter,
Borrower's Coverage Ratio will not be less than 1.2 to 1.0. For purposes of
this section, "Coverage Ratio" means, at any date in question, the ratio of (a)
the aggregate NPV attributable to all Collateral as determined from the
Engineering
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Report prepared as of such date, to (b) the principal amount of the Note
outstanding on such date at the end of the day.
ARTICLE VI - Security
Section 6.1. The Security. The Obligations will be secured by the
Security Documents listed in the Security Schedule and any additional Security
Documents hereafter delivered by any Related Person and accepted by Lender.
Section 6.2. Agreement to Deliver Security Documents. Borrower
agrees to deliver and to cause its Subsidiaries to deliver, to further secure
the Obligations whenever requested by Lender in its sole and absolute
discretion, deeds of trust, mortgages, chattel mortgages, security agreements,
financing statements and other Security Documents in form and substance
satisfactory to Lender for the purpose of granting, confirming, and perfecting
first and prior liens or security interests in any real or personal property
now owned or hereafter acquired by any of the Related Persons (other than the
trucks and office complex referred to in Section 5.2(b)(iii)). Borrower also
agrees to deliver, whenever reasonably requested by Lender, favorable title
opinions from legal counsel reasonably acceptable to Lender with respect to any
Related Person's properties and interests designated by Lender, based upon
abstract or record examinations to dates acceptable to Lender and (a) stating
that such Related Person has good and defensible title to such properties and
interests, free and clear of all Prohibited Liens, (b) confirming that such
properties and interests are subject to Security Documents securing the
Obligations that constitute and create legal, valid and duly perfected deed of
trust or mortgage liens in such properties and interests and assignments of and
security interests in the oil and gas attributable to such properties and
interests and the proceeds thereof, and (c) covering such other matters as
Lender may request.
Section 6.3. Perfection and Protection of Security Interests and
Liens. Borrower will from time to time deliver to Lender any financing
statements, continuation statements, extension agreements and other documents,
properly completed and executed (and acknowledged when required) by the Related
Persons in form and substance satisfactory to Lender, which Lender requests for
the purpose of perfecting, confirming, or protecting any Liens or other rights
in Collateral securing any Obligations.
Section 6.4. Bank Accounts; Offset. To secure the repayment of the
Obligations Borrower hereby grants to Lender a security interest, a lien, and a
right of offset, each of which shall be in addition to all other interests,
liens, and rights of Lender at common law, under the Loan Documents, or
otherwise, and each of which shall be upon and against (a) any and all moneys,
securities or other property (and the proceeds therefrom) of Borrower now or
hereafter held or received by or in transit to Lender from or for the account
of Borrower, whether for
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safekeeping, custody, pledge, transmission, collection or otherwise, (b) any
and all deposits (general or special, time or demand, provisional or final) of
Borrower with Lender, and (c) any other credits and claims of Borrower at any
time existing against Lender, including claims under certificates of deposit.
Upon the occurrence of any Default, Lender is hereby authorized to foreclose
upon, offset, appropriate, and apply, at any time and from time to time,
without notice to Borrower, any and all items hereinabove referred to against
the Obligations then due and payable.
Section 6.5. Guaranties of Borrower's Subsidiaries. Each Subsidiary
of Borrower now existing or created, acquired or coming into existence after
the date hereof shall, promptly upon request by Lender, execute and deliver to
Lender an absolute and unconditional guaranty of the timely repayment of the
Obligations and the due and punctual performance of the obligations of Borrower
hereunder, which guaranty shall be satisfactory to Lender in form and
substance. Borrower will cause each of its Subsidiaries to deliver to Lender,
simultaneously with its delivery of such a guaranty, written evidence
reasonably satisfactory to Lender and its counsel that such Subsidiary has
taken all corporate or partnership action necessary to duly approve and
authorize its execution, delivery and performance of such guaranty and any
other documents which it is required to execute.
Section 6.6. Production Proceeds. Notwithstanding that, by the terms
of the various Security Documents, Borrower will be assigning to Lender all of
the "Production Proceeds" (as defined therein) accruing to the property covered
thereby, so long as no Event of Default has occurred Borrower (and any other
Guarantor which hereafter makes such an assignment) may continue to receive
from the purchasers of production all such Production Proceeds, subject,
however, to the Liens created under the Security Documents, which Liens are
hereby affirmed and ratified. During the continuance of any Event of Default,
Lender may exercise all rights and remedies granted under the Security
Documents, including the right to obtain possession of all Production Proceeds
then held by Borrower or any other Related Person or to receive directly from
the purchasers of production all other Production Proceeds. In no case shall
any failure, whether purposed or inadvertent, by Lender to collect directly any
such Production Proceeds constitute in any way a waiver, remission or release
of any of its rights under the Security Documents, nor shall any release of any
Production Proceeds by Lender to Borrower constitute a waiver, remission, or
release of any other Production Proceeds or of any rights of Lender to collect
other Production Proceeds thereafter.
Section 6.7. Agreement to Release Earned Sands. Upon Lender's
receipt of written notification from each of Borrower and CXY that CXY has
earned an assignment of Earned Sands under the terms of the Farmout Agreement,
and concurrently with the execution of an assignment by Borrower to CXY of such
Earned
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Sands in accordance with the terms and conditions of the Farmout Agreement,
Lender hereby agrees to execute an appropriate instrument, in recordable form,
that releases Lender's Liens insofar and only insofar as the same affects such
Earned Sands. The release contemplated by this Section 6.7 with respect to the
Earned Sands shall specifically exclude any interest of Borrower in the Earned
Sands that is to be reserved or retained by Borrower under the terms of the
Farmout Agreement. In all cases, the term "Earned Sands" shall not include
such reserved or retained interests of Borrower. As used in this section:
"CXY" shall mean CXY Energy, Inc.
"Earned Sands" shall mean that portion or those portions of
the Farmout Lands of which CXY is or may from time to time become
entitled to receive an assignment from Borrower pursuant to the terms
and conditions of the Farmout Agreement.
"Farmout Agreement" shall mean that certain Option/Farmout
Agreement dated June 9, 1995, by WRT Energy Corporation, as farmor,
and CXY Energy, Inc., as farmee, affecting Borrower's leasehold
interests in the Lac Blanc field in Vermilion Parish, Louisiana, a
true and correct copy of which has heretofore been delivered to
Lender.
"Farmout Lands" shall have the meaning given to such term in
the Farmout Agreement.
ARTICLE VII - Events of Default and Remedies
Section 7.1. Events of Default. Each of the following events
constitutes an Event of Default under this Agreement:
(a) Any Related Person fails to pay any Obligation when due and
payable, whether at a date for the payment of a fixed installment or as a
contingent or other payment becomes due and payable or as a result of
acceleration or otherwise, and such failure is not remedied within one Business
Day after it occurs;
(b) Any "default" or "event of default" occurs under any Loan
Document which defines either such term, and the same is not remedied within
the applicable period of grace (if any) provided in such Loan Document;
(c) Any Related Person fails to duly observe, perform or comply with
any covenant, agreement or provision of Section 5.1(d) or Section 5.2;
(d) Any Related Person fails (other than as referred to in
subsections (a), (b) or (c) above) to duly observe, perform or comply with any
covenant, agreement, condition or provision of any Loan Document, and such
failure remains unremedied for a
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period of ten (10) days after notice of such failure is given by Lender to
Borrower;
(e) Any representation or warranty previously, presently or hereafter
made in writing by or on behalf of any Related Person in connection with any
Loan Document shall prove to have been false or incorrect in any material
respect on any date on or as of which made, or any Loan Document at any time
ceases to be valid, binding and enforceable as warranted in Section 4.1(e) for
any reason other than its release or subordination by Lender;
(f) Any Related Person fails to duly observe, perform or comply with
any agreement with any Person or any term or condition of any instrument, if
such agreement or instrument is materially significant to Borrower or to
Borrower and its subsidiaries on a Consolidated basis or materially significant
to any Guarantor, and such failure is not remedied within the applicable period
of grace (if any) provided in such agreement or instrument;
(g) Any Related Person (i) fails to pay any portion, when such
portion is due, of any of its Restricted Debt in excess of $100,000, or (ii)
breaches or defaults in the performance of any agreement or instrument by which
any such Debt is issued, evidenced, governed, or secured, and any such failure,
breach or default continues beyond any applicable period of grace provided
therefor;
(h) Either (i) any "accumulated funding deficiency" (as defined in
Section 412(a) of the Internal Revenue Code of 1986, as amended) in excess of
$100,000 exists with respect to any ERISA Plan, whether or not waived by the
Secretary of the Treasury or his delegate, or (ii) any Termination Event occurs
with respect to any ERISA Plan and the then current value of such ERISA Plan's
benefit liabilities exceeds the then current value of such ERISA Plan's assets
available for the payment of such benefit liabilities by more than $100,000 (or
in the case of a Termination Event involving the withdrawal of a substantial
employer, the withdrawing employer's proportionate share of such excess exceeds
such amount);
(i) Any material adverse change occurs in Borrower's Consolidated
condition (financial or otherwise), businesses, operations, properties
(including any intangible assets) or prospects as the same exist on the date
hereof; or
(j) Any Related Person:
(i) suffers the entry against it of a judgment, decree or
order for relief by a court of competent jurisdiction in an
involuntary proceeding commenced under any applicable bankruptcy,
insolvency or other similar law of any jurisdiction now or hereafter
in effect, including the federal Bankruptcy Code, as from time to time
amended, or
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has any such proceeding commenced against it which remains undismissed
for a period of thirty days; or
(ii) commences a voluntary case under any applicable
bankruptcy, insolvency or similar law now or hereafter in effect,
including the federal Bankruptcy Code, as from time to time amended;
or applies for or consents to the entry of an order for relief in an
involuntary case under any such law; or makes a general assignment for
the benefit of creditors; or fails generally to pay (or admits in
writing its inability to pay) its debts as such debts become due; or
takes corporate or other action to authorize any of the foregoing; or
(iii) suffers the appointment of or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of all or a substantial part of its assets or of any
part of the Collateral in a proceeding brought against or initiated by
it, and such appointment or taking possession is neither made
ineffective nor discharged within thirty days after the making
thereof, or such appointment or taking possession is at any time
consented to, requested by, or acquiesced to by it; or
(iv) suffers the entry against it of a final judgment for the
payment of money in excess of $100,000, unless the same is discharged
within thirty days after the date of entry thereof or an appeal or
appropriate proceeding for review thereof is taken within such period
and a stay of execution pending such appeal is obtained; or
(v) suffers a writ or warrant of attachment or any similar
process to be issued by any court against all or any substantial part
of its assets or any part of the Collateral, and such writ or warrant
of attachment or any similar process is not stayed or released within
thirty days after the entry or levy thereof or after any stay is
vacated or set aside;
(k) the Administrative Services Agreement ceases to be in full force
and effect or is declared null and void, or the validity or enforceability
thereof is contested by any party thereto, or any party thereto denies it has
any further obligations thereunder or fails to perform any of its obligations
thereunder; or
(l) Individuals nominated to the board of directors of Borrower by
DLB at any time cease to constitute a majority of the members of such board.
Upon the occurrence of an Event of Default described in subsection (j)(i),
(j)(ii) or (j)(iii) of this section with respect to Borrower, all of the
Obligations shall thereupon be immediately due and payable, without demand,
presentment, notice of demand or of dishonor and nonpayment, protest, notice of
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protest, notice of intention to accelerate, declaration or notice of
acceleration, or any other notice or declaration of any kind, all of which are
hereby expressly waived by Borrower and each Related Person who at any time
ratifies or approves this Agreement. During the continuance of any other Event
of Default, Lender at any time and from time to time may without notice to
Borrower or any other Related Person declare any or all of the Obligations
immediately due and payable, and all such Obligations shall thereupon be
immediately due and payable, without demand, presentment, notice of demand or
of dishonor and nonpayment, protest, notice of protest, notice of intention to
accelerate, declaration or notice of acceleration, or any other notice or
declaration of any kind, all of which are hereby expressly waived by Borrower
and each Related Person who at any time ratifies or approves this Agreement.
After any such acceleration (whether automatic or due to declaration by
Lender), any obligation of Lender to make any further loans of any kind under
any agreement with any Related Person shall be permanently terminated.
Section 7.2. Remedies. If any Default shall occur and be continuing,
Lender may protect and enforce its rights under the Loan Documents by any
appropriate proceedings, including proceedings for specific performance of any
covenant or agreement contained in any Loan Document, and Lender may enforce
the payment of any Obligations due or enforce any other legal or equitable
right. All rights, remedies and powers conferred upon Lender under the Loan
Documents shall be deemed cumulative and not exclusive of any other rights,
remedies or powers available under the Loan Documents or at law or in equity.
SECTION 7.3. INDEMNITY. BORROWER AGREES TO INDEMNIFY LENDER, UPON
DEMAND, FROM AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, CLAIMS, LOSSES,
DAMAGES, PENALTIES, FINES, ACTIONS, JUDGMENTS, SUITS, SETTLEMENTS, COSTS,
EXPENSES OR DISBURSEMENTS (INCLUDING REASONABLE FEES OF ATTORNEYS, ACCOUNTANTS,
EXPERTS AND ADVISORS) OF ANY KIND OR NATURE WHATSOEVER (IN THIS SECTION
COLLECTIVELY CALLED "LIABILITIES AND COSTS") WHICH TO ANY EXTENT (IN WHOLE OR
IN PART) MAY BE IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST LENDER GROWING OUT
OF, RESULTING FROM OR IN ANY OTHER WAY ASSOCIATED WITH ANY OF THE COLLATERAL,
THE LOAN DOCUMENTS, OR THE TRANSACTIONS AND EVENTS (INCLUDING THE ENFORCEMENT
OR DEFENSE THEREOF) AT ANY TIME ASSOCIATED THEREWITH OR CONTEMPLATED THEREIN
(INCLUDING ANY VIOLATION OR NONCOMPLIANCE WITH ANY ENVIRONMENTAL LAWS BY ANY
RELATED PERSON OR ANY LIABILITIES OR DUTIES OF ANY RELATED PERSON OR OF LENDER
WITH RESPECT TO HAZARDOUS MATERIALS FOUND IN OR RELEASED INTO THE ENVIRONMENT).
THE FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH
LIABILITIES AND COSTS ARE IN ANY WAY OR TO ANY EXTENT OWED, IN WHOLE OR IN
PART, UNDER ANY CLAIM OR THEORY OF STRICT LIABILITY, OR ARE CAUSED, IN WHOLE OR
IN PART, BY ANY NEGLIGENT ACT OR OMISSION OF ANY KIND BY LENDER,
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PROVIDED ONLY THAT LENDER SHALL BE NOT ENTITLED UNDER THIS SECTION TO RECEIVE
INDEMNIFICATION FOR THAT PORTION, IF ANY, OF ANY LIABILITIES AND COSTS WHICH IS
PROXIMATELY CAUSED BY ITS OWN INDIVIDUAL GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT, AS DETERMINED IN A FINAL JUDGMENT. IF ANY PERSON (INCLUDING
BORROWER OR ANY OF ITS AFFILIATES) EVER ALLEGES SUCH GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT BY LENDER, THE INDEMNIFICATION PROVIDED FOR IN THIS SECTION
SHALL NONETHELESS BE PAID UPON DEMAND, SUBJECT TO LATER ADJUSTMENT OR
REIMBURSEMENT, UNTIL SUCH TIME AS A COURT OF COMPETENT JURISDICTION ENTERS A
FINAL JUDGMENT AS TO THE EXTENT AND EFFECT OF THE ALLEGED GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT. AS USED IN THIS SECTION THE TERM "LENDER" SHALL REFER NOT
ONLY TO THE PERSON DESIGNATED AS SUCH IN SECTION 1.1 BUT ALSO TO EACH DIRECTOR,
OFFICER, AGENT, ATTORNEY, EMPLOYEE, REPRESENTATIVE AND AFFILIATE OF SUCH
PERSON.
ARTICLE VIII - Miscellaneous
Section 8.1. Waivers and Amendments; Acknowledgments.
(a) Waivers and Amendments. No failure or delay (whether by course
of conduct or otherwise) by Lender in exercising any right, power or remedy
which Lender may have under any of the Loan Documents shall operate as a waiver
thereof or of any other right, power or remedy, nor shall any single or partial
exercise by Lender of any such right, power or remedy preclude any other or
further exercise thereof or of any other right, power or remedy. No waiver of
any provision of any Loan Document and no consent to any departure therefrom
shall ever be effective unless it is in writing and signed by Lender, and then
such waiver or consent shall be effective only in the specific instances and
for the purposes for which given and to the extent specified in such writing.
No notice to or demand on any Related Person shall in any case of itself
entitle any Related Person to any other or further notice or demand in similar
or other circumstances. This Agreement and the other Loan Documents set forth
the entire understanding and agreement of the parties hereto and thereto with
respect to the transactions contemplated herein and therein and supersede all
prior discussions and understandings with respect to the subject matter hereof
and thereof, and no modification or amendment of or supplement to this
Agreement or the other Loan Documents shall be valid or effective unless the
same is in writing and signed by the party against whom it is sought to be
enforced.
(b) Acknowledgements and Admissions. Borrower hereby represents,
warrants, acknowledges and admits that (i) it has been advised by counsel in
the negotiation, execution and delivery of the Loan Documents to which it is a
party, (ii) it has made an independent decision to enter into this Agreement
and the other Loan Documents to which it is a party, without reliance on any
representation, warranty, covenant or undertaking by Lender, whether written,
oral or implicit, other than as expressly set out in this Agreement or in
another Loan Document
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delivered on or after the date hereof, (iii) there are no representations,
warranties, covenants, undertakings or agreements by Lender as to the Loan
Documents except as expressly set out in this Agreement or in another Loan
Document delivered on or after the date hereof, (iv) Lender owes no fiduciary
duty to Borrower with respect to any Loan Document or the transactions
contemplated thereby, (v) the relationship pursuant to the Loan Documents
between Borrower, on one hand, and Lender, on the other hand, is and shall be
solely that of debtor and creditor, respectively, (vi) no partnership or joint
venture exists with respect to the Loan Documents between Borrower and Lender,
(vii) should an Event of Default or Default occur or exist Lender will
determine in its sole discretion and for its own reasons what remedies and
actions it will or will not exercise or take at that time, (viii) without
limiting any of the foregoing, Borrower is not relying upon any representation
or covenant by Lender, or any representative thereof, and no such
representation or covenant has been made, that Lender will, at the time of an
Event of Default or Default, or at any other time, waive, negotiate, discuss,
or take or refrain from taking any action permitted under the Loan Documents
with respect to any such Event of Default or Default or any other provision of
the Loan Documents, and (ix) Lender has relied upon the truthfulness of the
acknowledgements in this section in deciding to execute and deliver this
Agreement and to make the Loan.
THIS WRITTEN AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE
FINAL AGREEMENT BETWEEN 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.
Section 8.2. Survival of Agreements; Cumulative Nature. All of the
Related Persons' various representations, warranties, covenants and agreements
in the Loan Documents shall survive the execution and delivery of this
Agreement and the other Loan Documents and the performance hereof and thereof,
including the making or granting of the Loan and the delivery of the Note and
the other Loan Documents, and shall further survive until all of the
Obligations are paid in full to Lender and all of Lender's obligations to
Borrower are terminated. All statements and agreements contained in any
certificate or other instrument delivered by any Related Person to Lender under
any Loan Document shall be deemed representations and warranties by Borrower or
agreements and covenants of Borrower under this Agreement. The
representations, warranties, and covenants made by the Related Persons in the
Loan Documents, and the rights, powers, and privileges granted to Lender in the
Loan Documents, are cumulative, and, except for expressly specified waivers and
consents, no Loan Document shall be construed in the context of another to
diminish, nullify, or otherwise reduce the benefit to
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Lender of any such representation, warranty, covenant, right, power or
privilege. In particular and without limitation, no exception set out in this
Agreement to any representation, warranty or covenant herein contained shall
apply to any similar representation, warranty or covenant contained in any
other Loan Document, and each such similar representation, warranty or covenant
shall be subject only to those exceptions which are expressly made applicable
to it by the terms of the various Loan Documents.
Section 8.3. Notices. All notices, requests, consents, demands and
other communications required or permitted under any Loan Document shall be in
writing, unless otherwise specifically provided in such Loan Document, and
shall be deemed sufficiently given or furnished if delivered by personal
delivery, by telecopy, by delivery service with proof of delivery, or by
registered or certified United States mail, postage prepaid, to Borrower and
the Related Persons at the address of Borrower specified on the signature pages
hereto and to Lender at its address specified on the signature pages hereto
(unless changed by similar notice in writing given by the particular Person
whose address is to be changed). Any such notice or communication shall be
deemed to have been given (a) in the case of personal delivery or delivery
service, as of the date of first attempted delivery at the address and in the
manner provided herein, (b) in the case of telecopy, upon receipt, or (c) in
the case of registered or certified United States mail, three days after
deposit in the mail; provided, however, that neither the Request for Loan nor
any Rate Election shall become effective until actually received by Lender.
Section 8.4. Joint and Several Liability; Parties in Interest. All
Obligations which are incurred by two or more Related Persons shall be their
joint and several obligations and liabilities. All grants, covenants and
agreements contained in the Loan Documents shall bind and inure to the benefit
of the parties thereto and their respective successors and assigns; provided,
however, that no Related Person may assign or transfer any of its rights or
delegate any of its duties or obligations under any Loan Document without the
prior consent of Lender.
SECTION 8.5. GOVERNING LAW; SUBMISSION TO PROCESS. EXCEPT TO THE
EXTENT THAT THE LAW OF ANOTHER JURISDICTION IS EXPRESSLY ELECTED IN A LOAN
DOCUMENT, THE LOAN DOCUMENTS SHALL BE DEEMED CONTRACTS AND INSTRUMENTS MADE
UNDER THE LAWS OF THE STATE OF NEW YORK AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK AND THE LAWS
OF THE UNITED STATES OF AMERICA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAW. BORROWER HEREBY AGREES THAT ANY LEGAL ACTION OR PROCEEDING AGAINST
BORROWER WITH RESPECT TO THIS AGREEMENT, THE NOTE OR ANY OF THE LOAN DOCUMENTS
MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES
OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK AS LENDER MAY
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ELECT, AND, BY EXECUTION AND DELIVERY HEREOF, BORROWER ACCEPTS AND CONSENTS TO,
FOR ITSELF AND IN RESPECT TO ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE
JURISDICTION OF THE AFORESAID COURTS AND AGREES THAT SUCH JURISDICTION SHALL BE
EXCLUSIVE, UNLESS WAIVED BY LENDER IN WRITING, WITH RESPECT TO ANY ACTION OR
PROCEEDING BROUGHT BY IT AGAINST LENDER AND ANY QUESTIONS RELATING TO USURY.
BORROWER AGREES THAT SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW
OF THE STATE OF NEW YORK SHALL APPLY TO THE LOAN DOCUMENTS AND WAIVES ANY RIGHT
TO STAY OR TO DISMISS ANY ACTION OR PROCEEDING BROUGHT BEFORE SAID COURTS ON
THE BASIS OF FORUM NON CONVENIENS. IN FURTHERANCE OF THE FOREGOING, BORROWER
HEREBY IRREVOCABLY DESIGNATES AND APPOINTS CT CORPORATION SYSTEM, ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, AS AGENT OF BORROWER TO RECEIVE SERVICE OF ALL
PROCESS BROUGHT AGAINST BORROWER WITH RESPECT TO ANY SUCH PROCEEDING IN ANY
SUCH COURT IN NEW YORK, SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY BORROWER TO
BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. COPIES OF ANY SUCH PROCESS
SO SERVED SHALL ALSO, IF PERMITTED BY LAW, BE SENT BY REGISTERED MAIL TO
BORROWER AT ITS ADDRESS AS PROVIDED HEREIN, BUT THE FAILURE OF BORROWER TO
RECEIVE SUCH COPIES SHALL NOT AFFECT IN ANY WAY THE SERVICE OF SUCH PROCESS AS
AFORESAID. BORROWER SHALL FURNISH TO LENDER A CONSENT OF CT CORPORATION SYSTEM
AGREEING TO ACT HEREUNDER ON OR PRIOR TO THE EFFECTIVE DATE OF THIS AGREEMENT.
NOTHING HEREIN SHALL AFFECT THE RIGHT OF LENDER TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF LENDER TO BRING PROCEEDINGS
AGAINST BORROWER IN THE COURTS OF ANY OTHER JURISDICTION. IF FOR ANY REASON CT
CORPORATION SYSTEM SHALL RESIGN OR OTHERWISE CEASE TO ACT AS AGENT, BORROWER
HEREBY IRREVOCABLY AGREES TO (A) IMMEDIATELY DESIGNATE AND APPOINT A NEW AGENT
ACCEPTABLE TO LENDER TO SERVE IN SUCH CAPACITY AND, IN SUCH EVENT, SUCH NEW
AGENT SHALL BE DEEMED TO BE SUBSTITUTED FOR CT CORPORATION SYSTEM FOR ALL
PURPOSES HEREOF AND (B) PROMPTLY DELIVER TO LENDER THE WRITTEN CONSENT (IN FORM
AND SUBSTANCE SATISFACTORY TO LENDER) OF SUCH NEW AGENT AGREEING TO SERVE IN
SUCH CAPACITY.
Section 8.6. Limitation on Interest. Lender, the Related Persons and
the other parties to the Loan Documents intend to contract in strict compliance
with applicable usury law from time to time in effect. In furtherance thereof
such persons stipulate and agree that none of the terms and provisions
contained in the Loan Documents shall ever be construed to provide for interest
in excess of the maximum amount of interest permitted to be charged by
applicable law from time to time in effect. Neither any Related Person nor any
present or future guarantors, endorsers, or other Persons hereafter becoming
liable for payment of any Obligation shall ever be liable for unearned interest
thereon or shall ever be required to pay interest thereon in excess of the
maximum amount that may be lawfully charged under applicable law from time to
time in effect, and the provisions of this section shall control over all other
provisions of the Loan Documents which may be in conflict or apparent conflict
herewith.
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Section 8.7. Termination; Limited Survival. In its sole and absolute
discretion Borrower may at any time that no Obligations are owing elect in a
notice delivered to Lender to terminate this Agreement. Upon receipt by Lender
of such a notice, if no Obligations are then owing this Agreement and all other
Loan Documents shall thereupon be terminated and the parties thereto released
from all prospective obligations thereunder. Notwithstanding the foregoing or
anything herein to the contrary, any waivers or admissions made by any Related
Person in any Loan Documents, any Obligations under Sections 2.12 through 2.16,
and any obligations which any Person may have to indemnify or compensate Lender
shall survive any termination of this Agreement or any other Loan Document. At
the request and expense of Borrower, Lender shall prepare and execute all
necessary instruments to reflect and effect such termination of the Loan
Documents.
Section 8.8. Severability. If any term or provision of any Loan
Document shall be determined to be illegal or unenforceable all other terms and
provisions of the Loan Documents shall nevertheless remain effective and shall
be enforced to the fullest extent permitted by applicable law.
Section 8.9. Counterparts. This Agreement may be separately executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to constitute one
and the same Agreement.
SECTION 8.10. WAIVER OF JURY TRIAL, PUNITIVE DAMAGES, ETC. TO THE
MAXIMUM EXTENT PERMITTED BY LAW, EACH OF LENDER AND BORROWER HEREBY KNOWINGLY,
VOLUNTARILY, INTENTIONALLY AND IRREVOCABLY WAIVES ANY RIGHTS IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR DIRECTLY OR
INDIRECTLY ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF LENDER OR BORROWER. THIS PROVISION
IS A MATERIAL INDUCEMENT FOR LENDER'S ENTERING INTO THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS. EACH OF BORROWER AND LENDER HEREBY FURTHER (A)
KNOWINGLY, VOLUNTARILY, INTENTIONALLY AND IRREVOCABLY, TO THE MAXIMUM EXTENT
NOT PROHIBITED BY LAW, WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY
SUCH LITIGATION ANY "SPECIAL DAMAGES", AS DEFINED BELOW, (B) CERTIFIES THAT NO
PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT OR COUNSEL FOR ANY PARTY HERETO
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT,
IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (C)
ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE OTHER
LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION.
AS USED IN THIS SECTION, "SPECIAL DAMAGES" INCLUDES ALL SPECIAL, CONSEQUENTIAL,
EXEMPLARY, OR PUNITIVE DAMAGES (REGARDLESS OF HOW NAMED), BUT DOES NOT INCLUDE
ANY PAYMENTS
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OR FUNDS WHICH ANY PARTY HERETO HAS EXPRESSLY PROMISED TO PAY OR DELIVER TO ANY
OTHER PARTY HERETO.
IN WITNESS WHEREOF, this Agreement is executed as of the date first
written above.
WRT ENERGY CORPORATION
By:
----------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Executive Vice President
Address:
▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: President
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
ING (U.S.) CAPITAL CORPORATION
By:
----------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Senior Vice President
Address:
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
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SCHEDULE 1
DISCLOSURE SCHEDULE
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SCHEDULE 2
SECURITY SCHEDULE
1. Mortgage, Assignment, Security Agreement, Fixture Filing and Financing
Statement dated July 11, 1997 (the "Mortgage") made by Borrower for
the benefit of Lender covering various properties of Borrower in
Louisiana.
2. Security Agreement of even date herewith (the "Security Agreement")
made by Borrower for the benefit of Lender.
3. Financing statements prepared for filing in Texas, Oklahoma and
Louisiana in connection with the Mortgage.
4. Pledge Agreement (Deposit Accounts) of even date herewith (the "Pledge
Agreement") made by Borrower for the benefit of Lender.
5. Financing statements prepared for filing in Texas, Oklahoma and
Louisiana in connection with the Pledge Agreement and the Security
Agreement.
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SCHEDULE 3
Insurance Schedule
1. Workers Compensation & Employers Liability/Texas Workers Compensation
Insurance Fund
Limit of Liability:
Workers Compensation -- Statutory
Employers Liability --
A. Bodily Injury by accident -- $1,000,000
B. Bodily Injury by disease each employee --
$1,000,000/employee
C. Bodily Injury by disease -- $1,000,000/aggregate
Also covers USL&H and Outer Continental Shelf Lands Act adjacent to Texas
waters.
2. Workers Compensation & Employers Liability
Louisiana Workers Compensation Corporation
Limit of Liability:
Workers Compensation -- Statutory
Employers Liability --
A. Bodily Injury by accident -- $1,000,000
B. Bodily Injury by disease -- $1,000,000/employee
C. Bodily Injury by disease -- $1,000,000/aggregate
Also covers USL&H and Outer Continental Shelf Lands Act.
3. Maritime Employers Liability
Limit of Liability -- $1,000,000 per occurrence
Deductible -- $25,000 per occurrence
4. Comprehensive General Liability
Limit of Liability -- $1,000,000 per occurrence and in the aggregate.
To include coverage for $1,000,000 CSL each occurrence for hired car and
non-owned auto liability.
5. Auto Liability
Limit of Liability -- $1,000,000 Combined Single Limit per accident.
6. Excess Liability
Limit of Liability -- $25,000,000 per occurrence and in the aggregate
except for auto liability. Covers legal liability excess of coverage
provided by primary employers liability, maritime employers liability,
comprehensive general liability, and auto liability coverages.
7. Directors & Officers Legal Liability
Limit of Liability -- $2,000,000 aggregate
Deductible -- $250,000 per claim for loss as to which indemnification by
the company is legally permissible.
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8. Excess Directors & Officers Legal Liability
Limit of Liability -- $3,000,000 excess of $2,000,000 underlying primary
coverage.
9. Cost of Well Control and Extra Expense
A. Areas I & II -- $5,000,000 (100% interest) any one occurrence.
B. Areas II-wet & III -- $10,000,000 (100% interest) any one
occurrence.
C. Care, Custody & Control -- $500,000 (100% interest) any one
occurrence.
Deductible:
A. Areas I, II, II-wet -- $50,000 (100%) per occurrence.
B. Area III -- $100,000 (100%) per occurrence.
C. Care, Custody & Control -- $10,000 (100%) per occurrence.
Covers Cost of Well Control, Restoration or Redrilling, and Pollution
Liability arising out of a blowout.
10. Physical Damage -- Pipelines and Platforms
Limit of Liability -- As per schedule of values in policy.
Deductible -- $50,000 (100%) per occurrence.
Covers physical damage loss and debris removal.
11. Physical Damage -- Oil & Gas Lease Property
Limit of Liability -- As per schedule of values in policy.
Deductible -- $10,000 (100%) per occurrence.
Covers physical damage loss and debris removal.
12. Contractors Equipment Physical Damage
Limit of Liability -- $1,294,000
Deductible -- $5,000 each loss.
Covers four (4) drilling/workover rigs, wireline truck, wireline unit,
and associated equipment.
13. Property Insurance -- Louisiana
Limit of Liability:
A. Loc. 1 -- Building $ 289,000
B. Loc. 1 -- Contents $ 50,000
C. Loc. 2 -- Contents $ 100,000
Deductible -- $1,000 each loss.
Covers building and personal property.
14. Property Insurance -- Texas
Limit of Liability:
A. Loc. 1 -- Contents $ 150,000
B. Loc. 2 -- Contents $ 20,000
Deductible -- $500 per loss.
Covers office contents at two (2) locations.
15. Boat Insurance (Hull)
Limit of Liability -- $10,190
Deductible -- $2,500 per loss.
Covers 20' aluminum boat, engine and trailer.
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EXHIBIT A
PROMISSORY NOTE
$15,000,000 New York, New York July 10, 1997
FOR VALUE RECEIVED, the undersigned, WRT Energy Corporation, a Delaware
corporation (herein called "Borrower"), hereby promises to pay to the order of
ING (U.S.) (herein called "Lender"), the principal sum of Fifteen Million
Dollars ($15,000,000), together with interest on the unpaid principal balance
thereof as hereinafter set forth, both principal and interest payable as herein
provided in lawful money of the United States of America at the offices of
Lender, ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ or at such other place within
New York County, New York, as from time to time may be designated by the holder
of this Note.
This Note (a) is issued and delivered under that certain Credit Agreement
of even date herewith between Borrower and Lender (herein, as from time to time
supplemented, amended or restated, called the "Credit Agreement"), and is the
Note as defined therein, (b) is subject to the terms and provisions of the
Credit Agreement, which contains provisions for payments and prepayments
hereunder and acceleration of the maturity hereof upon the happening of certain
stated events, and (c) is secured by and entitled to the benefits of certain
Security Documents (as identified and defined in the Credit Agreement).
Payments on this Note shall be made and applied as provided herein and in the
Credit Agreement. Reference is hereby made to the Credit Agreement for a
description of certain rights, limitations of rights, obligations and duties of
the parties hereto and for the meanings assigned to terms used and not defined
herein and to the Security Documents for a description of the nature and extent
of the security thereby provided and the rights of the parties thereto.
For the purposes of this Note, the following terms have the meanings
assigned to them below:
"Base Rate Payment Date" means (i) the last day of each calendar
month, beginning July 31, 1997, and (ii) any day on which past due
interest or principal is owed hereunder and is unpaid. If the terms
hereof or of the Credit Agreement provide that payments of interest or
principal hereon shall be deferred from one Base Rate Payment Date to
another day, such other day shall also be a Base Rate Payment Date.
"Fixed Rate Payment Date" means, with respect to any Fixed Rate
Portion: (i) the day on which the related Interest Period ends and (ii)
any day on which past due interest or past due principal is owed
hereunder with respect to such Fixed Rate Portion and is unpaid. If the
terms hereof or of
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the Credit Agreement provide that payments of interest or principal with
respect to such Fixed Rate Portion shall be deferred from one Fixed Rate
Payment Date to another day, such other day shall also be a Fixed Rate
Payment Date.
The principal amount of this Note, together with all interest accrued
hereon, shall be due and payable in full on the Maturity Date specified in the
Credit Agreement.
The Base Rate Portion of the Loan (exclusive of any past due principal or
interest) from time to time outstanding shall bear interest on each day
outstanding at the Adjusted Base Rate in effect on such day. On each Base Rate
Payment Date Borrower shall pay to the holder hereof all unpaid interest which
has accrued on the Base Rate Portion to but not including such Base Rate
Payment Date. Each Fixed Rate Portion of the Loan (exclusive of any past due
principal or interest) shall bear interest on each day during the related
Interest Period at the related Fixed Rate in effect on such day. On each Fixed
Rate Payment Date relating to such Fixed Rate Portion Borrower shall pay to the
holder hereof all unpaid interest which has accrued on such Fixed Rate Portion
to but not including such Fixed Rate Payment Date. To the extent permitted by
applicable law, all past due interest on the Loan shall bear interest on each
day outstanding at the Adjusted Base Rate in effect on such day, and such
interest shall be due and payable daily as it accrues.
Notwithstanding the foregoing paragraph and all other provisions of this
Note, in no event shall the interest payable hereon, whether before or after
maturity, exceed the maximum interest which, under applicable law, may be
charged on this Note, and this Note is expressly made subject to the provisions
of the Credit Agreement which more fully set out the limitations on how
interest accrues hereon.
If this Note is placed in the hands of an attorney for collection after
default, or if all or any part of the indebtedness represented hereby is
proved, established or collected in any court or in any bankruptcy,
receivership, debtor relief, probate or other court proceedings, Borrower and
all endorsers, sureties and guarantors of this Note jointly and severally agree
to pay reasonable attorneys' fees and collection costs to the holder hereof in
addition to the principal and interest payable hereunder.
Borrower and all endorsers, sureties and guarantors of this Note hereby
severally waive demand, presentment, notice of demand and of dishonor and
nonpayment of this Note, protest, notice of protest, notice of intention to
accelerate the maturity of this Note, declaration or notice of acceleration of
the maturity of this Note, diligence in collecting, the bringing of any suit
against any party and any notice of or defense on account of any extensions,
renewals, partial payments or changes in any manner of or in this Note or in
any of its terms, provisions and covenants, or any releases or substitutions of
any security, or
2
62
any delay, indulgence or other act of any trustee or any holder hereof, whether
before or after maturity.
THIS NOTE AND THE RIGHTS AND DUTIES OF THE PARTIES HERETO SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW), EXCEPT TO THE EXTENT THE SAME ARE GOVERNED BY APPLICABLE
FEDERAL LAW.
WRT ENERGY CORPORATION
By:
----------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Executive Vice President
3
63
EXHIBIT B
REQUEST FOR LOAN
Reference is made to that certain Credit Agreement dated as of July
10, 1997 (as from time to time amended, the "Agreement"), by and between WRT
Energy Corporation ("Borrower") and ING (U.S.) Capital Corporation ("Lender").
Terms which are defined in the Agreement are used herein with the meanings
given them in the Agreement. Pursuant to the terms of the Agreement Borrower
hereby requests Lender to make the Loan to Borrower in the principal amount of
$15,000,000, specifies July 11, 1997, as the date Borrower desires for Lender
to make the Loan, and directs Lender to apply all proceeds of the Loan to
payment of Lender's Bankruptcy Claim.
To induce Lender to make the Loan, Borrower hereby represents,
warrants, acknowledges, and agrees that:
(a) The officer of Borrower signing this instrument is the
duly elected, qualified and acting officer of Borrower as indicated
below such officer's signature hereto having all necessary authority
to act for Borrower in making the request herein contained.
(b) The representations and warranties of Borrower set forth
in the Agreement and the other Loan Documents are true and correct on
and as of the date hereof (except to the extent that the facts on
which such representations and warranties are based have been changed
by the extension of credit under the Agreement), with the same effect
as though such representations and warranties had been made on and as
of the date hereof.
(c) There does not exist on the date hereof any condition or
event which constitutes a Default which has not been waived in writing
as provided in Section 8.1(a) of the Agreement; nor will any such
Default exist upon Borrower's receipt and application of the Loan
requested hereby. Borrower will use the Loan hereby requested in
compliance with Section 2.3 of the Agreement.
(d) Except to the extent waived in writing as provided in
Section 8.1(a) of the Agreement, Borrower has performed and complied
with all agreements and conditions in the Agreement required to be
performed or complied with by Borrower on or prior to the date hereof,
and each of the conditions precedent to the Loan contained in the
Agreement remains satisfied.
(e) The Loan Documents have not been modified, amended or
supplemented by any unwritten representations or promises, by any
course of dealing, or by any other means
1
64
not provided for in Section 8.1(a) of the Agreement. The Agreement
and the other Loan Documents are hereby ratified, approved, and
confirmed in all respects.
The officer of Borrower signing this instrument hereby certifies that,
to the best of his knowledge after due inquiry, the above representations,
warranties, acknowledgements, and agreements of Borrower are true, correct and
complete.
IN WITNESS WHEREOF, this instrument is executed as of ____________,
19__.
WRT ENERGY CORPORATION
By:
----------------------------
Name:
Title:
By its signature below, Lender hereby acknowledges that in accordance
with Borrower's direction, Lender has applied all proceeds of the Loan to
Lender's Bankruptcy Claim.
ING (U.S.) CAPITAL CORPORATION
By:
----------------------------
Name:
Title:
2
65
EXHIBIT C
RATE ELECTION
Reference is made to that certain Credit Agreement dated as of July
10, 1997 (as from time to time amended, the "Agreement"), by and between WRT
Energy Corporation ("Borrower") and ING (U.S.) Capital Corporation ("Lender").
Terms which are defined in the Agreement and which are used but not defined
herein are used herein with the meanings given them in the Agreement. Pursuant
to the terms of the Agreement Borrower hereby elects a Fixed Rate Portion in
the amount of $ __________ with an Interest Period beginning on
__________________ and continuing for a period of __________________.
To meet the conditions set out in the Agreement for the making of such
election, Borrower hereby represents, warrants, acknowledges and agrees that:
(a) The officer of Borrower signing this instrument is a duly
elected, qualified and acting ____________ of Borrower, having all
necessary authority to act for Borrower in making the election herein
contained.
(b) There does not exist on the date hereof any condition or
event which constitutes a Default which has not been waived in writing
as provided in Section 8.1(a) of the Agreement.
(c) The Loan Documents have not been modified, amended or
supplemented by any unwritten representations or promises, by any
course of dealing, or by any other means not provided for in Section
8.1(a) of the Agreement. The Agreement and the other Loan Documents
are hereby ratified, approved, and confirmed in all respects.
The officer of Borrower signing this instrument hereby certifies that,
to the best of his knowledge after due inquiry, the above representations,
warranties, acknowledgements, and agreements of Borrower are true, correct and
complete.
IN WITNESS WHEREOF this instrument is executed as of ________________
________.
WRT ENERGY CORPORATION
By:
----------------------------
Name:
Title:
1
66
EXHIBIT D
CERTIFICATE ACCOMPANYING
FINANCIAL STATEMENTS
Reference is made to that certain Credit Agreement dated as of July
10, 1997 (as from time to time amended, the "Agreement"), by and between WRT
Energy Corporation ("Borrower") and ING (U.S.) Capital Corporation ("Lender"),
which Agreement is in full force and effect on the date hereof. Terms which
are defined in the Agreement are used herein with the meanings given them in
the Agreement.
This Certificate is furnished pursuant to Section 5.1(b)(ii) of the
Agreement. Together herewith Borrower is furnishing to Lender Borrower's
*[audited/unaudited] financial statements (the "Financial Statements") as at
____________ (the "Reporting Date"). Borrower hereby represents, warrants, and
acknowledges to Lender that:
(a) the officer of Borrower signing this instrument is the
duly elected, qualified and acting ____________ of Borrower and as
such is Borrower's chief financial officer;
(b) the Financial Statements are accurate and complete in all
material respects and satisfy the requirements of the Agreement;
(c) attached hereto is a schedule of calculations showing
Borrower's compliance as of the Reporting Date with the requirements
of Sections 5.2(l), (m) and (n) of the Agreement [*,Borrower's
non-compliance as of such date with the requirements of Section(s)
____________ of the Agreement] and a comparison of the Financial
Statements to the [Disclosure Statement][the business and financial
plan furnished under Section 5.1(b)(iv) of the Agreement];
(d) on the Reporting Date Borrower was, and on the date
hereof Borrower is, in full compliance with the disclosure
requirements of Section 5.1(d) of the Agreement, and no Default
otherwise existed on the Reporting Date or otherwise exists on the
date of this instrument *[except for Default(s) under Section(s)
____________ of the Agreement, which [is/are] more fully described on
a schedule attached hereto].
The officer of Borrower signing this instrument hereby certifies that
he has reviewed the Loan Documents and the Financial Statements and has
otherwise undertaken such inquiry as is in his opinion necessary to enable him
to express an informed opinion with respect to the above representations,
warranties and acknowledgments of Borrower and, to the best of his knowledge,
1
67
such representations, warranties, and acknowledgments are true, correct and
complete.
IN WITNESS WHEREOF, this instrument is executed as of ____________,
19__.
WRT ENERGY CORPORATION
By:
----------------------------
Name:
Title:
2
68
EXHIBIT E
ENVIRONMENTAL COMPLIANCE CERTIFICATE
Reference is made to that certain Credit Agreement dated as of July
10, 1997 (as from time to time amended, the "Agreement"), by and between WRT
Energy Corporation ("Borrower") and ING (U.S.) Capital Corporation ("Lender").
Terms which are defined in the Agreement are used herein with the meanings
given them in the Agreement. The undersigned, being the Chief Executive
Officer of Borrower, hereby certifies to Lender as follows:
1. For the Fiscal Year ending immediately prior to the
date hereof, Borrower has complied and is complying with Section
5.1(m) of the Credit Agreement *[except as set forth in Schedule I
attached hereto];
2. To the best knowledge of the undersigned after due
inquiry, Borrower is on the date hereof in compliance with all
applicable Environmental Laws, noncompliance with which could have a
material adverse effect on the financial condition or operations of
Borrower;
3. Borrower has taken (and continues to take) steps to
minimize the generation of potentially harmful effluents;
4. Borrower has established an ongoing program of
conducting an internal audit of each operating facility of Borrower to
identify actual or potential environmental liabilities which could
have a material adverse effect on the financial condition or
operations of Borrower; and
5. Borrower has established an ongoing program of
training its employees in issues of environmental, health and safety
compliance, and Borrower presently has one or more individuals in
charge of implementing such training program.
The officer of Borrower signing this instrument hereby certifies that,
to the best of his knowledge after due inquiry and consultation with the
operating officers of Borrower, the above representations, warranties,
acknowledgements, and agreements of Borrower are true, correct and complete.
IN WITNESS WHEREOF, this instrument is executed as of ____________,
19__.
WRT ENERGY CORPORATION
By:
----------------------------
Name:
Title:
69
SCHEDULE I
PAGE 1 OF 4
DISCLOSURE SCHEDULE
To supplement the following sections of the Agreement of which this
Schedule is a part, and in addition and in supplement to the Debtor's and
DLBW's Second Amended Disclosure Statement under 11 U.S. C. Section 1125 in
support of Debtor's and DLBW's Second Amended Joint Plan of Reorganization
under Chapter 11 of the United States Bankruptcy Code, In re: WRT Energy
Corporation, Case No. 96-BK-50212, in the United States Bankruptcy Court for
the Western District of Louisiana, Lafayette-Opelousas (the "Disclosure
Statement"), Borrower hereby makes the following disclosures:
1. SECTION 4.1(f) FINANCIAL STATEMENTS:
No material adverse change has occurred in Borrower's
financial condition or business since the date of the Initial Draft Financial
Statements, a copy of which was furnished by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ to counsel for
Lender by letter dated July 2, 1997.
2. SECTION 4.1(g) OTHER OBLIGATIONS AND RESTRICTIONS:
After giving effect to all payments under the Plan of Reorganization made on or
before the date hereof, Borrower is liable or potentially liable for the
following claims:
(i) Pre-Petition Liens that survive Effective Date pursuant to Plan of
Reorganization:
a. Secured Party: General Motors Acceptance Corporation
Amount outstanding: $2,745.47
Collateral: Automobile(s)
b. Secured Party: MC Bank & Trust Company
Amount outstanding: $195,580.02
Collateral: Office complex in Lafayette, Louisiana
c. Purported Secured Party: Tricore Energy Venture, L.P.(1)
Amount of asserted Claim: $9,063,798.00
Purported Collateral: Certain interests (aggregating
approximately 4.69% leasehold working interest and
approximately 3.72% net revenue interest) in West ▇▇▇▇ ▇▇▇▇▇▇▇
Bay Field. This security interest is disputed. If the asserted
security interest is upheld, Borrower will have the option
either to transfer the
---------------
(1) The Borrower disputes the validity of the asserted lien and of the
amount of the asserted claim. The Borrower has filed an adversary proceeding
seeking to void or avoid the asserted lien, and intends to file an object to
the amount of the asserted claim.
70
SCHEDULE I
PAGE 2 OF 4
collateral to Tricore subject to all senior rights, or to pay
an amount equal to the lesser of the allowed amount of
Tricore's claim and the value of the collateral.
(ii) Pre-Petition Liens not provided for in the Plan of Reorganization,
that are being disputed:(2)
a. Claimant: Duck Lake Acquisition Partners
Asserted Amount: $318,377.12
Asserted Collateral: Lac Blanc Field
b. Claimant: Amerada ▇▇▇▇ Corporation
Asserted Amount: $301,758.25
Asserted Collateral: Lac Blanc Field
c. Claimant: LLOG Exploration Company
Asserted Amount: $1,100,000.00
Asserted Collateral: Bayou Penchant, Bayou Pigeon, Deer
Island, Abbeville and Golden Meadow Fields
d. Claimant: Continental Land & Fur (claim purchased by LLOG
Exploration Company)
Asserted Amount: $78,000.00
Asserted Collateral: Deer Island Field and Bayou Penchant
Field
e. Claimant: Miscellaneous Asserted Royalty Claimants
Asserted Amount: $49,595.76 in the aggregate
Asserted Collateral: Miscellaneous
(iii) Mechanics' and Materialmen's Liens (Classes C-1 through C-16) that
are to receive cash payments under the Plan of Reorganization:(3)
a. Allowed Claims:
Aggregate dollar amount to be paid: $1,294,848.03
Amount to be reserved by Disbursing Agent: $1,294,848.03
---------------
(2) The Borrower disputes the validity of the asserted liens and of the
amount of the asserted claims. The Borrower has filed motions under applicable
law challenging the validity of the asserted liens and of the asserted claims.
No reserve is being established on account of these claims.
(3) Pursuant to the Plan of Reorganization, it is a condition to all
distributions to each holder of a claim in these Classes (other than Class
C-11) that the holder execute appropriate documents to release its liens. In
addition, the Plan of Reorganization and the Confirmation Order provides for
the extinguishment of all liens asserted by the holders of claims in these
Classes.
71
SCHEDULE I
PAGE 3 OF 4
b. Disputed Claims:
Aggregate dollar amount potentially payable, based upon
maximum asserted amount of Claim and the Class in which the
Claim is asserted: $1,008,428.13
Amount to be reserved by Disbursing Agent: $1,008,428.13
(iv) Administrative Expenses incurred outside the ordinary course of
business:(4)
a. Allowed Claims:
Aggregate dollar amount to be paid on Effective Date:
$1,227,444.63
Aggregate dollar amount of professional fees applications for
which have been filed but with respect to which the hearing
has not occurred as of July 10: $437,043.76. No reserve is
being established on account of these fees.
b. Disputed Claims:
Aggregate dollar amount asserted: $1,162,974.76
Amount to be reserved by Disbursing Agent: $265,778.09
(v) Priority Claims:
a. Allowed Claims: None.
b. Disputed Claims: None.
(vi) Priority Tax Claims:
a. Allowed Claims:
Aggregate dollar amount: $1,157,025.32
Aggregate dollar amount to be paid on Effective Date:
$302,679.01)(5)
Aggregate dollar amount remaining to be paid:
$854,343.61
b. Disputed Claims:
Aggregate dollar amount asserted: $95,947.09. This amount will
be reserved in full.
---------------
(4) Pursuant to the Plan of Reorganization, all Administrative Expenses
that have been and are incurred in the ordinary course of Old WRT's business
will be paid in the ordinary course and are not included herein or in the
amounts set forth in Section 4.1(g) of the Agreement.
(5) Pursuant to the Plan of Reorganization, this amount shall be paid in
full in equal quarterly installments, plus interest at the rate of LIBOR plus
2%, with the last payment being made on December 31, 2001.
72
SCHEDULE I
PAGE 4 OF 4
(vii) Convenience Class Claims
Aggregate dollar amount to be paid on Effective Date:
$143,335.94
3. SECTION 4.1(i) LITIGATION:
Attached hereto as Exhibit "1" is a list of all outstanding
litigation.
4. SECTION 4.1(j) ERISA LIABILITIES:
The Borrower maintains a 401(k) savings plan, under which the
Borrower may, at its election, make matching contributions for its employees'
contributions. The Borrower has no ERISA liabilities other than its
obligations, if any, under the 401(k) plan.
5. SECTION 4.1(k) ENVIRONMENTAL MATTERS:
There have been no reportable releases of hazardous
substances, citations or summons for violations of environmental laws or
regulations or any known or threatened criminal, civil or administrative
actions relating to environmental matters.
6. SECTIONS 4.1(l) AND 8.3 NAMES AND PLACES OF BUSINESS:
NAME CHANGES:
The Borrower - WRT Energy Corporation, a Texas corporation,
merged into WRT Energy Corporation, a Delaware corporation, as of July 10,
1997.
CURRENT AND FORMER PLACES OF BUSINESS:
The Borrower: WRT Energy Corporation
▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
(formerly ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ 77057)
also:
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
73
EXHIBIT 1
[▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇ LETTERHEAD]
July 9, 1997
VIA FACSIMILE: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
RE: IN RE WRT ENERGY CORPORATION;
PENDING LITIGATION
Dear ▇▇▇▇▇▇:
Pursuant to our telephone conversations over the past two days, please find
below a listing of all known pending litigation involving WRT. Such listing does
not include those matters as to which actual litigation is either intended or
contemplated by WRT, but not yet filed, and does not disclose litigation as to
which the Litigation Entity will effectively become the party in interest; it
merely discloses actual pending litigation as to which New WRT will be a party
on and after the Effective Date of the Plan. Additionally, this listing has been
compiled without consultation with WRT and, therefore, may not reflect
additional litigation as to which we have not yet been made aware.
ADVERSARY PROCEEDINGS:
PARTIES NATURE OF DISPUTE STATUS
------- ----------------- ------
Wrt v. Tri-Deck & Perry Gas Turnover (Section 542) Motion for partial
(Adv. No. 96AP-5028) summary judgement by
WRT under advisement;
mtn for summary judg-
ment by Perry Gas filed-
hearing set 7/29/97 @
8:00 am
WRT v. Tricore Declaratory Judgm't/ Adv. + claim obj. con-
(Adv. No. 97AP-5003) Avoidance Action solidated; Status tele-
Sections 544 and 547) phonic conference - 7/14/97
+ claim objection @ 8:30 am; hearing on
(consol.) motions for partial sum-
▇▇▇▇ judgment - 7/15/97 @
10:00 am; trial - 8/18/97
as to validity/avoidance
of security ints.
74
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Page 2
July 9, 1997
PARTIES NATURE OF DISPUTE STATUS
------- ----------------- ------
WRT v. Continental Land & Fur Lien Avoidance Action Status telephonic hearing --
(Adv. No. 97AP-5037) (Section 545) 7/24/97 @ 9:30 am
WRT v. EC Energy Prod. Turnover (Section 542) Motion to w/draw as counsel
(Adv. No. 97AP-5036) recently filed by counsel to EC
Energy; ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ should
be consulted to determine status
WRT v. LLOG Lien Avoidance Action Status telephonic hearing --
(Adv. No. 97AP-5036) (Section 545) 7/24/97 @ 9:00 am
WRT v. Duck Lake Lien Avoidance Action Effectively off calendar;
(Adv. No. 97AP-5018) (Section 545) claim obj. as to secured nature
of claim under advisement
WRT ▇. ▇▇▇▇▇▇▇ Resources, Lien Avoidance Action Rendered moot by disallowance
et al. (Adv. No. 97AP-5017) (Section 545) of claims in full response to
claims objections; counterclaims
of defendants abstained from;
Notice of Appeal filed by
defendants
CONTESTED MATTERS:
PARTIES NATURE OF DISPUTE STATUS
------- ----------------- ------
Court, WRT, Plaintiffs from Unsealing of Supplement WRT to release certain docs
Securities Litigation to Examiner's Report upon execution of appropriate
confid. agmt.
WRT v. Plains Marketing 2004 exam. -- Plains = Negotiated confid. agmt. to
WRT's ex-oil purchaser be executed and approved by
Bankruptcy Court in order for
Plains to cooperate
Exxon v. WRT Mtn for Allowance of Motion granted; pending agmt
Admin. Expense for as to form of order
Unpaid Royalties
75
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Page 3
July 9, 1997
PARTIES NATURE OF DISPUTE STATUS
------- ----------------- ------
WRT v. Amerada ▇▇▇▇ Claim Objection Trial hearing
continued -- date
left open
WRT v. Continental
Land & Fur Claim Objection Under advisement as
to post-petition
royalty piece of
claim; claim
duplicative of claim
compromised as admin
claim; awaiting
response from ▇▇▇▇▇
▇▇▇▇▇▇▇▇ re
disposition of proof
of claim as a result
of settlement; if
POC not eliminated
and WRT does not
recover Tri-Deck
funds, issue remains
as to whether
remaining royalties
-- secured or unsec.
claim
WRT v. LLOG Claim Objection Under advisement as
to site restoration
claim and status of
entire claim as
secured v. unsec.
WRT v. Unclassified
Secured Claimants 1141 Lien Stripping Motion Adverse ruling
entered by
Bankruptcy Court; to
be appealed
Pigeon Land v. WRT Mtn for allowance &
prnt of admin. claim Mtn granted; dispute
as to form of order;
awaiting word as to
date/time of
hearing/telephone
conf. with Court to
resolve dispute as
to form of order
WRT ▇. ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇▇▇▇ Claim Objection Off trial calendar;
proposed form of
order permitting
liquid. of claim in
state court per
Class D-2 of plan
submitted to
opposing counsel &
awaiting signature
for submission to
Ct.
76
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Page 4
July 9, 1997
PARTIES NATURE OF DISPUTE STATUS
------- ----------------- ------
CXY v. WRT Mtn for allowance & Hearing 7/15/97 @ 10:00 am;
pmt of admin. claim unopposed mtn for continuance
filed by CXY - proposing
10/7/97 as new hearing date;
outstanding document request
still being fulfilled by WRT
WRT v. CXY Claim Objection Hearing 7/15/97 @ 10:00 am;
unopposed mtn for continuance
filed (see above)
WRT v. CXY Mtn to Assume JOA, Hearing 7/15/97 @ 10:00 am;
Reject Gas Sched. Agmt unopposed mtn for continuance
filed (see above)
WRT v. Duck Lake Claim Objection Under advisement
WRT v. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Claim Objection WRT's summary judgment
granted disallowing claim in
full; Notice of Appeal filed 7/3
WRT ▇. ▇▇▇▇▇▇▇ Resources Claim Objection WRT's summary judgment
granted disallowing claim in
full; Notice of Appeal filed 7/3
WRT v. Griffins Claim Objection WRT's summary judgment
granted disallowing claim in
full; Notice of Appeal filed 7/3
Perry Gas v. WRT Mtn for allowance of Reasons for Decision entered
admin. claim granting motion in an amount
= approx. $64,400; Perry Gas
to submit form of order
WRT v. Ambar, Inc. Claim Objection Hearing 8/12/97 @ 8:00 am
WRT ▇. ▇▇▇▇▇ Barge Claim Objection Hearing 8/12/97 @ 8:00 am
77
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Page 5
July 9, 1997
PARTIES NATURE OF DISPUTE STATUS
------- ----------------- ------
WRT v. Inland Marine Claim Objection Hearing 8/12/97 @ 8:00 a.m.
WRT ▇. ▇▇▇▇▇▇▇, Inc. Claim Objection Hearing 8/12/97 @ 8:00 a.m.
WRT ▇. ▇▇▇▇▇▇▇ Marine, Inc. Claim Objection Hearing 8/12/97 @ 8:00 a.m.
WRT ▇. ▇▇▇▇▇ Rentals Claim Objection Hearing 8/12/97 @ 8:00 a.m.
WRT ▇. ▇▇▇▇▇▇▇▇▇ Marine Claim Objection Hearing 8/12/97 @ 8:00 a.m.
OTHER KNOWN LITIGATION:
PARTIES NATURE OF DISPUTE STATUS
------- ----------------- ------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, et al. Class Action Securities Pending SDNY - WRT severed
v. WRT et al., S.D.N.Y. Litigation into separate case; no class
certified; WRT effectively not
represented due to ▇▇▇▇▇▇ &
▇▇▇▇▇▇' withdrawal; case should
be dismissed upon
consummation of Plan
▇▇▇▇▇▇▇▇▇▇ v. WRT et al., Personal Injury WRT's state counsel =
Cause No. 116977, 32nd ▇▇▇ ▇▇▇▇▇▇;
▇▇▇. Dist. Ct., Terrebonne relief from auto. stay
Parish, La. granted to permit liquidation
of claim subject to satisfaction
as Class D-2 claim
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ v. Personal Injury WRT's state counsel =
WRT et al., Cause No. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇; form of
10-13933, 38th Jud. Dist. agreed order permitting
Ct., Cameron Parish, La. case to go forward sent to
opposing counsel; claim
subject to satisfaction as
Class D-2 claim.
78
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Page 6
July 9, 1997
PARTIES NATURE OF DISPUTE STATUS
------- ----------------- ------
▇▇▇▇▇▇ v. WRT et al., Tortious Interference Claim disallowed in bankruptcy;
Cause No. 484-091, 24th with Contract state law case should be dism'd
Jud. Dist. Ct., Jefferson as a result; WRT's state law
Parish, La. counsel = ▇▇▇▇▇ ▇▇▇▇▇.
▇▇▇▇▇▇ v. So. Gulf, et al. Personal Injury Unknown, other than fact stayed
by bankruptcy; state counsel =
▇▇▇▇▇▇ ▇▇▇▇▇▇
NON-CONTESTED MATTERS:
MOVANT NATURE OF MOTION STATUS
------- ----------------- ------
▇▇▇▇▇▇▇▇▇ & Company, Inc. Final Fee Application Hearing - 7/15/97 @ 8:00 am
▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ Second Interim Fee App Hearing - 7/29/97 @ 8:00 am
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ Final Fee Application Hearing - 7/29/97 @ 8:00 am
WRT Exercise of option Motion granted; ▇▇▇▇ of Sale must
purchase Vortoil equip. be executed by ▇▇▇▇▇ ▇▇▇▇▇▇
Process Systems
WRT Motion to Assume Conditional motions filed as to
oil & gas leases held by State
of Louisiana and LaFourche
Parish School Board; need to
withdraw motions now that oil
& gas lease appeal dismissed.
▇▇▇▇▇ Royalty Corp. Motion for allowance of Form of order submitted to
admin. claim Court for disallowance of
claim as moot due to approval
of compromise; awaiting
entry by Court
79
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Page 7
July 9, 1997
In providing the foregoing, I have made every effort (given the
shortness of time and the numerous other urgencies in concluding the closing)
to include every pending item of litigation. However, I cannot guaranty the
complete accuracy of the above listing. Should you have any questions or
concerns, please feel free to give me a call.
Very truly yours,
/s/ E. ▇▇▇ ▇▇▇▇▇▇
E. ▇▇▇ ▇▇▇▇▇▇
ELM\per
16397.001
cc: ▇▇▇▇ ▇. ▇▇▇, Esq. [Firm]
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq. [Firm]
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq. [Firm]
J. ▇▇▇▇▇ ▇▇▇, Esq. [Firm]
▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
