Execution Counterpart
U.S. $20,000,000
AMENDED AND RESTATED
CREDIT AGREEMENT,
dated as of October 13, 1998
between
ESENJAY EXPLORATION, INC.,
as the Borrower
and
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as the Lender
TABLE OF CONTENTS
SECTION PAGE
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS..........................................2
1.1. Defined Terms..................................................2
1.2. Use of Defined Terms..........................................26
1.3. Cross-References..............................................26
1.4. Accounting and Financial Determinations.......................27
ARTICLE II
COMMITMENTS, BORROWING PROCEDURES AND NOTES..............................28
2.1. Commitments...................................................28
2.1.1. Tranche A Commitment........................................28
2.1.2. Tranche B Commitment........................................28
2.1.3. Letters of Credit...........................................29
2.1.4. Lender Not Required To Make Loans, etc. Under Certain
Circumstances.............................................29
2.2. Reduction of Commitment Amounts.............................29
2.2.1. Optional....................................................29
2.2.2. Mandatory...................................................30
2.3. Borrowing Procedure...........................................30
2.4. Continuation and Conversion Elections.........................30
2.5. Loan Accounts and Notes.......................................30
2.6. Borrowing Base Redetermination and Collateral Value
Redeterminaton............................................31
2.7. Purposes......................................................32
ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES.............................32
3.1. Repayments and Prepayments and Certain Borrowing Base
Matters..................................................32
3.1.1. Repayments and Prepayments................................32
3.1.2. Borrowing Base Deficiencies, Collateral Value
Deficiencies and Asset Sales.............................34
3.2. Interest Provisions.........................................36
3.2.1. Rate......................................................36
3.2.2. Post-Maturity Rates.......................................36
3.2.3. Payment Dates.............................................36
3.2.4. Maximum Interest..........................................37
3.3. Fees........................................................38
i
SECTION PAGE
3.3.1. Commitment Fee...........................................38
3.3.2. Structuring Fee..........................................38
3.3.3. Closing Fee..............................................38
3.3.4. Engineering Fee..........................................38
3.3.5. Letter of Credit Stated Amount Fee.......................39
3.3.6. Letter of Credit Issuance Fee............................39
3.3.7. Letter of Credit Administrative Fees.....................39
3.3.8. Borrowing Base Fee.......................................39
3.4. Proceeds Account.........................................39
3.5. Overriding Royalty Interest; Assignment is Not
Collateral Security......................................39
ARTICLE IV
LETTERS OF CREDIT......................................................40
4.1. Issuance Requests...........................................40
4.2. Issuances and Extensions....................................41
4.3. Expenses....................................................42
4.4. Disbursements...............................................42
4.5. Reimbursement...............................................43
4.6. Deemed Disbursements........................................43
4.7. Nature of Reimbursement Obligations.........................44
4.8. Increased Costs; Indemnity..................................46
ARTICLE V
CERTAIN INTEREST RATE AND OTHER PROVISIONS.............................47
5.1. LIBO Rate Lending Unlawful..................................47
5.2. Deposits Unavailable........................................47
5.3. Increased Loan Costs, etc...................................47
5.4. Funding Losses..............................................48
5.5. Increased Capital Costs.....................................49
5.6. Taxes ......................................................49
5.7. Payments, Computations, etc.................................50
5.8. Setoff......................................................51
5.9. Use of Proceeds.............................................51
ARTICLE VI
CONDITIONS PRECEDENT...................................................51
6.1. Initial Credit Extension....................................51
ii
SECTION PAGE
6.1.1. Resolutions, etc..........................................51
6.1.2. Delivery of Notes.........................................52
6.1.3. Guaranties................................................52
6.1.4. Pledge Agreements.........................................52
6.1.5. Security Agreement........................................53
6.1.6. Consents and Mortgage Consents............................53
6.1.7. Mortgage..................................................53
6.1.8. Opinions of Counsel.......................................54
6.1.9. UCC-11s...................................................54
6.1.10. Evidence of Insurance....................................54
6.1.11. Engineering Reports......................................54
6.1.12. Environmental Report.....................................55
6.1.13. Budget...................................................55
6.1.14. Approved Development Plan................................55
6.1.15. Amended and Restated Security Documents..................55
6.1.16. ORRI Certificate, etc....................................55
6.1.17. Hedging Agreements.......................................55
6.1.18. Assignment...............................................55
6.1.19. Warrants.................................................56
6.1.20. Closing Fees, Expenses, etc..............................56
6.1.21. Other Documents..........................................56
6.2. Inclusion of Hydrocarbon Interests in the Borrowing Base....56
6.2.1. Environmental Report......................................56
6.2.2. Mortgage..................................................56
6.2.3. UCC-11s...................................................57
6.2.4. Evidence of Insurance.....................................57
6.2.5. Engineering Reports.......................................57
6.2.6. Material Contracts and Related Consents; Security
Agreement.................................................57
6.2.7. Guaranties................................................58
6.2.8. Additional Stock or Partnership Pledge....................58
6.2.9. Overriding Royalty Interests..............................58
6.2.10. Other Documents..........................................58
6.3. All Credit Extensions.....................................58
6.3.1. Compliance with Warranties, No Default, etc...............59
6.3.2. Credit Request............................................59
6.3.3. Satisfactory Legal Form...................................59
ARTICLE VII
REPRESENTATIONS AND WARRANTIES.........................................60
7.1. Organization, etc...........................................60
iii
SECTION PAGE
7.2. Due Authorization, Non-Contravention, etc...................60
7.3. Government Approval, Regulation, etc........................61
7.4. Investment Company Act......................................61
7.5. Public Utility Holding Company Act..........................61
7.6. Validity, etc...............................................61
7.7. Financial Information.......................................61
7.8. No Material Adverse Change..................................61
7.9. Litigation, Labor Controversies, etc........................62
7.10. Ownership of Properties....................................62
7.11. Taxes......................................................62
7.12. Pension and Welfare Plans..................................62
7.13. Compliance with Law........................................63
7.14. Claims and Liabilities.....................................63
7.15. No Prohibition on Perfection of Security Documents.........63
7.16. Solvency...................................................63
7.17. Environmental Warranties...................................63
7.18. Regulations G, U and X.....................................65
7.19. Year 2000 Compliance.......................................66
7.20. Insurance..................................................66
7.21. Accuracy of Information....................................66
7.22. Title Warranty.............................................66
ARTICLE VIII
COVENANTS..............................................................67
8.1. Affirmative Covenants.......................................67
8.1.1. Financial Information, Reports, Notices, etc..............67
8.1.2. Compliance with Laws, etc.................................70
8.1.3. Maintenance, Development and Sale of Properties...........70
8.1.4. Insurance.................................................72
8.1.5. Books and Records.........................................73
8.1.6. Environmental Covenant....................................73
8.1.7. Further Assurances........................................74
8.1.8. Hydrocarbon Hedging.......................................75
8.1.9. Interest Rate Protection..................................75
8.1.10. Intercreditor Agreement..................................76
8.1.11. Merger of Certain Subsidiaries...........................76
8.2. Negative Covenants........................................76
8.2.1. Business Activities.......................................76
8.2.2. Indebtedness..............................................76
8.2.3. Liens.....................................................78
iv
SECTION PAGE
8.2.4. Financial Condition.......................................80
8.2.5. Investments...............................................81
8.2.6. Restricted Payments, etc..................................82
8.2.7. Rental Obligations........................................82
8.2.8. Consolidation, Merger, etc................................82
8.2.9. Asset Dispositions, etc...................................83
8.2.10. Modification of Certain Documents........................83
8.2.11. Transactions with Affiliates.............................83
8.2.12. Negative Pledges, Restrictive Agreements, etc............84
8.2.13. Take or Pay Contracts....................................84
ARTICLE IX
EVENTS OF DEFAULT......................................................84
9.1. Listing of Events of Default................................84
9.1.1. Non-Payment of Obligations................................84
9.1.2. Breach of Warranty........................................85
9.1.3. Non-Performance of Certain Covenants and Obligations......85
9.1.4. Non-Performance of Other Covenants and Obligations........85
9.1.5. Default on Other Indebtedness.............................85
9.1.6. Judgments.................................................86
9.1.7. Pension Plans.............................................86
9.1.8. Control of the Borrower...................................86
9.1.9. Bankruptcy, Insolvency, etc...............................86
9.1.10. Impairment of Security, etc..............................87
9.1.11. Material Adverse Effect..................................87
9.2. Action if Bankruptcy........................................87
9.3. Action if Other Event of Default............................87
9.4. Rights Not Exclusive........................................88
ARTICLE X
MISCELLANEOUS PROVISIONS...............................................88
10.1. Waivers, Amendments, etc...................................88
10.2. Notices....................................................88
10.3. Payment of Costs and Expenses..............................89
10.4. Indemnification............................................90
10.5. Survival...................................................91
10.6. Severability...............................................91
10.7. Headings...................................................92
10.8. Execution in Counterparts, Effectiveness, etc..............92
v
SECTION PAGE
10.9. Governing Law; Entire Agreement............................92
10.10. Successors and Assigns....................................92
10.11. Sale and Transfer of Loans and Notes;
Participations in Loans and Notes.........................92
10.11.1. Assignments.............................................92
10.11.2. Participations..........................................94
10.12. Forum Selection and Consent to Jurisdiction...............94
10.13. Waiver of Jury Trial......................................95
10.14. Notice....................................................95
vi
SCHEDULE I Disclosure Schedule
SCHEDULE II Certain Oil and Gas Properties
SCHEDULE III Subsidiaries
SCHEDULE IV Minimum Hedging Volumes
SCHEDULE V Existing Mortgages
SCHEDULE VI Certain Consents and Mortgage Consents
EXHIBIT A - Form of Note
EXHIBIT B-1 - Form of Borrowing Request
EXHIBIT B-2 - Form of Continuation/Conversion Notice
EXHIBIT C - Form of Security Agreement
EXHIBIT D - Form of Mortgage
EXHIBIT E - Form of Secured Guaranty
EXHIBIT F-1 - Form of Pledge Agreement (Stock)
EXHIBIT F-2 - Form of Pledge Agreement (Partnership Agreement)
EXHIBIT G - Form of Lender Assignment Notice
EXHIBIT H - Form of Opinions of Counsel to the Borrower and
the other Obligors
EXHIBIT I - Form of Opinions of Special Title Counsel to
the Borrower
EXHIBIT J - Form of Assignment and Conveyance of Overriding
Royalty Interest
EXHIBIT K - Form of Certificate as to Overriding Royalty
Interests
EXHIBIT L - Form of Agreement as to Certain Tax Matters
EXHIBIT M - Form of Issuance Request
EXHIBIT N - Form of Irrevocable Standby Letter of Credit
EXHIBIT O-1 - Form of Warrant Agreement
EXHIBIT O-2 - Form of Warrants
EXHIBIT O-3 - Form of Registration Rights Agreement
EXHIBIT P - Form of Approved Development Plan
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT, dated as of October 13, 1998,
between ESENJAY EXPLORATION, INC., a Delaware corporation and the
successor-by-merger to Frontier Natural Gas Corporation (the "BORROWER"), and
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, a national banking
association and the successor-by-merger to Bank of America Illinois (the
"LENDER"),
W I T N E S S E T H:
WHEREAS, the Borrower is engaged in the business of oil and gas exploration
and production, and activities related or ancillary thereto; and
WHEREAS, the Borrower's predecessor in interest (then known as "Frontier
Natural Gas Corporation") and the Lender's predecessor in interest (then known
as "Bank of America Illinois") are parties to that certain Credit Agreement
dated as of January 3, 1996 (the "PRIOR AGREEMENT"), pursuant to which the
Lender made Commitments to make Loans to the Borrower prior to the applicable
Commitment Termination Date in the maximum principal amount, of Loans at any one
time not to exceed in the aggregate the lesser of (x) the Collateral Value, or
(y) $15,000,000, and
WHEREAS, the Borrower and the Lender are also parties to that certain
Amendment No. 1 to Credit Agreement dated as of November 1, 1996 and that
certain Amendment No. 2 to Credit Agreement dated as of July 1, 1997 (the Prior
Agreement, as so amended, herein called the "EXISTING AGREEMENT"); and
WHEREAS, pursuant to that certain Acquisition Agreement and Plan of
Exchange dated January 19, 1998 ("ACQUISITION AGREEMENT"), between Frontier
Natural Gas Corporation, Esenjay Petroleum Corporation, a Texas corporation
("OLD ESENJAY") and Aspect Resources LLC, a Colorado limited liability company
("ASPECT"), certain assets of Old Esenjay and certain assets of Aspect were
transferred to Frontier Natural Gas Corporation in exchange for shares of the
capital stock of Frontier Natural Gas Corporation; and
WHEREAS, pursuant to that certain Plan and Agreement of Merger dated as of
May 14, 1998 ("MERGER AGREEMENT"), Frontier Natural Gas Corporation, an Oklahoma
corporation, merged with and into Esenjay Exploration, Inc, a Delaware
corporation; and
WHEREAS, the Lender has heretofore merged with and into Bank of America
National Trust and Savings Association; and
WHEREAS, the Borrower desires to amend the Existing Agreement and to obtain
Commitments from the Lender pursuant to which Loans will be made to the Borrower
from time to time prior to the applicable Commitment Termination Date; in a
maximum aggregate principal amount of Loans at any one time not to exceed in
the aggregate the lesser of (x) the Collateral Value, or (y) $20,000,000; and
WHEREAS, the Lender is willing, on the terms and subject to the conditions
hereinafter set forth (including ARTICLE V), to amend the Existing Agreement, to
extend such Commitments, and to make such Loans to the Borrower; and
WHEREAS, the proceeds of such Loans will be used
(a) to refinance certain oil and gas producing Properties owned by the
Borrower or one of the Borrower's Subsidiaries in the States of Oklahoma,
Kansas, Louisiana and Texas;
(b) to further develop the Starboard Properties;
(c) to conduct other Approved Development Activities on the Oil and Gas
Properties owned by the Borrower or one of the Borrower's Subsidiaries,
including those Properties located in Matagorda, San Patricio, Karnes,
Willacy and Xxxxxxx Counties, Texas; and
WHEREAS, the Parties have agreed it is in their respective best interests
to enter into this Agreement amending, restating and superseding the Existing
Agreement,
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1. DEFINED TERMS. The following terms (whether or not
underscored) when used in this Agreement, including its preamble and recitals,
shall, except where the context otherwise requires, have the following meanings
(such meanings to be equally applicable to the singular and plural forms
thereof):
"ACQUIRED PROPERTIES" means those Oil and Gas Properties and other assets
that are acquired from time to time in an Acquisition.
"ACQUISITION" means an acquisition by the Borrower or one or more of its
Subsidiaries of Acquired Properties.
2
"AFFILIATE" of any Person means any other Person which, directly or
indirectly, controls, is controlled by or is under common control with such
Person (excluding any trustee under, or any committee with responsibility for
administering, any Plan). A Person shall be deemed to be "controlled by" any
other Person if such other Person possesses, directly or indirectly, power
(a) to vote 10% 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, on any date, this Amended and Restated Credit Agreement
as originally in effect on the Effective Date and as thereafter from time to
time amended, supplemented, amended and restated, or otherwise modified and in
effect on such date.
"ALTERNATE BASE RATE" means, on any date and with respect to all Base Rate
Loans, a fluctuating rate of interest per annum equal to the higher of
(a) the rate of interest as announced from time to time by the Lender
as its "reference rate" at its Domestic Office; or
(b) the Federal Funds Rate most recently determined by the Lender plus
1/2%.
The Alternate Base Rate is not necessarily intended to be the lowest rate of
interest in connection with extensions of credit. Changes in the rate of
interest on that portion of any Loans maintained as Base Rate Loans will take
effect simultaneously with each change in the Alternate Base Rate. The Lender
will give notice to the Borrower of changes in the Alternate Base Rate.
"APPLICABLE LAW" means with respect to any Person or matter, any federal,
state, regional, tribal or local statute, law, code, rule, treaty, convention,
application, order, decree, consent decree, injunction, directive, determination
or other requirement (whether or not having the force of law) relating to such
Person or matter and, where applicable, any interpretation thereof by a
Government Agency having jurisdiction with respect thereto or charged with the
administration or interpretation thereof.
"APPLICABLE MARGIN" means, with respect to any Credit Extension at any time
of determination, a margin above the interest rate or fee applicable to such
Credit Extension equal to the following:
3
-------------------------------------------------------------------------
Alternate
LIBO Rate Base Rate
-------------------------------------------------------------------------
Tranche A Loan 2% 0%
-------------------------------------------------------------------------
Tranche B Loan 4% 2%
-------------------------------------------------------------------------
Letter of Credit 2% 0%
-------------------------------------------------------------------------
"APPROVALS" means each and every approval, authorization, license, permit,
consent, variance, land use entitlement, franchise, agreement, filing or
registration by or with any Government Agency or other Person necessary for all
stages of developing, operating, maintaining and abandoning Oil and Gas
Properties.
"APPROVED DEVELOPMENT ACTIVITIES" means development drilling on the
Mortgaged Properties and the Development Properties (i) in order to bring into
production Proven Reserves which the Lender has included in its determination of
the Borrowing Base, and (ii) in order to further develop the Mortgaged
Properties and the Development Properties, in each case as approved by the
Lender.
"APPROVED DEVELOPMENT PLAN" means the Borrower's plan, as approved by the
Lender, for conducting Approved Development Activities on the Oil & Gas
Properties comprising the Development Properties.
"ASPECT" is defined in the RECITALS.
"ASSIGNEE LENDER" is defined in SECTION 10.11.1.
"ASSIGNMENT" means the Assignment and Conveyance of Overriding Royalty
Interest, substantially in the form of EXHIBIT J, from the Borrower and/or the
Borrower's Subsidiaries to the Designee, assigning to the Designee, as
additional consideration for the making of Commitments by the Lender and not as
collateral security for the Loans, overriding royalty interests in its or their
Hydrocarbon Interests listed on SCHEDULE II, PART B (New Mortgaged Properties)
and SCHEDULE II, PART C (Starboard Properties).
"AUTHORIZED OFFICER" means, relative to any Obligor, those of its officers
whose signatures and incumbency shall have been certified to the Lender pursuant
to SECTION 6.1.1.
"BASE RATE LOAN" means a Loan bearing interest at a fluctuating rate
determined by reference to the Alternate Base Rate.
"BORROWER" is defined in the PREAMBLE.
4
"BORROWING" means the Loans of the same type and, in the case of LIBO Rate
Loans, having the same Interest Period made by the Lender on the same Business
Day and pursuant to the same Borrowing Request in accordance with SECTION 2.1.
"BORROWING BASE" means, as at any date, (a) prior to the initial Borrowing
Base Redetermination, $4,000,000 and (b) thereafter, (i) that amount of
Indebtedness for borrowed money under the Facility that the Lender determines
can be supported by the Proven Reserves attributable to Hydrocarbon Interests
owned directly by the Borrower or its Subsidiaries which are a part of the
Mortgaged Properties, after an engineering and economic review of such reserves
conducted by the Lender using its normal procedures for oil and gas facilities
of this type, taking into account the value of all those proved developed
producing oil and gas reserves and certain portions of certain other categories
of Proven Reserves attributable to the Mortgaged Properties.
"BORROWING BASE DEFICIENCY" means the amount by which (a) the sum of the
aggregate outstanding principal amount of all Tranche A Loans plus Letter of
Credit Outstandings exceeds (b) the then current Borrowing Base.
"BORROWING BASE DEFICIENCY NOTIFICATION DATE" means the date on which any
notice of a Borrowing Base Deficiency is received by the Borrower.
"BORROWING BASE FEE" is defined in SECTION 3.3.8.
"BORROWING BASE REDETERMINATION" is defined in SECTION 2.6.
"BORROWING REQUEST" means a loan request and certificate duly executed by
an Authorized Officer of the Borrower, substantially in the form of EXHIBIT B-1
hereto.
"BUSINESS DAY" means
(a) any day which is neither a Saturday or Sunday nor any other day on
which banks are authorized or required to be closed in Chicago, Illinois;
and
(b) relative to the making, continuing, prepaying or repaying of any
LIBO Rate Loans, any day on which dealings in Dollars are carried on in the
London interbank market.
"CAPITAL EXPENDITURES" means, for any period, (without duplication) the
aggregate amount of all expenditures of the Borrower and its consolidated
Subsidiaries for fixed or capital assets made during such period which, in
accordance with GAAP, would be classified as capital expenditures including,
with respect to any period, payments made by the Borrower and its consolidated
Subsidiaries with respect to Capitalized Lease Liabilities incurred during such
period.
5
"CAPITALIZATION" means, at any time, the sum of (a) the total Debt of the
Borrower and its consolidated Subsidiaries PLUS (b) the total equity of the
Borrower and its consolidated Subsidiaries.
"CAPITALIZED LEASE LIABILITIES" means all monetary obligations of the
Borrower or any of its consolidated Subsidiaries under any leasing or similar
arrangement which, in accordance with GAAP, would be classified as capitalized
leases, and, for purposes of this Agreement and each other Loan Document, the
amount of such obligations shall be the capitalized amount thereof, determined
in accordance with GAAP.
"CASH EQUIVALENT INVESTMENT" means, at any time:
(a) any evidence of Indebtedness, maturing not more than one year after
such time, issued or guaranteed by the United States Government;
(b) commercial paper, maturing not more than nine months from the date
of issue, which is issued by
(i) a corporation (other than an Affiliate of the Borrower)
organized under the laws of any state of the United States or of the
District of Columbia and rated at least A-1 by Standard & Poor's
Corporation or P-1 by Xxxxx'x Investors Service, Inc., or
(ii) the Lender;
(c) any certificate of deposit or bankers acceptance, maturing not more
than one year after such time, which is issued by
(i) a commercial banking institution that is a member of the
Federal Reserve System and has a combined capital and surplus and
undivided profits of not less than $500,000,000, or
(ii) the Lender; or
(d) any repurchase agreement entered into with the Lender (or other
commercial banking institution of the stature referred to in CLAUSE (c))
which
(i) is secured by a fully perfected security interest in any
obligation of the type described in any of CLAUSES (a) through (c); and
(ii) has a market value at the time such repurchase agreement is
entered into of not less than 100% of the repurchase obligation of the
Lender (or other commercial banking institution) thereunder.
6
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended.
"CERCLIS" means the Comprehensive Environmental Response Compensation
Liability Information System List.
"CHANGE IN CONTROL" means if either Old Esenjay or Aspect shall fail
beneficially to own at least 80% of their existing percentages of the
outstanding shares of the voting capital stock of the Borrower as of October 13,
1998 (subject to dilution only in the event of the issuance of additional shares
of such voting capital stock), on a fully diluted basis or Xxxxxxx Xxxxxxx, Xxxx
Xxxxxxxx, Xxxxx Xxxxx and/or Xxxxx Xxxxxxxxxxxxxx shall fail to be actively
involved in the management of the business of the Borrower or (b) if the
Borrower ceases to own beneficially and of record 100% of the capital stock of
each of the Borrower's Subsidiaries.
"CODE" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time, and the regulations promulgated
thereunder.
"COLLATERAL VALUE" shall mean, as at any date, (a) prior to the initial
Collateral Value Redetermination, $9,000,000 and (b) thereafter, the quotient of
(i) the projected net future cash flow, discounted at nine percent (9%) per
annum, from the anticipated production of Hydrocarbons from Proven Reserves
attributable to Hydrocarbon Interests owned directly by the Borrower or one of
the Borrower's Subsidiaries which are a part of the Mortgaged Properties, after
an engineering and economic review of such reserves conducted by the Lender
taking into account the value of all those proved developed producing oil and
gas reserves and all other categories of Proven Reserves attributable to the
Mortgaged Properties that the Lender expects can become proved developed
producing reserves within the next following eighteen (18) months with funds
that the Lender determines are available to the Borrower for such purpose and
use, divided by (ii) 1.65.
"COLLATERAL VALUE DEFICIENCY" means the amount by which (a) the sum of the
aggregate outstanding principal amount of all Tranche A Loans plus all Tranche B
Loans plus all Letter of Credit Outstandings exceeds (b) the then current
Collateral Value.
"COLLATERAL VALUE DEFICIENCY NOTIFICATION DATE" shall mean the date on
which any notice of a Collateral Value Deficiency is received by the Borrower.
"COLLATERAL VALUE REDETERMINATION" is defined in SECTION 2.6.
"COMMITMENT" means the Lender's commitment pursuant to SECTION 2.1 to make
Loans to the Borrower and to issue Letters of Credit in accordance with the
terms and provisions of this Agreement.
7
"COMMITMENT AMOUNT" means the lesser of (i) $20,000,000, as reduced from
time to time pursuant to the provisions of Section 2.2, or (ii) the Borrowing
Base.
"COMMITMENT AVAILABILITY" means, on any date, the excess of
(a) the then applicable Commitment Amount, over
(b) the sum of
(i) the aggregate outstanding principal amount of all applicable
Loans on such date, plus
(ii) the Letter of Credit Outstandings on such date.
"COMMITMENT TERMINATION DATE" means the earliest of
(a) the Stated Maturity Date;
(b) the date on which either the Tranche A Commitment Amount or the
Tranche B Commitment Amount, or either of them, as applicable, is
terminated in full or reduced to zero pursuant to SECTION 2.2; and
(c) the date on which any Commitment Termination Event occurs.
"COMMITMENT TERMINATION EVENT" means
(a) the occurrence of any Default described in CLAUSES (a) through (d)
of SECTION 9.1.9 with respect to the Borrower or any Subsidiary; or
(b) the occurrence and continuance of any other Event of Default and
either
(i) the declaration of the Loans and other Obligations to be due
and payable pursuant to SECTION 9.3, or
(ii) in the absence of such declaration, the giving of notice by
the Lender to the Borrower that the Commitments have been terminated.
"CONSENT" means a Consent to Assignment executed and delivered pursuant to
SECTION 6.2.6, substantially in the form of EXHIBIT J, as amended, supplemented,
restated or otherwise modified from time to time pursuant to which the
Borrower's counterparty to each Material Contract (i) consents to the assignment
of each such Material Contract to the Lender as security for the Obligations and
(ii) provides the Lender an independent right to cure defaults under such
Material Contract.
8
"CONSOLIDATED NET INCOME" means, with respect to the Borrower and its
consolidated Subsidiaries for any period, the consolidated net income (or loss)
of the Borrower and its consolidated Subsidiaries for such period determined in
accordance with GAAP.
"CONTINGENT LIABILITY" means, as to any Person, any direct or indirect
liability of that Person, whether or not contingent, with or without recourse,
(a) with respect to any Indebtedness, lease, dividend, letter of credit or other
obligation (the "primary obligations") of another Person (the "primary
obligor"), including any obligation of that Person (i) to purchase, repurchase
or otherwise acquire such primary obligations or any security therefor, (ii) to
advance or provide funds for the payment or discharge of any such primary
obligation, or to maintain working capital or equity capital of the primary
obligor or otherwise to maintain the net worth or solvency or any balance sheet
item, level of income or financial condition of the primary obligor, (iii) to
purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation, or (iv) otherwise to assure or hold
harmless the holder of any such primary obligation against loss in respect
thereof (each, a "GUARANTY OBLIGATION"); (b) with respect to any Surety
Instrument issued for the account of that Person or as to which that Person is
otherwise liable for reimbursement of drawings or payments; or (c) to purchase
any materials, supplies or other property from, or to obtain the services of,
another Person if the relevant contract or other related document or obligation
requires that payment for such materials, supplies or other property, or for
such services, shall be made regardless of whether delivery of such materials,
supplies or other property is ever made or tendered, or such services are ever
performed or tendered.
"CONTINUATION/CONVERSION NOTICE" means a notice of continuation or
conversion and certificate duly executed by an Authorized Officer of the
Borrower, substantially in the form of Exhibit B-2 hereto.
"CONTROLLED GROUP" means all members of a controlled group of corporations
and all members of a controlled group of trades or businesses (whether or not
incorporated) under common control which, together with the Borrower, are
treated as a single employer under Section 414(b) or 414(c) of the Code or
Section 4001 of ERISA.
"CREDIT EXTENSION" means and includes
(a) the advancing of any Tranche A Loans by the Lender in connection
with a Borrowing hereunder,
(b) the advancing of any Tranche B Loans by the Lender in connection
with a Borrowing hereunder, and
9
(c) any issuance by an Issuer, or the extension of the Stated Expiry
Date by an Issuer, of a Letter of Credit.
"CURRENT RATIO" means, as of the end of each Fiscal Quarter, the ratio
of
(a) the current assets (including the unused portion of the Commitment
Amount) of the Borrower and its consolidated Subsidiaries to
(b) the current liabilities (minus the current portion of long term
Debt) of the Borrower and its consolidated Subsidiaries.
"DEBT" means the outstanding principal amount of all Indebtedness of the
Borrower and its consolidated Subsidiaries of the nature referred to in CLAUSES
(a) AND (b) of the definition of "INDEBTEDNESS".
"DEBT TO CAPITALIZATION RATIO" means, as of the end of each Fiscal Quarter,
the ratio of (a) Debt to (b) Capitalization.
"DEFAULT" means any Event of Default or any condition, occurrence or event
which, after notice or lapse of time or both, would constitute an Event of
Default.
"DEVELOPMENT PROPERTIES" means those Oil & Gas Properties described in
SCHEDULE II, PART C (Starboard Properties) and SCHEDULE II, PART D (Other
Development Properties) to this Agreement.
"DISBURSEMENT DATE" is defined in SECTION 4.4.
"DESIGNEE" is defined in SECTION 3.5.
"DISBURSEMENT" means the amount disbursed by the Issuer on a Disbursement
Date.
"DISCLOSURE SCHEDULE" means the Disclosure Schedule attached hereto as
SCHEDULE I, as it may be amended, supplemented or otherwise modified from time
to time by the Borrower with the written consent of the Lender.
"DISTRIBUTION PAYMENTS" is defined in SECTION 8.2.6.
"DOLLAR" and the sign "$" mean lawful money of the United States.
"DOMESTIC OFFICE" means the office of the Lender designated as such on its
signature page hereto or designated in a Lender Assignment Notice or such other
10
office of the Lender (or any successor or assign of the Lender) within the
United States as may be designated from time to time by notice from the Lender,
as the case may be, to each other Person party hereto.
"EBITDA" means for any period, the sum, without duplication, of the
following:
(a) Consolidated Net Income for such period, plus
(b) Interest Expense for such period, plus
(c) all depreciation and amortization of assets (including goodwill and
other intangible assets) of the Borrower and its consolidated Subsidiaries
deducted in determining Consolidated Net Income for such period, plus
(minus)
(d) all federal, state, local and foreign income taxes of the Borrower
and its consolidated Subsidiaries deducted (or credits added) in
determining Consolidated Net Income for such period, plus (minus)
(e) other non-cash items deducted or added in determining Consolidated
Net Income for such period.
"EFFECTIVE DATE" means the date this Agreement becomes effective
pursuant to SECTION 10.8.
"ENGINEERING REPORT" means one or more reports, in form and substance
satisfactory to the Lender, prepared at the sole cost and expense of the
Borrower by Netherland, Xxxxxx & Associates, Inc. or another petroleum engineer
acceptable to the Lender in its reasonable business judgment, which shall
evaluate the Proven Reserves and probable reserves attributable to the
Hydrocarbon Interests owned directly by the Borrower and/or its Subsidiaries and
constituting part of the Mortgaged Properties, as of the immediately preceding
January 1 or July 1. Each Engineering Report shall set forth volumes,
projections of the future rate of production, Hydrocarbons prices, escalation
rates, discount rate assumptions, and net proceeds of production, present value
of the net proceeds of production, estimated costs of Remedial Action, operating
expenses and capital expenditures, in each case based upon updated economic
assumptions reasonably acceptable to the Lender.
"ENVIRONMENTAL LAWS" means all Applicable Laws relating to public health
and safety through protection of the environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to sections of ERISA also refer to any successor sections.
11
"EVENT OF DEFAULT" is defined in SECTION 9.1.
"FACILITY" means the Tranche A Facility or the Tranche B Facility, or
either of them, as the case may be, providing for the Commitment and the Loans.
"FEDERAL FUNDS RATE" means, for any day, the rate set forth in the weekly
statistical release designated as H.15(519), or any successor publication,
published by the Federal Reserve Bank of New York (including any such successor,
"H.15(519)") on the preceding Business Day opposite the caption "Federal Funds
(Effective)"; or, if for any relevant day, such rate is not so published on any
such preceding Business Day, the rate for such day will be the arithmetic mean
as determined by the Lender of the rates for the last transaction in overnight
Federal funds arranged prior to 9:00 a.m. (New York City time) on that day by
each of three leading brokers of Federal funds transactions in New York City
selected by the Lender.
"FISCAL QUARTER" means any quarter ending on the last day of March, June,
September, and December of a Fiscal Year.
"FISCAL YEAR" means any period of twelve consecutive calendar months ending
on December 31; references to a Fiscal Year with a number corresponding to any
calendar year (e.g., "Fiscal Year 1998") refer to the Fiscal Year ending on the
December 31 occurring during such calendar year.
"F.R.S. BOARD" means the Board of Governors of the Federal Reserve System
or any successor thereto.
"GAAP" is defined in Section 1.4.
"GOVERNMENT AGENCY" means any federal, state, regional, tribal or local
government or governmental department or other entity charged with the
administration, interpretation or enforcement of any Applicable Law.
"GUARANTIES" means the guaranties of the Obligations, executed and
delivered pursuant to Section 6.1.3 and Section 6.2.7, substantially in the form
of Exhibit E, given by each of the Borrower's Subsidiaries.
"HAZARDOUS MATERIAL" means
(a) any "hazardous substance", as defined by CERCLA;
(b) any "hazardous waste", as defined by the Resource Conservation and
Recovery Act, as amended;
(c) any petroleum, crude oil or fraction thereof;
12
(d) any hazardous, dangerous or toxic chemical, material, waste or
substance within the meaning of any Environmental Law;
(e) any radioactive material, including any naturally occurring
radioactive material, and any source, special or by-product material as defined
in 42 U.S.C. Section 2011 ET SEQ., and any amendments or reauthorizations
thereof;
(f) asbestos-containing materials in any form or condition; or
(g) polychlorinated biphenyls in any form or condition.
"HEDGING AGREEMENTS" means:
(a) interest rate swap agreements, basis swap agreements, interest
rate cap agreements, forward rate agreements, interest rate floor
agreements and interest rate collar agreements, and all other agreements or
arrangements designed to protect such Person against fluctuations in
interest rates or currency exchange rates, and
(b) forward contracts, options, futures contracts, futures options,
commodity swaps, commodity options, commodity collars, commodity caps,
commodity floors and all other agreements or arrangements designed to
protect such Person against fluctuations in the price of commodities.
"HEDGING OBLIGATIONS" means, with respect to any Person, all liabilities
(including but not limited to obligations and liabilities arising in connection
with or as a result of early or premature termination of a Hedging Agreement,
whether or not occurring as a result of a default thereunder) of such Person
under a Hedging Agreement.
"HIGHEST LAWFUL RATE" is defined in SECTION 3.2.4.
"HYDROCARBON INTERESTS" means all rights, titles and interests in and to
oil and gas leases; oil, gas and mineral leases; other Hydrocarbon leases;
mineral interests; mineral servitudes; overriding royalty interests; royalty
interests; net profits interests; production payment interests; and other
similar interests.
"HYDROCARBONS" means, collectively, oil, gas, casinghead gas, drip
gasoline, natural gasoline, condensate, distillate and all other liquid or
gaseous hydrocarbons and related minerals and all products therefrom, in each
case whether in a natural or a processed state.
13
"IMPERMISSIBLE QUALIFICATION" means, relative to the opinion or
certification of any independent public accountant as to any financial statement
of the Borrower, any qualification or exception to such opinion or certification
(a) which is of a "going concern" or similar nature;
(b) which relates to the limited scope of examination of matters
relevant to such financial statement;
(c) which relates to the treatment or classification of any item in
such financial statement and which, as a condition to its removal, would
require an adjustment to such item the effect of which would be to cause
the Borrower to be in default of any of its obligations under SECTION
8.2.4.; or
(d) which relates to possible errors generated by financial reporting
and related systems due to the Year 2000 Problem.
"INCLUDING" means including without limiting the generality of any
description preceding such term, and, for purposes of this Agreement and each
other Loan Document, the parties hereto agree that the rule of EJUSDEM GENERIS
shall not be applicable to limit a general statement, which is followed by or
referable to an enumeration of specific matters, to matters similar to the
matters specifically mentioned.
"INDEBTEDNESS" of any Person means, without duplication:
(a) all obligations of such Person for borrowed money and all
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments;
(b) all obligations, contingent or otherwise, relative to the face
amount of all letters of credit, whether or not drawn, and banker's
acceptances issued for the account of such Person;
(c) all other items which, in accordance with GAAP, would be included
as liabilities on the liability side of the balance sheet of such Person as
of the date at which Indebtedness is to be determined;
(d) net liabilities of such Person under all Hedging Obligations;
(e) all net monetary obligations of such Persons with respect to
Production Payments;
(f) all Capitalized Lease Liabilities;
14
(g) whether or not so included as liabilities in accordance with
GAAP, all obligations of such Person to pay the deferred purchase price of
property or services, and indebtedness (excluding prepaid interest thereon)
secured by a Lien on property owned or being purchased by such Person
(including indebtedness arising under conditional sales or other title
retention agreements), whether or not such indebtedness shall have been
assumed by such Person or is limited in recourse; and
(h) all Contingent Liabilities of such Person;
For all purposes of this Agreement, the Indebtedness of any Person shall include
the Indebtedness of any partnership or joint venture in which such Person is a
general partner or a joint venturer, unless the Lender expressly permits
exclusion based on non-recourse provisions acceptable to the Lender set forth in
the agreements regarding such Indebtedness..
"INDEMNIFIED LIABILITIES" is defined in SECTION 10.4.
"INDEMNIFIED PARTIES" is defined in SECTION 10.4.
"INTEREST COVERAGE RATIO" means, for any four consecutive Fiscal Quarters,
the ratio of (a) EBITDA for such Fiscal Quarters to (b) Interest Expense for
such Fiscal Quarters; PROVIDED, HOWEVER, that solely for purposes of calculating
the Interest Coverage Ratio there shall be excluded from the calculation of
Consolidated Net Income those expenses of the Borrower and its Consolidated
Subsidiaries for geological and geophysical services and those incurred in
connection with oil and gas xxxxx that were not commercially successful, in each
case with respect to such entities, Oil & Gas Properties where such expenses
have not been capitalized.
"INTEREST EXPENSE" means, for any period, the consolidated interest expense
of the Borrower and its consolidated Subsidiaries for such period (including all
imputed interest under Hedging Agreements, but excluding all fees paid under
SECTION 3.3), as determined in accordance with GAAP, including the interest
expense associated with any Capitalized Lease Liabilities of the Borrower and
its consolidated Subsidiaries.
"INTEREST PERIOD" means, relative to any LIBO Rate Loan, the period
beginning on (and including) the date on which such LIBO Rate Loan is made or
continued as, or converted into, a LIBO Rate Loan pursuant to SECTION 2.3 or 2.4
and ending on (but excluding) the day which numerically corresponds to such date
one, two, three or six months thereafter (or, if such month has no numerically
corresponding day, on the last Business Day of such month), in each case as the
Borrower may select in its relevant notice pursuant to SECTION 2.3 or 2.4;
PROVIDED, HOWEVER, that
15
(a) no more than three different Interest Periods may be in effect at
any time;
(b) Interest Periods commencing on the same date for Loans comprising
part of the same Borrowing shall be of the same duration;
(c) if such Interest Period would otherwise end on a day which is not
a Business Day, such Interest Period shall end on the next following
Business Day (unless, if such Interest Period applies to LIBO Rate Loans,
such next following Business Day is the first Business Day of another
calendar month, in which case such Interest Period shall end on the
Business Day next preceding such numerically corresponding day);
(d) no Interest Period may end later than the Stated Maturity Date;
and
(e) the Borrower shall select each Interest Period for a particular
LIBO Rate Loan so as not to require (as reasonably foreseeable as possible)
a prepayment of such LIBO Rate Loan during such Interest Period.
"INVESTMENT" means, relative to any Person,
(a) any loan or advance made by such Person to any other Person
(excluding commission, travel and similar advances to officers and
employees made in the ordinary course of business and excluding prepaid
expenses incurred in the ordinary course of business);
(b) any Contingent Liability of such Person; and
(c) any ownership or similar interest held by such Person in any
other Person; PROVIDED, HOWEVER, that (i) Hedging Obligations and (ii)
Production Payments where the Borrower or its Subsidiary is the grantor or
transferror thereof shall not be considered Investments.
The amount of any Investment shall be the original principal or capital amount
thereof less all returns of principal or equity thereon (and without adjustment
by reason of the financial condition of such other Person) and shall, if made by
the transfer or exchange of property other than cash, be deemed to have been
made in an original principal or capital amount equal to the fair market value
of such property.
"ISSUANCE REQUEST" means a request for the issuance of a Letter of Credit
and certificate duly executed by the chief executive, accounting or financial
Authorized Officer of the Borrower, in substantially the form of EXHIBIT M
attached hereto (with
16
such changes thereto as may be agreed upon from time to time by the Issuer and
the Borrower).
"ISSUER" means the Lender or its designee, in its capacity as an issuer of
the Letters of Credit.
"LENDER ASSIGNMENT NOTICE" means a Lender Assignment Notice substantially
in the form of EXHIBIT G hereto.
"LENDER" is defined in the PREAMBLE.
"LETTER OF CREDIT" is defined in SECTION 4.1.
"LETTER OF CREDIT AVAILABILITY" means, at any time, the lesser of
(a) the excess of
(i) $1,000,000 OVER
(ii) the then Letter of Credit Outstandings,
OR
(b) the Tranche A Commitment Availability at such time.
"LETTER OF CREDIT OUTSTANDINGS" means, at any time, an amount equal to sum
of
(a) the aggregate Stated Amount at such time of all Letters of Credit
then outstanding and undrawn (as such aggregate Stated Amount shall be
adjusted, from time to time, as a result of drawings, the issuance of
Letters of Credit, or otherwise),
PLUS
(b) the then aggregate amount of all unpaid and outstanding
Reimbursement Obligations.
"LIBO RATE" means, with respect to each Interest Period for a LIBO Rate
Loan, the rate of interest equal to the average (rounded upward, if necessary,
to the nearest 1/16th of 1%) of the rates per annum at which Dollar deposits in
immediately available funds are offered to the Lender's LIBOR Office in the
London interbank market as at or about 11:00 a.m. London time two (2) Business
Days prior to the beginning of such Interest Period for Dollar deposits of
amounts comparable to the outstanding principal
17
amount of the LIBO Rate Loan for which an interest rate is then being determined
with maturities comparable to the Interest Period to be applicable to such LIBO
Rate Loan.
"LIBO RATE LOAN" means a Loan bearing interest, at all times during an
Interest Period applicable to such Loan, at a fixed rate of interest determined
by reference to the LIBO Rate.
"LIBO RATE (RESERVE ADJUSTED)" means, relative to any Loan to be made,
continued or maintained as, or converted into, a LIBO Rate Loan for any Interest
Period, a rate per annum (rounded upwards, if necessary, to the nearest 1/16 of
1%) determined pursuant to the following formula:
LIBO Rate = LIBO RATE
-------------------------------
(Reserve Adjusted) 1.00 - LIBOR Reserve Percentage
The LIBO Rate (Reserve Adjusted) for any Interest Period for LIBO Rate
Loans will be determined by the Lender on the basis of the LIBOR Reserve
Percentage in effect on, and the applicable rates furnished to and received by
the Lender, two Business Days before the first day of such Interest Period.
"LIBOR OFFICE" means the office of the Lender designated as such on the
signature page hereto or designated in a Lender Assignment Notice or such other
office of the Lender (or any successor or assign of the Lender) as designated
from time to time by notice from the Lender to the Borrower, whether or not
outside the United States, which shall be making or maintaining LIBO Rate Loans
of the Lender hereunder.
"LIBOR RESERVE PERCENTAGE" means, relative to any Interest Period for LIBO
Rate Loans, the reserve percentage (expressed as a decimal) equal to the maximum
aggregate reserve requirements (including all basic, emergency, supplemental,
marginal and other reserves and taking into account any transitional adjustments
or other scheduled changes in reserve requirements) specified under regulations
issued from time to time by the F.R.S. Board and then applicable to assets or
liabilities consisting of and including "Eurocurrency Liabilities", as currently
defined in Regulation D of the F.R.S. Board, having a term approximately equal
or comparable to such Interest Period.
"LIEN" means any security interest, mortgage, deed of trust, pledge,
hypothecation, assignment, charge or deposit arrangement, encumbrance, lien
(statutory or otherwise), charge against or interest in Property to secure (i)
the payment of a debt or (ii) the performance of an obligation, or other
priority or preferential arrangement of any kind or nature whatsoever in respect
of any Property (including those created by, arising under or evidenced by any
conditional sale or other title retention agreement, the interest of a lessor
under a capital lease, any financing
18
lease having substantially the same economic effect as any of the foregoing, or
the filing of any financing statement naming the owner of the asset to which
such lien relates as debtor, under the Uniform Commercial Code or any comparable
law) and any contingent or other agreement to provide any of the foregoing.
"LOANS" means the loans provided for by SECTION 2.1 and shall include
Tranche A Loans and Tranche B Loans.
"LOAN DOCUMENTS" means this Agreement, the Notes, the Security Documents,
the Warrant Documents, all Letters of Credit, all Hedging Agreements and all
other agreements relating to this Agreement entered into from time to time
between the Borrower (or any or all of its Subsidiaries or Affiliates) and the
Lender (or any Affiliate of the Lender), and any document delivered by the
Borrower or any of its Subsidiaries in connection with any of the foregoing.
"MMBTu" means one million British Thermal Units.
"MATERIAL ADVERSE EFFECT" means (a) a material adverse change in, or a
material adverse effect upon, the operations, business, properties, condition
(financial or otherwise) or prospects of the Borrower or any other Obligor and
its Subsidiaries; or (b) a material impairment of the ability of the Borrower or
any Obligor to perform under any Loan Document and to avoid any Event of
Default; or (c) a material adverse effect upon (i) the legality, validity,
binding effect or enforceability against the Borrower, its Subsidiaries or any
other Obligor of any Loan Document, or (ii) the perfection or priority of any
Lien granted under any of the Loan Documents.
"MATERIAL CONTRACT" means (i) each Acquisition Agreement, Hydrocarbon
purchase and sale agreement, or similar contract relating to any Hydrocarbon
Interests included in the Mortgaged Properties or (ii) other agreement
designated as such by the Lender.
"MERGER AGREEMENT" is defined in the RECITALS.
"MORTGAGE CONSENTS" means all consents required under existing oil and gas
leases or other agreements and Approvals by Governmental Agencies to the
granting of a Mortgage to the Lender, and as reasonably determined by the Lender
with respect to Acquired Properties that become Mortgaged Properties after the
Effective Date.
"MORTGAGES" means the Mortgage, Deed of Trust, Assignment, Security
Agreement, Financing Statements and Fixture Filing executed and delivered
pursuant to SECTION 6.1.7 and SECTION 6.2.2, substantially in the form of
EXHIBIT D hereto, as amended, supplemented, restated or otherwise modified from
time to time.
19
"MORTGAGED PROPERTIES" means the Hydrocarbon Interests, Properties and
interests described in and secured by the Mortgages, as such Properties and
interests are from time to time constituted, all as further provided in SECTION
6.1.7 and SECTION 6.2.2.
"NON-REDEEMABLE STOCK" means stock issued by the Borrower or any of its
Subsidiaries, PROVIDED that such stock is not considered debt for GAAP, tax law
or any other purpose and PROVIDED FURTHER that neither the Borrower nor any of
its Subsidiaries has any obligation to redeem or purchase or pay dividends on
such stock or to exchange such stock for, or convert such stock to, any other
security, whether such obligation arises pursuant to the terms of such stock or
any other agreement relating thereto or otherwise and whether or not such
obligation exists in all circumstances or only upon the occurrence of a
particular event or condition or upon the passage of time or otherwise.
"NOTES" means the secured promissory note or notes of the Borrower payable
to the order of the Lender, in the form of EXHIBIT A hereto (as such promissory
notes may be amended, endorsed or otherwise modified from time to time),
evidencing the aggregate Indebtedness of the Borrower to the Lender resulting
from outstanding Loans, and also means all other promissory notes accepted from
time to time in substitution therefor or renewal thereof.
"OBLIGATIONS" means all obligations (monetary or otherwise) of the Borrower
and/or any other Obligor arising under or in connection with this Agreement, the
Notes and each other Loan Document, including without limitation, all Hedging
Obligations arising under Hedging Agreements between the Borrower (or any
Affiliate of the Borrower) and the Lender (or any Affiliate of the Lender).
"OBLIGOR" means the Borrower, any of its Subsidiaries or any other Person
(other than the Lender or any Affiliate of the Lender) obligated under, or
otherwise a party to, any Loan Document.
"OIL AND GAS PROPERTIES" means Hydrocarbon Interests; the Properties now or
hereafter pooled or unitized with Hydrocarbon Interests; all presently existing
or future unitization, pooling agreements and declarations of pooled units and
the units created thereby (including without limitation all units created under
orders, regulations and rules of any Government Agency having jurisdiction)
which may affect all or any portion of the Hydrocarbon Interests; all operating
agreements, joint venture agreements, contracts and other agreements which
relate to any of the Hydrocarbon Interests or the production, sale, purchase,
exchange or processing of Hydrocarbons from or attributable to such Hydrocarbon
Interests; all Hydrocarbons in and under and which may be produced and saved or
attributable to the Hydrocarbon Interests, the lands covered thereby and all oil
in tanks and all rents, issues, profits, proceeds, products, revenues and other
incomes from or attributable to the Hydrocarbon
20
Interests; all tenements, profits a prendre, hereditaments, appurtenances and
Properties in anywise appertaining, belonging, affixed or incidental to the
Hydrocarbon Interests, Properties, rights, titles, interests and estates
described or referred to above, including any and all Property, real or
personal, now owned or hereinafter acquired and situated upon, used, held for
use or useful in connection with the operating, working or development of any of
such Hydrocarbon Interests or Property (excluding drilling rigs, automotive
equipment or other personal property which may be on such premises for the
purpose of drilling a well or for other similar temporary uses) and including
any and all oil xxxxx, gas xxxxx, water xxxxx, injection xxxxx or other xxxxx,
buildings, structures, fuel separators, liquid extraction plants, plant
compressors, pumps, pumping units, field gathering systems, tanks and tank
batteries, fixtures, valves, fittings, machinery and parts, engines, boilers,
meters, apparatus, equipment, appliances, tools, implements, cables, wires,
towers, casing, tubing and rods, surface leases, rights-of-way, easements and
servitudes together with all additions, substitutions, replacements, accessions
and attachments to any and all of the foregoing.
"OLD ESENJAY" is defined in the RECITALS.
"ORGANIC DOCUMENT" means, relative to any corporate Obligor, its
certificate of incorporation, its by-laws and all shareholder agreements, voting
trusts and similar arrangements applicable to any of its authorized shares of
capital stock, and, relative to any partnership Obligor, its partnership
agreement.
"OVERRIDING ROYALTY INTEREST" means the interests conveyed and assigned by
the Assignment.
"PARTICIPANT" is defined in SECTION 10.11.2.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"PENSION PLAN" means a "pension plan", as such term is defined in section
3(2) of ERISA, which is subject to Title IV of ERISA (other than a multiemployer
plan as defined in section 4001(a)(3) of ERISA), and to which the Borrower or
any corporation, trade or business that is, along with the Borrower, a member of
a Controlled Group, may have liability, including any liability by reason of
having been a substantial employer within the meaning of section 4063 of ERISA
at any time during the preceding five years, or by reason of being deemed to be
a contributing sponsor under section 4069 of ERISA.
"PERCENTAGE" means, relative to the Lender, 100%, as such percentage may be
adjusted from time to time pursuant to Lender Assignment Notice(s) executed by
the Lender and its Assignee Lender(s) and delivered pursuant to SECTION 10.11.
21
"PERSON" means any natural person, corporation, partnership, joint venture,
limited liability company, firm, association, trust, Government Agency or any
other entity, whether acting in an individual, fiduciary or other capacity.
"PLAN" means any Pension Plan or Welfare Plan.
"PLEDGE AGREEMENT" means a Pledge Agreement of the Borrower executed and
delivered pursuant to SECTION 6.1.4 and SECTION 6.2.8, substantially in the form
of EXHIBIT F-1 hereto, and a Pledge Agreement of each of the Borrower's
Subsidiaries executed and delivered pursuant to SECTION 6.1.4 and SECTION 6.2.8,
substantially in the form of EXHIBIT F-2 hereto, in each case as amended,
supplemented, restated or otherwise modified from time to time.
"PROCEEDS ACCOUNT" is defined in SECTION 3.4.
"PRODUCTION PAYMENTS" means a production payment (whether volumetric or
dollar denominated) or similar royalty, overriding royalty, net profits interest
or other similar interest in Oil and Gas Properties, or the right to receive all
or a portion of the production or the proceeds from the sale of production
attributable to such Oil and Gas Properties where the holder of such interest
has recourse solely to such interest and the grantor or transferor thereof has
an express contractual obligation to produce and sell Hydrocarbons from such Oil
and Gas Properties, or to cause such Oil and Gas Properties to be so operated
and maintained, in each case in a reasonably prudent manner.
"PROPERTY" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.
"PROVEN RESERVES" means collectively, "proved oil and gas reserves,"
"proved developed producing oil and gas reserves," "proved developed
non-producing oil and gas reserves" (consisting of proved developed shut-in oil
and gas reserves and proved developed behind pipe oil and gas reserves), and
"proved undeveloped oil and gas reserves," as such terms are defined by the U.S.
Securities and Exchange Commission in its standards and guidelines.
"QUARTERLY PAYMENT DATE" means, commencing December, 1998, the last
Business Day of each March, June, September and December.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement,
substantially in the form of EXHIBIT O-3, between the Borrower and the Lender or
the Designee.
"REIMBURSEMENT OBLIGATION" is defined in SECTION 4.5.
22
"RELEASE" means a "release," as such term is defined in CERCLA.
"REMEDIAL ACTION" means any action under Environmental Laws required to (a)
clean up, remove, treat, dispose of, xxxxx, or in any other way address
pollutants (including Hazardous Materials) in the environment, (b) prevent the
Release or threat of a Release or minimize the further Release of pollutants, or
(c) investigate and determine if a remedial response is needed and to design
such a response and any post-remedial investigation, monitoring, operation, and
maintenance and care.
"REQUIRED ASSET SALES" means those sales of Oil and Gas Properties of the
Borrower and its Subsidiaries not containing Proven Reserves required to be
completed by the Borrower pursuant to SECTION 8.1.3(g).
"RESOURCE CONSERVATION AND RECOVERY ACT" means the Resource Conservation
and Recovery Act, 42 U.S.C. Section 6901, ET SEQ., as in effect from time to
time.
"RESTRICTED PAYMENT TESTS" means compliance with each of the following
restrictions (both before and immediately after giving effect to the applicable
Distribution Payment):
(a) Tangible Net Worth shall not be less than the sum of (i)
$45,000,000 plus (ii) fifty percent (50%) of Consolidated Net Income
(excluding the effects of consolidated net losses), for all Fiscal Quarters
beginning after the Effective Date and treated as a single accounting
period, plus (iii) one-hundred percent (100%) of the net proceeds received
by the Borrower or its Subsidiaries from the sale of any Non-Redeemable
Stock at any time after the Effective Date;
(b) the Current Ratio shall be not less than 1.1:1.0;
(c) the Debt to Capitalization Ratio shall not be greater than 50%;
(d) the Interest Coverage Ratio shall be not less than 3.0:1.0;
(e) all Tranche B Loans shall have been paid in full and the Tranche
B Commitment shall have been terminated;
(f) there shall exist no Collateral Value Deficiency;
(g) there shall exist no Borrowing Base Deficiency; and
(h) no Default shall have occurred and be continuing.
23
"SECURITY AGREEMENT" means a security agreement and any similar instrument
or agreement executed and delivered pursuant to SECTION 6.1.5 or SECTION 6.2.6,
substantially in the form of EXHIBIT C, as amended, supplemented, restated or
otherwise modified from time to time.
"SECURITY DOCUMENTS" means, collectively, (a) the Guaranties, (b) the
Pledge Agreements, (c) the Mortgages, (d) the Security Agreements, (e) the
Consents and (f) the Mortgage Consents, together with any exhibits, schedules
and other attachments to such documents and any financing statements related
thereto, as such documents, exhibits, schedules, attachments or financing
statements may be, from time to time, amended, supplemented, restated or
otherwise modified.
"STARBOARD PROPERTIES" means those Oil & Gas Properties described in
SCHEDULE II, PART C to this Agreement located in Terrebonne Parish, Louisiana.
"STATED AMOUNT" of each Letter of Credit means the face amount or the
"Stated Amount" of such Letter of Credit (as defined therein).
"STATED EXPIRY DATE" is defined in SECTION 4.1.
"STATED MATURITY DATE means
(a) as to any Tranche A Loan, that date that is three (3) years after
the Tranche A Availability Termination Date; and
(b) as to any Tranche B Loan, the Tranche B Availability Termination
Date.
"SUBORDINATED CREDITOR" means Duke Energy Financial Services, Inc. and/or
such other Person or Persons who are acceptable to the Lender.
"SUBSIDIARY" means, with respect to any Person, (a) any corporation of
which more than 50% of the outstanding capital stock having ordinary voting
power to elect a majority of the board of directors of such corporation
(irrespective of whether at the time capital stock of any other class or classes
of such corporation shall or might have voting power upon the occurrence of any
contingency) is at the time directly or indirectly owned by such Person, (b) any
partnership, limited liability company, joint venture, association or other
business entity in which more than 50% of the equity interest or voting power is
at the time directly or indirectly owned by such Person, by such Person and one
or more other Subsidiaries of such Person, or by one or more other Subsidiaries
of such Person or (c) any partnership in which such Person is a general partner.
24
"SURETY INSTRUMENTS" means all letters of credit (including standby and
commercial), banker's acceptances, bank guaranties, shipside bonds, surety bonds
and similar instruments.
"TANGIBLE NET WORTH" means the consolidated net worth of the Borrower and
its consolidated Subsidiaries after subtracting therefrom the aggregate amount
of any intangible assets of the Borrower and its consolidated Subsidiaries,
including goodwill, franchises, licenses, patents, trademarks, trade names,
copyrights, service marks and brand names.
"TAXES" is defined in SECTION 5.6.
"TERM LOAN" means a Tranche A Loan that has been converted from a revolving
loan to a term loan pursuant to the provisions of SECTION 2.1.1.
"TRANCHE A AVAILABILITY TERMINATION DATE" means October 13, 2000.
"TRANCHE A COMMITMENT" means the Lender's commitment pursuant to SECTION
2.1.1 to make Tranche A Loans to the Borrower in accordance with the terms and
provisions of this Agreement.
"TRANCHE A COMMITMENT AMOUNT" means $15,000,000 as reduced from time to
time pursuant to the provisions of SECTION 2.2.
"TRANCHE A FACILITY" means the Facility providing for the Tranche A
Commitment and the Tranche A Loans.
"TRANCHE A LOAN" means the loans made by the Lender to the Borrower
pursuant to its Tranche A Commitment in accordance with SECTIONS 2.1.1 and 2.3,
and includes such Loans during all times before and after they have been
converted into a Term Loan pursuant to SECTION 2.1.1(b).
"TRANCHE B AVAILABILITY TERMINATION DATE" means April 13, 2000.
"TRANCHE B COMMITMENT" means the Lender's commitment pursuant to SECTION
2.1.2 to make Tranche B Loans to the Borrower in accordance with the terms and
provisions of this Agreement.
"TRANCHE B COMMITMENT AMOUNT" means $5,000,000 as reduced from time to time
pursuant to the provisions of SECTION 2.2.
"TRANCHE B FACILITY" means the Facility providing for the Tranche B
Commitment and the Tranche B Loans.
25
"TRANCHE B LOAN" means each loan made by the Lender to the Borrower from
time to time pursuant to its Tranche B Commitment in accordance with SECTIONS
2.1.2 and 2.3.
"TYPE" means, relative to any Loan, the portion thereof, if any, being
maintained as a Base Rate Loan or a LIBO Rate Loan.
"UNAVAILABLE COMMITMENT" means $20,000,000 less the Borrowing Base (in each
case as reduced from time to time pursuant to the provisions of SECTION 2.2).
"UNITED STATES" or "U.S." means the United States of America, its fifty
States and the District of Columbia.
"WARRANT AGREEMENT" means the Warrant Agreement, substantially in the form
of EXHIBIT O-1, between the Borrower and the Lender or the Designee.
"WARRANT DOCUMENTS" means the Warrant Agreement, the Warrants and the
Registration Rights Agreement.
"WARRANTS" means the warrants, substantially in the form of EXHIBIT O-2,
from the Borrower to the Lender or the Designee.
"WELFARE PLAN" means a "welfare plan", as such term is defined in section
3(1) of ERISA.
"YEAR 2000 COMPLIANT" is defined in SECTION 7.19.
"YEAR 2000 PROBLEM" is defined in SECTION 7.19.
SECTION 1.2. USE OF DEFINED TERMS. Unless otherwise defined or the
context otherwise requires, terms for which meanings are provided in this
Agreement shall have such meanings when used in the Disclosure Schedule and in
each Note, Borrowing Request, Continuation/Conversion Notice, notice and other
communication or other Loan Document delivered from time to time in connection
with this Agreement or any other Loan Document.
SECTION 1.3. CROSS-REFERENCES. Unless otherwise specified, references in
this Agreement and in each other Loan Document to any Article or Section are
references to such Article or Section in this Agreement or other Loan Document,
as applicable.
(a) The meanings of defined terms are equally applicable to the
singular and plural forms of the defined terms.
26
(b) The words "hereof," "herein," "hereunder" and similar words refer
to this Agreement as a whole and not to any particular provision of this
Agreement; and subsection, Section, Schedule and Exhibit references are to
this Agreement or such other Loan Document, as the case may be, and, unless
otherwise specified, references in any Article, Section or definition to
any clause are references to such clause of such Article, Section or
definition.
(c) (i) The term "documents" includes any and all instruments,
documents, agreements, certificates, indentures, notices and other
writings, however evidenced.
(ii) In the computation of periods of time from a specified date
to a later specified date, the word "from" means "from and including"; the
words "to" and "until" each mean "to but excluding," and the word "through"
means "to and including."
(iii) The term "property" includes any kind of property or asset,
real, personal or mixed, tangible or intangible.
(d) Unless otherwise expressly provided herein, (i) references to
agreements (including this Agreement) and other contractual instruments
shall be deemed to include all subsequent amendments and other
modifications thereto, but only to the extent such amendments and other
modifications are not prohibited by the terms of any Loan Document, and
(ii) references to any statute or regulation are to be construed as
including all statutory and regulatory provisions consolidating, amending,
replacing, supplementing or interpreting the statute or regulation.
(e) This Agreement and other Loan Documents may use several different
limitations, tests or measurements to regulate the same or similar matters.
All such limitations, tests and measurements are cumulative and shall each
be performed in accordance with their terms. Unless otherwise expressly
provided, any reference to any action of the Lender by way of consent,
approval or waiver shall be deemed modified by the phrase "in its sole
discretion."
(f) This Agreement and the other Loan Documents are the result of
negotiations among and have been reviewed by counsel to the Lender, the
Borrower and the other parties, and are the products of all parties.
Accordingly, they shall not be construed against the Lender merely because
of the Lender's involvement in their preparation.
SECTION 1.4. ACCOUNTING AND FINANCIAL DETERMINATIONS. Unless otherwise
specified, all accounting terms used herein or in any other Loan Document shall
be
27
interpreted, all accounting determinations and computations hereunder or
thereunder (including under SECTION 8.2.4) shall be made, and all financial
statements required to be delivered hereunder or thereunder shall be prepared in
accordance with, those generally accepted accounting principles ("GAAP") applied
in the preparation of the financial statements referred to in SECTION 7.7.
ARTICLE II
COMMITMENTS, BORROWING PROCEDURES AND NOTES
SECTION 2.1. COMMITMENTS. On the terms and subject to the conditions of
this Agreement (including ARTICLE V), the Lender agrees to make loans ("LOANS")
to the Borrower equal to the aggregate amount of the Borrowing of Loans
requested by the Borrower to be made pursuant to the Commitments on such day
described in this SECTION 2.1.
SECTION 2.1.1. TRANCHE A COMMITMENT.
(a) From time to time on any Business Day during the period from and
after the Effective Date to the earlier to occur of (x) Tranche A Availability
Termination Date and (y) any Commitment Termination Date relating to all
Commitments or to the Tranche A Commitment, the Lender will make Tranche A Loans
to the Borrower equal to the amount of the Tranche A Loan requested by the
Borrower to be made on such day in the applicable Borrowing Request therefor.
On the terms and subject to the conditions of this Agreement, the Borrower may
from time to time borrow, prepay and reborrow Tranche A Loans.
(b) On the terms and subject to the conditions of this Agreement, the
Lender agrees to convert the aggregate unpaid principal amount of the Tranche A
Loans outstanding at the opening of business on the Tranche A Availability
Termination Date to a Term Loan, PROVIDED that (i) no Event of Default has
occurred and is continuing at that time and (ii) the Borrower has provided a
certificate to the Lender to that effect. Once repaid or prepaid, such Term
Loan may not be reborrowed.
SECTION 2.1.2. TRANCHE B COMMITMENT. From time to time on any Business
Day during the period from and after the Effective Date to the earlier to occur
of (x) Tranche B Availability Termination Date, and (y) any Commitment
Termination Date relating to all Commitments or to the Tranche B Commitment, the
Lender will make Tranche B Loans to the Borrower equal to the aggregate amount
of the Tranche B Loan requested by the Borrower to be made on such day in the
applicable Borrowing Request therefor. On the terms and subject to the
conditions of this Agreement, the Borrower may from time to time borrow and
prepay or repay Tranche B Loans, but may not reborrow any amounts paid or
prepaid.
28
SECTION 2.1.3. LETTERS OF CREDIT. From time to time on any Business Day,
the Issuer will issue the Letters of Credit in accordance with ARTICLE IV.
SECTION 2.1.4. LENDER NOT REQUIRED TO MAKE LOANS, ETC. UNDER CERTAIN
CIRCUMSTANCES. The Lender shall not be required to
(a) make any Loan if, after giving effect thereto
(i) the aggregate outstanding principal amount of all Tranche A Loans
would exceed the Tranche A Commitment Amount less the Letter of Credit
Outstandings, or
(ii) the aggregate outstanding principal amount of all Tranche B Loans
would exceed the Tranche B Commitment Amount, or
(iii) a Collateral Value Deficiency would exist; or
(iv) a Borrowing Base Deficiency would exist; or
(v) an Event of Default has occurred and is continuing; or
(b) cause an Issuer to issue any Letter of Credit if, after giving effect
thereto
(i) all Letter of Credit Outstandings together with the aggregate
outstanding principal amount of all Tranche A Loans would exceed the
Tranche A Commitment Amount; or
(ii) a Collateral Value Deficiency would exist; or
(iii) a Borrowing Base Deficiency would exist; or
(iv) all Letter of Credit Outstandings would exceed $1,000,000; or
(v) an Event of Default has occurred and is continuing.
SECTION 2.2. REDUCTION OF COMMITMENT AMOUNTS. Any Commitment Amount is
subject to reduction from time to time pursuant to this SECTION 2.2.
SECTION 2.2.1. OPTIONAL. The Borrower may, from time to time on any
Business Day, voluntarily reduce the Tranche A Commitment Amount, the Tranche B
Commitment Amount or either of them; PROVIDED, HOWEVER, that all such reductions
shall require at least three (3) Business Days' prior notice to the Lender and
be permanent, and any partial reduction of either Commitment Amount shall be in
a minimum amount of $250,000 and in an integral multiple of $50,000.
29
SECTION 2.2.2. MANDATORY.
(a) On the Tranche A Availability Termination Date, the unused
portion of the Tranche A Commitment shall, without any further action,
automatically and permanently be cancelled.
(b) On the Tranche B Availability Termination Date, the unused
portion of the Tranche B Commitment shall, without any further action,
automatically and permanently be cancelled.
(c) On any Commitment Termination Date, the Commitment Amount of each
Facility shall be reduced to zero.
SECTION 2.3. BORROWING PROCEDURE. By delivering a Borrowing Request to
the Lender on or before 10:00 a.m. (Chicago time) on a Business Day, the
Borrower may from time to time irrevocably request, on not less than three (3)
nor more than five (5) Business Days' notice, that a Borrowing be made in a
minimum amount of $250,000 and an integral multiple of $50,000, or in the unused
amount of the applicable Commitment. On the terms and subject to the conditions
of this Agreement, each Borrowing shall be made on the Business Day specified in
such Borrowing Request. The Lender shall make such funds available to the
Borrower by wire transfer to the accounts the Borrower shall have specified in
its Borrowing Request.
SECTION 2.4. CONTINUATION AND CONVERSION ELECTIONS. By delivering a
Continuation/Conversion Notice to the Lender on or before 10:00 a.m. (Chicago
time) on a Business Day, the Borrower may from time to time irrevocably
elect, on not less than three (3) nor more than five (5) Business Days'
notice that all, or any portion in an aggregate minimum amount of $250,000
and an integral multiple of $50,000, of any LIBO Rate Loans, be converted
into a Base Rate Loan or continued as a LIBO Rate Loan (in the absence of
delivery of a Continuation/Conversion Notice with respect to any LIBO Rate
Loan at least three (3) Business Days before the last day of the then current
Interest Period with respect thereto, such LIBO Rate Loan shall, on such last
day, automatically convert to a Base Rate Loan); PROVIDED, HOWEVER, that no
portion of the outstanding principal amount of any LIBO Rate Loan may be
continued as, and no portion of the outstanding principal amount of any Base
Rate Loan may be converted into, LIBO Rate Loans when any Default has
occurred and is continuing.
SECTION 2.5. LOAN ACCOUNTS AND NOTES.
(a) The Loans made by the Lender shall be evidenced by one or more
loan accounts or records maintained by the Lender in the ordinary course of
business. The loan accounts or records maintained by the Lender shall be
conclusive absent manifest error of the amount of the Loans made by the
Lender to the Borrower and the interest and payments thereon. Any failure
so
30
to record or any error in doing so shall not, however, limit or otherwise affect
the obligation of the Borrower hereunder to pay any amount owing with respect to
the Loans.
(b) The Loans made by the Lender shall also be evidenced by a Note or
Notes payable to the order of the Lender in a maximum principal amount
equal to the original, aggregate Commitment Amount. The Borrower hereby
irrevocably authorizes the Lender to make (or cause to be made) appropriate
notations on the grid attached to the Notes (or on any continuation of such
grid) or in other books and records maintained by the Lender, which
notations, if made, shall evidence, INTER ALIA, the date of, the
outstanding principal of, and the interest rate applicable to the Loans
evidenced thereby (the Borrower may from time to time reasonably request a
copy of such grid). Such notations shall be conclusive and binding on the
Borrower absent manifest error rebuttable presumptive evidence of the
matters described therein; PROVIDED, HOWEVER, that the failure of the
Lender to make any such notations shall not limit or otherwise affect any
Obligations of the Borrower or any other Obligor.
(c) The Borrower acknowledges that the Note delivered to the Lender
as of the Effective Date amends, restates and renews the promissory note
given by the Borrower under the Existing Agreement.
SECTION 2.6. BORROWING BASE REDETERMINATION AND COLLATERAL VALUE
REDETERMINATON.
(a) Within thirty (30) days after receipt of the Engineering Report
required to be delivered semi-annually, commencing with the Engineering
Report required to be delivered sixty (60) days after January 1, 1999, the
Lender shall notify the Borrower in writing of the Borrowing Base
determined by the Lender on the basis of such Engineering Report. Borrower
or Lender may request, and Lender will consider, one (1) additional
determination of the Borrowing Base at any time during each calendar year
following the Effective Date. Each such determination is herein called a
"BORROWING BASE REDETERMINATION". Contemporaneously with each Borrowing
Base Redetermination that shall occur at any time that any Tranche B Loan
is outstanding, the Lender shall notify the Borrower in writing of the
Collateral Value determined by the Lender on the basis of such Engineering
Report. Each such determination is herein called a "COLLATERAL VALUE
REDETERMINATION". Each Borrowing Base Redetermination (and, as applicable,
Collateral Value Redetermination) shall be effective as of April 1st (with
respect to Engineering Reports effective January 1st), October 1st (with
respect to Engineering Reports effective July 1st) or upon notice from the
Lender (with respect to any requested Borrowing Base Redetermination) when
the Borrower is notified of the amount of the redetermined Borrowing Base
31
(and, as applicable the amount of the redetermined Collateral Value) by the
Lender.
(b) The Borrowing Base and Collateral Value are also subject to
adjustment as provided for in SECTION 3.1.2.
SECTION 2.7. PURPOSES. The Borrower shall apply the proceeds of each Loan
only in the following manner:
(a) in the case of Tranche A Loans, to refinance certain oil and gas
producing properties owned by the Borrower or one of the Borrower's
Subsidiaries in the States of Oklahoma, Kansas, Louisiana and Texas, and
for other general corporate and working capital purposes;
(b) in the case of Tranche B Loans, to finance Approved Development
Activities with respect to (i) the Development Properties owned by the
Borrower or one of the Borrower's Subsidiaries including those Properties
located in Matagorda, San Patricio, Karnes, Willacy and Xxxxxxx Counties,
Texas and (ii) Oil & Gas Properties which the Borrower has acquired from
Old Esenjay and Aspect.
ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
SECTION 3.1. REPAYMENTS AND PREPAYMENTS AND CERTAIN BORROWING BASE
MATTERS. The Borrower shall repay the unpaid principal amount of the Loans as
set forth in this SECTION 3.1.
SECTION 3.1.1. REPAYMENTS AND PREPAYMENTS. The Borrower shall repay in
full the unpaid principal amount of each Tranche A Loan, and each Tranche A Loan
shall mature and be due and payable, on the Tranche A Availability Termination
Date; PROVIDED, HOWEVER, that, as provided in SECTION 2.1.1(b), if no Event of
Default has occurred and is continuing, the unpaid principal amount of the
Tranche A Loans shall, on the Tranche A Availability Termination Date, not be
due and payable but shall convert to a Term Loan. The Borrower shall repay in
full the unpaid principal amount of each Loan upon the Stated Maturity Date
applicable thereto. Prior thereto, the Borrower
(a) may, from time to time on any Business Day, make a voluntary
prepayment, in whole or in part, of the outstanding principal amount of any
Loans; PROVIDED, HOWEVER, that
32
(i) any such prepayment shall be made PRO RATA among Loans of the
same type;
(ii) no such prepayment of any LIBO Rate Loan may be made on any
day other than the last day of the Interest Period for such Loan;
(iii) all such voluntary prepayments shall require at least three
(3) but no more than five (5) Business Days' prior written notice to
the Lender (which notice is irrevocable) stating the date and amount
of such prepayment and the type of Loan to be prepaid; and
(iv) all such voluntary partial prepayments shall be in an
aggregate minimum amount of $100,000 and an integral multiple of
$50,000;
(b) shall, on each date when any reduction in any Commitment Amount
shall become effective, including pursuant to SECTION 2.2, make a mandatory
prepayment (which shall be applied (or held for application, as the case
may be) by the Lender to the payment of the aggregate unpaid principal
amount of those Loans then outstanding and then to the payment of the then
Letter of Credit Outstandings) equal to the excess, if any, of the
aggregate outstanding principal amount of all Loans and Letter of Credit
Outstandings over such Commitment Amount as so reduced;
(c) shall make prepayments as specified in SECTION 3.1.2;
(d) shall, if Tranche A Loans have been converted to a Term Loan
pursuant to the terms and conditions hereof, on each Quarterly Payment Date
after the Tranche A Availability Termination Date, make a payment in an
amount equal to that necessary to amortize the principal of all Tranche A
Loans that have been converted into a Term Loan equally over the remaining
Quarterly Payment Dates and the Stated Maturity Date that is applicable to
Tranche A Loans;
(e) shall, on the Tranche B Availability Termination Date, pay in
full all Tranche B Loans;
(f) shall, immediately upon any acceleration of the Loans pursuant to
SECTION 9.2 or SECTION 9.3, repay all Loans, unless, pursuant to SECTION
9.3, only a portion of all Loans is so accelerated.
Each payment or prepayment of any Loans made pursuant to this Section shall be
without premium or penalty, except as may be required by SECTION 4.4, and shall
be applicable, to the extent of such prepayment, in the inverse order of
maturity. No
33
voluntary prepayment of principal of any Loans or any prepayment pursuant to the
preceding CLAUSE (c) shall cause a reduction in any Commitment Amount.
SECTION 3.1.2. BORROWING BASE DEFICIENCIES, COLLATERAL VALUE DEFICIENCIES
AND ASSET SALES.
(a) Upon the occurrence of a Borrowing Base Deficiency and/or a
Collateral Value Deficiency, the Lender may notify the Borrower of such
Borrowing Base Deficiency and/or such Collateral Value Deficiency, as
applicable. Within ten (10) days from and after the Borrowing Base
Deficiency Notification Date and/or such Collateral Value Deficiency
Notification Date, as applicable, the Borrower shall notify the Lender that
it shall take one of the following actions:
(i) execute and deliver to the Lender supplemental or additional
Security Documents, in form and substance reasonably satisfactory to
the Lender and its counsel, securing payment of the Notes and the
other Obligations and covering additional Oil and Gas Properties
directly owned by the Borrower or one or more of the Borrower's
Subsidiaries which are not then covered by any Loan Document and which
are of a type and nature satisfactory to the Lender, and having a
value, in addition to other Oil and Gas Properties already subject to
a Mortgage, sufficient to eliminate the Borrowing Base Deficiency and
the Collateral Value Deficiency, as applicable, all as more
particularly described in SECTION 8.1.7(a) and (b); or
(ii) make a payment with respect to the Obligations, (which shall
be applied (or held for application, as the case may be) by the Lender
to the payment of the aggregate unpaid principal amount of those Loans
then outstanding and then to the payment of the then Letter of Credit
Outstandings) in an aggregate principal amount sufficient to eliminate
such Borrowing Base Deficiency and Collateral Value Deficiency, as
applicable, within sixty (60) days after the Borrowing Base Deficiency
Notification or Collateral Value Deficiency Notification Date, as
applicable.
If the Borrower shall elect to execute and deliver (or cause one or more of
the Borrower's Subsidiaries to execute and deliver) supplemental or
additional Security Documents to the Lender pursuant to CLAUSE (i), it
shall provide the Lender with descriptions of the additional assets to be
collaterally assigned (together with current valuations, Engineering
Reports, Security Documents described in CLAUSE (i) and title evidence
applicable thereto, each of which shall be in form and substance reasonably
satisfactory to the Lender) within sixty (60) days after the Borrowing Base
Deficiency Notification Date or Collateral
34
Value Deficiency Notification Date, as applicable. Such supplemental or
additional Security Documents shall be subject to the terms of SECTION
8.1.7. If the Borrower fails to take any of the actions described in
CLAUSES (i) or (ii) above within such ten (10) day period, then without any
necessity for notice to the Borrower or any other person, the Borrower
shall become obligated immediately to pay Obligations in an aggregate
principal amount equal to the applicable Borrowing Base Deficiency and/or
Collateral Value Deficiency.
(b) If the Borrower or any Subsidiary sells, transfers or otherwise
disposes of Oil and Gas Properties included in the most recent
determination of the Borrowing Base and that have a fair market value in
the aggregate for the Borrower and such Subsidiaries in excess of $250,000
during the period from the effective date of the most recent Borrowing Base
Redetermination until the effective date of the next Borrowing Base
Redetermination, the Borrowing Base and the Collateral Value shall be
immediately reduced, until the effective date of the next Borrowing Base
Redetermination and Collateral Value Redetermination, by an amount as
reasonably determined by the Lender, or if the value of the applicable Oil
and Gas Properties cannot be readily determined by the Lender, by the net
sales proceeds realized from the sale, transfer or other disposition of
such assets.
If such reduction shall result in a Borrowing Base Deficiency and/or
Collateral Value Deficiency, then in lieu of the provisions of CLAUSE (a)
of SECTION 3.1.2, the Borrower shall immediately make a payment with
respect to the Obligations in an amount equal to the greater of such
Borrowing Base Deficiency or such Collateral Value Deficiency. In addition
to and cumulative of the foregoing , if a Borrowing Base Deficiency and/or
Collateral Value Deficiency exists prior to such sale, transfer or other
disposition of assets, then in lieu of the provisions of CLAUSE (a) of
SECTION 3.1.2, the Borrower shall, with the written consent of the Lender,
immediately make a payment with respect to the Obligations (which shall be
applied (or held for application, as the case may be) by the Lender first
to the payment of the aggregate unpaid principal amount of those Loans then
outstanding, and then to the payment of the then Letter of Credit
Outstandings) in an aggregate principal amount equal to the lesser of (i)
the greater of the amount of the Collateral Value Deficiency or the amount
of the Borrowing Base Deficiency (after giving effect to the applicable
sale, transfer or other disposition) or (ii) 100% of the net sales proceeds
realized from the applicable sale, transfer or other disposition.
(c) In addition, if the Borrower or any of its Subsidiaries raises
capital through the issuance of any type of equity or issues any
subordinated debt or senior unsecured debt, the proceeds of such issuance
will first be applied to cure any Borrowing Base Deficiency and/or
Collateral Value Deficiency
35
SECTION 3.2. INTEREST PROVISIONS. Interest on the outstanding principal
amount of Loans shall accrue and be payable in accordance with this SECTION 3.2.
SECTION 3.2.1. RATE. Pursuant to an appropriately delivered Borrowing
Request or Continuation/Conversion Notice, the Borrower may elect that Loans
accrue interest at a rate per annum:
(a) on that portion maintained from time to time as a Base Rate Loan,
equal to the Alternate Base Rate plus the Applicable Margin from time to
time in effect; and
(b) on that portion maintained as a LIBO Rate Loan, during each
Interest Period applicable thereto, equal to the sum of the LIBO Rate
(Reserve Adjusted) for such Interest Period plus the Applicable Margin.
All LIBO Rate Loans shall bear interest from and including the first day of the
applicable Interest Period to (but not including) the last day of such Interest
Period at the interest rate determined as applicable to such LIBO Rate Loan.
SECTION 3.2.2. POST-MATURITY RATES. After (w) the date any principal
amount of any Loan shall have become due and payable (whether on the Stated
Maturity Date, upon acceleration or otherwise), (x) the date any other monetary
Obligation of the Borrower shall have become due and payable, (y) the date any
other Event of Default shall have occurred (and so long as such Event of Default
shall be continuing), and (z) the date that is sixty (60) days after a Borrowing
Base Deficiency Notification Date or after a Collateral Value Deficiency
Notification Date, if the applicable Borrowing Base Deficiency or Collateral
Value Deficiency, as applicable, has not been cured, the Borrower shall pay, but
only to the extent permitted by Applicable Law, interest (after as well as
before judgment) on all Obligations at a rate per annum equal to
(a) with respect to LIBO Rate Loans for the period from the date such
Loan becomes due and payable to the end of the then current Interest
Period, the higher of (i) the sum of the LIBO Rate (Reserve Adjusted) for
such Interest Period plus the Applicable Margin plus a margin of 3%, or
(ii)the sum of the Alternate Base Rate plus the Applicable Margin plus a
margin of 3%; or
(b) in all other cases, the sum of the Alternate Base Rate plus the
Applicable Margin plus a margin of 3%.
SECTION 3.2.3. PAYMENT DATES. Interest accrued on each Loan shall be
payable, without duplication:
(a) on the Stated Maturity Date;
36
(b) on the date of any optional or required payment or prepayment, in
whole or in part, of principal outstanding on such Loan and on that portion
of such Loan so paid or prepaid;
(c) with respect to Base Rate Loans, on each Quarterly Payment Date
occurring after the Effective Date;
(d) with respect to LIBO Rate Loans, on the last day of each
applicable Interest Period and, if such Interest Period shall exceed three
months, on the ninetieth (90th) day of such Interest Period; and
(e) on that portion of any Loans which is accelerated pursuant to
SECTION 9.2 or SECTION 9.3, immediately upon such acceleration.
Interest accrued on Loans or other monetary Obligations arising under this
Agreement or any other Loan Document after the date such amount shall have
become due and payable (whether on the Stated Maturity Date, upon acceleration
or otherwise) shall be payable upon demand.
SECTION 3.2.4. MAXIMUM INTEREST. It is the intention of the parties hereto
to conform strictly to applicable usury laws and, anything herein to the
contrary notwithstanding, the Obligations of the Borrower to the Lender under
this Agreement shall be subject to the limitation that payments of interest
shall not be required to the extent that receipt thereof would be contrary to
provisions of Applicable Law limiting rates of interest which may be charged or
collected by the Lender. Accordingly, if the transactions contemplated hereby
would be usurious under Applicable Law with respect to the Lender then, in that
event, notwithstanding anything to the contrary in this Agreement, it is agreed
as follows:
(a) the provisions of this SECTION 3.2.4 shall govern and control;
(b) the aggregate of all consideration which constitutes interest
under Applicable Law that is contracted for, charged or received under this
Agreement, or under any of the other aforesaid agreements or otherwise in
connection with this Agreement by the Lender shall under no circumstances
exceed the maximum amount of interest allowed by Applicable Law (such
maximum lawful interest rate, if any, with respect to the Lender herein
called the "HIGHEST LAWFUL RATE"), and any excess shall be credited to the
Borrower by the Lender (or, if such consideration shall have been paid in
full, such excess refunded to the Borrower);
(c) all sums paid, or agreed to be paid, to the Lender for the use,
forbearance and detention of the indebtedness of the Borrower to the Lender
hereunder shall, to the extent permitted by Applicable Law, be amortized,
37
prorated, allocated and spread throughout the full term of such
indebtedness until payment in full so that the actual rate of interest is
uniform throughout the full term thereof; and
(d) if at any time the interest provided pursuant to SECTIONS 3.2.1
and 3.2.2 together with any other fees payable pursuant to this Agreement
and deemed interest under Applicable Law, exceeds that amount which would
have accrued at the Highest Lawful Rate, the amount of interest and any
such fees to accrue to the Lender pursuant to this Agreement shall be
limited, notwithstanding anything to the contrary in this Agreement, to
that amount which would have accrued at the Highest Lawful Rate, but any
subsequent reductions, as applicable, shall not reduce the interest to
accrue to such Lender pursuant to this Agreement below the Highest Lawful
Rate until the total amount of interest accrued pursuant to this Agreement
and such fees deemed to be interest equals the amount of interest which
would have accrued to such Lender if a varying rate per annum equal to the
interest provided pursuant to SECTIONS 3.2.1 and 3.2.2 had at all times
been in effect, PLUS the amount of fees which would have been received but
for the effect of this SECTION 3.2.4.
SECTION 3.3. FEES. The Borrower agrees to pay the fees set forth in this
SECTION 3.3. All such fees shall be non-refundable.
SECTION 3.3.1. COMMITMENT FEE. The Borrower agrees to pay to the Lender,
for the period (including any portion thereof when any of the Commitments are
suspended by reason of the Borrower's inability to satisfy any condition of
ARTICLE V) commencing on December 31, 1998, and continuing through the final
Commitment Termination Date, a commitment fee at the rate of three-eighths of
one percent (0.375%) per annum on the average daily Commitment Availability.
Such fees shall be payable by the Borrower in arrears on the last Business Day
of each March, June, October and December, commencing with the first such day
following the Effective Date, and on each Commitment Termination Date.
SECTION 3.3.2. STRUCTURING FEE. The Borrower has agreed to pay to the
Lender, on or before the Effective Date, a structuring fee in the amount of
$50,000. If paid before the Effective Date, such fee shall be credited against
the closing fee provided for in SECTION 3.3.3.
SECTION 3.3.3. CLOSING FEE. On the Effective Date, the Borrower agrees to
pay to the Lender a closing fee in the amount of $250,000.
SECTION 3.3.4. ENGINEERING FEE. The Borrower agrees to pay an annual
engineering and re-determination fee in the amount of $25,000. The applicable
portion of such fees shall be payable by the Borrower in arrears on each
Quarterly Payment Date.
38
SECTION 3.3.5. LETTER OF CREDIT STATED AMOUNT FEE. The Borrower agrees to
pay to the Issuer a fee for each Letter of Credit for the period from and
including the date of the issuance of such Letter of Credit to (but not
including) the date upon which such Letter of Credit expires, at a rate per
annum equal to 1% of the Stated Amount of such Letter of Credit, based on a year
comprised of three-hundred and sixty (360) days. A prorated portion of such fee
shall be payable by the Borrower in arrears on each Quarterly Payment Date, and
on the earlier of the Tranche A Availability Termination Date or the Tranche A
Commitment Termination Date for any period then ending for which such fee shall
not theretofore have been paid, commencing on the first such date after the
issuance of such Letter of Credit.
SECTION 3.3.6. LETTER OF CREDIT ISSUANCE FEE. The Borrower agrees to pay
to the Issuer an issuance fee for each Letter of Credit issued by the Issuer for
the period from and including the date of issuance of such Letter of Credit to
(but not including) the date upon which such Letter of Credit expires, the
greater of (x) 0.25% of the Stated Amount of such Letter of Credit or (y) $300.
Such fee shall be payable by the Borrower on the date of issuance of such Letter
of Credit.
SECTION 3.3.7. LETTER OF CREDIT ADMINISTRATIVE FEES. The Borrower agrees
to pay to the Lender the amounts described in SECTION 4.3.
SECTION 3.3.8. BORROWING BASE FEE. The Borrower agrees to pay to the
Lender a fee in the amount of $150,000 (the "BORROWING BASE FEE") immediately
following the first time the Borrowing Base is redetermined (pursuant to a
Borrowing Base Redetermination) to be in excess of $10 million.
SECTION 3.4. PROCEEDS ACCOUNT. The Security Documents contain an
assignment to the Lender by the Borrower and its Subsidiaries, as applicable, of
all production of Hydrocarbons and all proceeds attributable thereto properly
allocable to the Mortgaged Properties. Notwithstanding such assignment of
production, the Borrower may, until the Lender shall give notice to the
contrary, receive such proceeds. Thereafter, all such proceeds from the sale of
such production shall be paid directly into an account of the Borrower
maintained with the Lender (the "PROCEEDS ACCOUNT"). The Borrower hereby grants
to the Lender, subject to the prior assignment in favor of the Lender of such
production and its proceeds, a security interest in the Proceeds Account and all
proceeds thereof.
SECTION 3.5. OVERRIDING ROYALTY INTEREST; ASSIGNMENT IS NOT COLLATERAL
SECURITY.
(a) In addition to interest paid on the Loans, the Borrower and its
Subsidiaries, as applicable, shall assign and convey to the Lender's
designee ("DESIGNEE"), as additional consideration payable to the Lender to
be retained in perpetuity and not as additional collateral security, an
overriding royalty
39
interest in the Borrower's and each of Borrower's Subsidiaries' Hydrocarbon
Interests that are described on SCHEDULE II, PART B (New Mortgaged
Properties) and SCHEDULE II, PART C (Starboard Properties). Such
overriding royalty interest shall be conveyed by the Assignment. In
addition to the representations and warranties given in the Assignment, the
Borrower hereby represents and warrants that the overriding royalty
interest conveyed by the Assignment is free and clear of any mortgages,
deeds of trust, voluntary or contractual liens, pledges, security
interests, charges, conditional sales or other title retention documents,
or other encumbrances or burdens other than those in favor of the Lender,
if any, and as expressly set forth in EXHIBIT A to the Assignment.
(b) If all Tranche B Loans are paid in full and the Tranche B
Commitment is terminated on or before January 13, 2000, then the Borrower
may purchase the overriding royalty interest conveyed by the Assignment in
consideration of the payment of $200,000. Such conveyance shall be without
recourse, representation or warranty of any kind, except that the Designee
shall warrant against liens created by, through or under the Designee.
(c) The overriding royalty interest described in the foregoing
SUBSECTIONS (a) AND (b) shall not affect in any way the overriding royalty
interests acquired by the Designee pursuant to the Prior Agreement.
ARTICLE IV
LETTERS OF CREDIT
SECTION 4.1. ISSUANCE REQUESTS. By delivering to the Issuer an Issuance
Request on or before 12:00 noon (Chicago time), the Borrower may request, from
time to time prior to the earlier to occur of (x) the Tranche A Availability
Termination Date and (y) the Tranche A Commitment Termination Date, and on not
less than three (3) nor more than ten (10) Business Days' notice, that the
Issuer issue an irrevocable standby letter of credit in substantially the form
of EXHIBIT N hereto, or in such other form as may be mutually agreed by the
Borrower and the Issuer (each a "LETTER OF CREDIT"), in support of financial
obligations of the Borrower incurred in the Borrower's ordinary course of
business and which are described in such Issuance Request. Each Letter of
Credit shall by its terms:
(a) be issued in a Stated Amount which
(i) is at least $50,000;
(ii) does not exceed (or would not exceed) the then Letter of
Credit Availability;
40
(b) be stated to expire on a date (its "STATED EXPIRY DATE") no later
than the earlier of (i) one (1) year after its date of issuance, or (ii)
one (1) year after the Availability Termination Date; and
(c) on or prior to its Stated Expiry Date
(i) terminate immediately upon notice to the Issuer from the
beneficiary thereunder that all obligations covered thereby have been
terminated, paid, or otherwise satisfied in full,
(ii) reduce in part immediately and to the extent the beneficiary
thereunder has notified the Issuer that the obligations covered
thereby have been paid or otherwise satisfied in part, or
(iii) terminate thirty (30) Business Days after notice to the
beneficiary thereunder from the Lender that an Event of Default has
occurred and is continuing.
So long as no Default has occurred and is continuing, by delivery to the Issuer
of an Issuance Request at least three (3) but not more than ten (10) Business
Days prior to the Stated Expiry Date of any Letter of Credit, the Borrower may
request the Issuer to extend the Stated Expiry Date of such Letter of Credit for
an additional period not to exceed the earlier of one (1) year from its date of
extension, the Tranche A Availability Termination Date or the Tranche A
Commitment Termination Date.
SECTION 4.2. ISSUANCES AND EXTENSIONS. On the terms and subject to the
conditions of this Agreement (including ARTICLE VI), the Issuer shall issue
Letters of Credit, and extend the Stated Expiry Dates of outstanding Letters of
Credit, in accordance with the Issuance Requests made therefor. The Issuer will
make available the original of each Letter of Credit which it issues in
accordance with the Issuance Request therefor to the beneficiary thereof and
will notify the beneficiary under any Letter of Credit of any extension of the
Stated Expiry Date thereof. Upon the expiration of any Letter of Credit, the
Borrower may re-use any portion of the Letter of Credit Availability for the
issuance of new Letters of Credit prior to the earlier to occur of the Tranche A
Availability Termination Date or the Tranche A Commitment Termination Date.
The Issuer is under no obligation to issue any Letter of Credit if:
(i) any order, judgment or decree of any Government Agency or
arbitrator shall by its terms purport to enjoin or restrain the Issuer from
issuing such Letter of Credit, or any requirement of Applicable Law or any
request or directive (whether or not having the force of law) from any
Government Agency with jurisdiction over the Issuer shall prohibit, or
request that the Issuer refrain
41
from, the issuance of letters of credit generally or such Letter of Credit in
particular or shall impose upon the Issuer with respect to such Letter of Credit
any restriction, reserve or capital requirement (for which the Issuer is not
otherwise compensated hereunder) not in effect on the Effective Date, or shall
impose upon the Issuer any unreimbursed loss, cost or expense which was not
applicable on the Effective Date and which the Issuer in good xxxxx xxxxx
material to it;
(ii) one or more of the applicable conditions contained in ARTICLE VI
is not then satisfied;
(iii) the expiry date of any requested Letter of Credit is prior to the
maturity date of any financial obligation to be supported by the requested
Letter of Credit;
(iv) any requested Letter of Credit does not provide for drafts, or is
not otherwise in form and substance acceptable to the Issuer, or the
issuance of a Letter of Credit shall violate any applicable policies of the
Issuer;
(v) any standby Letter of Credit is for the purpose of supporting the
issuance of any letter of credit by any other Person; or
(vi) such Letter of Credit is in a face amount denominated in a
currency other than Dollars.
The Uniform Customs and Practice for Documentary Credits most recently published
by the International Chamber of Commerce at the time of issuance of any Letter
of Credit shall (unless otherwise expressly provided in the Letters of Credit)
apply to the Letters of Credit.
SECTION 4.3. EXPENSES. The Borrower agrees to pay to the Issuer all
reasonable administrative expenses of the Issuer in connection with the
issuance, maintenance, modification (if any) and administration of each Letter
of Credit issued by the Issuer upon demand from time to time.
SECTION 4.4. DISBURSEMENTS. The Issuer will notify the Borrower promptly
of the presentment for payment of any Letter of Credit, together with notice of
the date (the "DISBURSEMENT DATE") such payment shall be made. Subject to the
terms and provisions of such Letter of Credit, the Issuer shall make such
payment to the beneficiary (or its designee) of such Letter of Credit. In
paying any drawing under a Letter of Credit, the Issuer shall not have any
responsibility to obtain any document (other than to obtain and review any sight
draft and certificates expressly required by the Letter of Credit) or to
ascertain or inquire as to the validity or accuracy of any such document or the
authority of the Person executing or delivering any such document.
42
Prior to 12:00 noon (Chicago time) on the Disbursement Date, the Borrower will
reimburse the Issuer for all amounts which it has disbursed under the Letter of
Credit. To the extent the Issuer is not reimbursed in full in accordance with
the preceding sentence, the Borrower's Reimbursement Obligation shall accrue
interest at a fluctuating rate equal to the lesser of (i) the Highest Lawful
Rate or (ii) the Alternate Base Rate, plus the Applicable Margin, plus a margin
of 3% per annum, payable on demand. In the event the Issuer is not reimbursed
by the Borrower on the Disbursement Date, or if the Issuer must for any reason
return or disgorge such reimbursement, the Lender shall, on the terms and
subject to the conditions of this Agreement, fund the Reimbursement Obligation
therefor by making, on the next Business Day, Loans as provided in SECTION 2.1.1
(the Borrower being deemed to have given a timely Borrowing Request therefor for
such amount); PROVIDED, HOWEVER, for the purpose of determining the availability
of the Commitments to make Loans immediately prior to giving effect to the
application of the proceeds of such Loans, such Reimbursement Obligation shall
be deemed not to be outstanding at such time.
SECTION 4.5. REIMBURSEMENT. The Borrower's obligation (a "REIMBURSEMENT
OBLIGATION") under SECTION 4.4 to reimburse the Issuer with respect to each
Disbursement (including interest thereon) shall be absolute and unconditional
under any and all circumstances and irrespective of any setoff, counterclaim, or
defense to payment which the Borrower may have or have had against the Lender,
the Issuer or any beneficiary of a Letter of Credit, including any defense based
upon the occurrence of any Default, any draft, demand or certificate or other
document presented under a Letter of Credit proving to be forged, fraudulent,
invalid or insufficient, the failure of any Disbursement to conform to the terms
of the applicable Letter of Credit (if, in the Issuer's good faith opinion, such
Disbursement is determined to be appropriate) or any non-application or
misapplication by the beneficiary of the proceeds of such Disbursement, or the
legality, validity, form, regularity, or enforceability of such Letter of
Credit; PROVIDED, HOWEVER, that nothing herein shall adversely affect the right
of the Borrower to commence any proceeding against the Issuer for any wrongful
Disbursement made by the Issuer under a Letter of Credit as a result of acts or
omissions constituting gross negligence or wilful misconduct on the part of the
Issuer.
SECTION 4.6. DEEMED DISBURSEMENTS. Upon the occurrence and during the
continuation of any Event of Default or the occurrence of the Tranche A
Commitment Termination Date, an amount equal to that portion of Letter of Credit
Outstandings attributable to outstanding and undrawn Letters of Credit shall, at
the election of the Lender, and without demand upon or notice to the Borrower,
be deemed to have been paid or disbursed by the Lender under such Letters of
Credit (notwithstanding that such amount may not in fact have been so paid or
disbursed), and, upon notification by the Lender to the Borrower of its
obligations under this Section, the Borrower shall be immediately obligated to
reimburse the Lender the amount deemed to have been so paid or disbursed by the
Lender. Any amounts so received by the Lender from the Borrower pursuant to
this Section shall be held as collateral security for the repayment
43
of the Borrower's obligations in connection with the Letters of Credit issued by
the applicable Issuer. At any time when such Letters of Credit shall terminate
and all Obligations to the Lender are either terminated or paid or reimbursed to
the Lender in full, the Obligations of the Borrower under this Section shall be
reduced accordingly (subject, however, to reinstatement in the event any payment
in respect of such Letters of Credit is recovered in any manner from the Lender
or the Issuer), and the Lender will return to the Borrower the excess, if any,
of
(a) the aggregate amount deposited by the Borrower with the Lender
and not theretofore applied by the Lender to any Reimbursement Obligation
OVER
(b) the aggregate amount of all Reimbursement Obligations to the
Lender pursuant to this Section, as so adjusted.
At such time when all Events of Default shall have been cured or waived, the
Lender shall return to the Borrower all amounts then on deposit with the Lender
pursuant to this Section. All amounts on deposit pursuant to this Section
shall, until their application to any Reimbursement Obligation or their return
to the Borrower, as the case may be, bear interest for the Borrower's account at
the daily average Federal Funds Rate from time to time in effect (net of the
costs of any reserve requirements, in respect of amounts on deposit pursuant to
this Section, pursuant to F.R.S. Board Regulation D), which interest shall be
held by the Lender as additional collateral security for the repayment of the
Borrower's Obligations in connection with the Letters of Credit issued by the
Lender.
SECTION 4.7. NATURE OF REIMBURSEMENT OBLIGATIONS. The Borrower shall
assume all risks of the acts, omissions, or misuse of any Letter of Credit by
the beneficiary thereof. Neither the Lender nor any Issuer (except to the
extent of its own gross negligence or wilful misconduct) shall be responsible
for:
(a) the form, validity, sufficiency, accuracy, genuineness, or legal
effect of any Letter of Credit or any document submitted by any party in
connection with the application for and issuance of a Letter of Credit,
even if it should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent, or forged;
(b) the form, validity, sufficiency, accuracy, genuineness, or legal
effect of any instrument transferring or assigning or purporting to
transfer or assign a Letter of Credit or the rights or benefits thereunder
or proceeds thereof in whole or in part, which may prove to be invalid or
ineffective for any reason;
44
(c) failure of the beneficiary to comply fully with conditions
required in order to demand payment under a Letter of Credit;
(d) errors, omissions, interruptions, or delays in transmission or
delivery of any messages, by mail, cable, telegraph, telex, facsimile or
otherwise;
(e) any loss or delay in the transmission or otherwise of any
document or draft required in order to make a Disbursement under a Letter
of Credit or of the proceeds thereof;
(f) any change in the time, manner or place of payment of, or in any
other term of, all or any of the obligations of the Borrower in respect of
any Letter of Credit;
(g) the existence of any claim, set-off, defense or other right that
the Borrower may have at any time against any beneficiary or any transferee
of any Letter of Credit (or any Person for whom any such beneficiary or any
such transferee may be acting), the Issuer (if other than the Lender or its
Affiliates) or any other Person, whether in connection with this Agreement,
the transactions contemplated hereby or by the Letters of Credit or any
unrelated transaction;
(h) any payment by an Issuer under any Letter of Credit against
presentation of a draft or certificate that does not strictly comply with
the terms of any Letter of Credit; or any payment made by an Issuer under
any Letter of Credit to any Person purporting to be a trustee in
bankruptcy, debtor-in-possession, assignee for the benefit of creditors,
liquidator, receiver or other representative of or successor to any
beneficiary or any transferee of any Letter of Credit, including any
arising in connection with any insolvency proceeding; or
(i) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing, including any other circumstance that
might otherwise constitute a defense available to, or a discharge of, the
Borrower or a guarantor.
None of the foregoing shall affect, impair, or prevent the vesting of any of the
rights or powers granted the Lender or the Issuer hereunder. In furtherance and
extension, and not in limitation or derogation, of any of the foregoing, any
action taken or omitted to be taken by the Lender or the Issuer in good faith
and not constituting gross negligence or willful misconduct shall be binding
upon the Borrower and shall not put the Lender or the Issuer under any resulting
liability to the Borrower.
45
SECTION 4.8. INCREASED COSTS; INDEMNITY. If by reason of
(a) any change in Applicable Law after the Effective Date or any
change in the interpretation or application by any judicial or regulatory
authority of any Applicable Law, or
(b) compliance by the Lender with any direction, request or
requirement (whether or not having the force of law) of any Government
Agency, including Regulation D of the F.R.S. Board:
(i) the Lender shall be subject to any tax (other than taxes on
net income and franchises), levy, charge or withholding of any nature
or to any variation thereof or to any penalty with respect to the
maintenance or fulfillment of its obligations under this ARTICLE IV,
whether directly or by such being imposed on or suffered by the
Lender;
(ii) any reserve, deposit or similar requirement is or shall be
applicable, increased, imposed or modified in respect of any Letters
of Credit issued by an Issuer; or
(iii) there shall be imposed on the Lender any other
condition regarding this ARTICLE IV or any Letter of Credit,
and the result of the foregoing is directly or indirectly to increase the cost
to the Lender or the Issuer of issuing or maintaining any Letter of Credit or to
reduce any amount receivable in respect thereof by the Lender or the Issuer,
then and in any such case may, at any time after the additional cost is incurred
or the amount received is reduced, notify the Borrower thereof, and the Borrower
shall pay on demand such amounts as the Lender or the Issuer may specify to be
necessary to compensate the Lender or the Issuer for such additional cost or
reduced receipt, together with interest on such amount from the date demanded
until payment in full thereof at a rate equal at all times to the Alternate Base
Rate plus the Applicable Margin plus three percent (3%) per annum. The
determination by the Lender or the Issuer, as the case may be, of any amount due
pursuant to this Section, as set forth in a statement setting forth the
calculation thereof in reasonable detail shall, in the absence of manifest
error, be final and conclusive and binding on all of the parties hereto.
(c) In addition to amounts payable as elsewhere provided in this
ARTICLE IV, the Borrower hereby indemnifies, exonerates and holds the
Lender and each Issuer harmless from and against any and all actions,
causes of action, suits, losses, costs, liabilities and damages, and
expenses incurred in connection therewith (irrespective of whether the
Lender or the Issuer is a party to the action for which indemnification is
sought), including reasonable
46
attorneys' fees and disbursements, which the Lender or the Issuer may incur or
be subject to as a consequence, direct or indirect, of
(i) the issuance of the Letters of Credit, other than as a
result of the gross negligence or wilful misconduct of the Issuer as
determined by a court of competent jurisdiction, or
(ii) the failure of the Issuer to honor a drawing under any
Letter of Credit as a result of any act or omission, whether rightful
or wrongful, of any present or future de jure or de facto Government
Agency.
ARTICLE V
CERTAIN INTEREST RATE AND OTHER PROVISIONS
SECTION 5.1. LIBO RATE LENDING UNLAWFUL. If the Lender shall determine
(which determination shall, upon notice thereof to the Borrower, be conclusive
and binding on the Borrower) that the introduction of or any change in or in the
interpretation of any law makes it unlawful, or any central bank or other
governmental authority asserts that it is unlawful, for the Lender to make,
continue or maintain any Loan as, or to convert any Loan into, a LIBO Rate Loan,
the obligation of the Lender to make, continue, maintain or convert into any
such LIBO Rate Loans shall, upon such determination, forthwith be suspended
until the Lender shall notify the Borrower that the circumstances causing such
suspension no longer exist, and all LIBO Rate Loans shall automatically convert
into Base Rate Loans at the end of the then current Interest Periods with
respect thereto or sooner, if required by such law or assertion.
SECTION 5.2. DEPOSITS UNAVAILABLE. If the Lender shall have determined
that Dollar deposits in the relevant amount are not available to the Lender in
its relevant market, then, upon notice from the Lender to the Borrower, the
obligations of the Lender under SECTION 2.3 to make any Loans shall forthwith be
suspended until the Lender shall notify the Borrower that the circumstances
causing such suspension no longer exist.
SECTION 5.3. INCREASED LOAN COSTS, ETC. If by reason of
(a) any change in Applicable Law after the Effective Date or any
change in the interpretation or application by any judicial or regulatory
authority of any Applicable Law, or
(b) compliance by the Lender with any direction, request or
requirement (whether or not having the force of Governmental Agency,
including Regulation D of the F.R.S. Board:
47
(i) the Lender shall be subject to any tax (other than taxes on
net income and franchises), levy, charge or withholding of any nature
or to any variation thereof or to any penalty with respect to any
payment due under any LIBO Rate Loan or other amounts due under this
Agreement, whether directly or by such being imposed on or suffered by
the Lender;
(ii) any reserve, deposit or similar requirement is or shall be
applicable, increased, imposed or modified in respect of Letters of
Credit issued by an Issuer or any other extensions of credit or other
assets of, or any deposits with or other liabilities of, the Lender or
Loans made by the Lender, or against any other funds, obligations or
other property owned or held by the Lender and the Lender actually
incurs such additional costs; or
(iii) there shall be imposed on the Lender any other condition
affecting this Agreement (or any of such extensions of credit or
liabilities),
and the result of the foregoing is directly or indirectly to increase the cost
to the Lender of making, continuing or the Issuer of issuing or maintaining (or
of its obligation to make, continue or maintain) any Loans as, or of converting
(or of its obligation to convert) any Loans into, LIBO Rate Loans, any Letter of
Credit or to reduce any amount receivable in respect thereof by the Lender or
the Issuer, then and in any such case the Lender may, at any time after the
additional cost is incurred or the amount received is reduced, notify the
Borrower thereof, and the Borrower shall pay on demand such amounts as the
Lender or the Issuer may specify to be necessary to compensate the Lender or the
Issuer for such additional cost or reduced receipt, together with interest on
such amount from the date demanded until payment in full thereof at a rate equal
at all times to the Alternate Base Rate plus three percent (3%) per annum. The
determination by the Lender or the Issuer, as the case may be, of any amount due
pursuant to this Section, as set forth in a statement setting forth the
calculation thereof in reasonable detail, shall, in the absence of manifest
error, be final and conclusive and binding on all of the parties hereto.
SECTION 5.4. FUNDING LOSSES. In the event the Lender shall incur any loss
or expense (including any loss or expense incurred by reason of the liquidation
or reemployment of deposits or other funds acquired by the Lender to make,
continue or maintain any portion of the principal amount of any Loan as, or to
convert any portion of the principal amount of any Loan into, a LIBO Rate Loan)
as a result of
(a) any conversion or repayment or prepayment of the principal amount
of any LIBO Rate Loans on a date other than the scheduled last day of the
Interest Period applicable thereto, whether pursuant to SECTION 3.1 or
otherwise;
48
(b) any Loans not being made as LIBO Rate Loans in accordance with the
Borrowing Request therefor by reason of any act or omission by the Borrower
or failure of a condition precedent to be satisfied; or
(c) any Loans not being continued as, or converted into, LIBO Rate
Loans in accordance with the Continuation/ Conversion Notice therefor by
reason of any act or omission by the Borrower;
then, upon the written notice of the Lender to the Borrower, the Borrower shall,
within five (5) days of its receipt thereof, pay to the Lender such amount as
will (in the reasonable determination of the Lender) reimburse the Lender for
such loss or expense. Such written notice (which shall include calculations in
reasonable detail) shall, in the absence of manifest error, be conclusive and
binding on the Borrower.
SECTION 5.5. INCREASED CAPITAL COSTS. If any change in, or the
introduction, adoption, effectiveness, interpretation, reinterpretation or
phase-in of, any Applicable Law of any Government Agency, affects or would
affect the amount of capital required or expected to be maintained by the Lender
or any Person controlling the Lender, and the Lender determines (in its sole and
absolute discretion) that the rate of return on its or such controlling Person's
capital as a consequence of its Commitments hereunder, issuance of Letters of
Credit or the Loans made by the Lender is reduced to a level below that which
the Lender or such controlling Person could have achieved but for the occurrence
of any such circumstance, then, in any such case upon notice from time to time
by the Lender to the Borrower, the Borrower shall immediately pay directly to
the Lender additional amounts sufficient to compensate the Lender or such
controlling Person for such reduction in rate of return. A statement of the
Lender as to any such additional amount or amounts (including calculations
thereof in reasonable detail) shall, in the absence of manifest error, be
conclusive and binding upon the Borrower. In determining such amount, the
Lender may use any method of averaging and attribution that it (in its
reasonable discretion) shall deem applicable.
SECTION 5.6. TAXES. All payments by the Borrower of principal of, and
interest on, the Loans and all other amounts payable hereunder shall be made
free and clear of and without deduction for any present or future income,
excise, stamp or franchise taxes and other taxes, levies, assessments, imposts,
deductions, fees, duties, withholdings or other charges and all liabilities with
respect thereto of any nature whatsoever imposed by any taxing authority, but
excluding franchise taxes and taxes imposed on or measured by the Lender's net
income or receipts (such non-excluded items being called "TAXES"). In the event
that any withholding or deduction from any payment to be made by the Borrower
hereunder is required in respect of any Taxes pursuant to any Applicable Law
then (unless the Borrower already knows of such withholding or deduction, upon
notice thereof from the Lender) the Borrower will
49
(a) pay directly to the relevant authority the full amount required
to be so withheld or deducted;
(b) promptly forward to the Lender an official receipt or other
documentation satisfactory to the Lender evidencing such payment to such
authority; and
(c) pay to the Lender such additional amount or amounts as is
necessary to ensure that the net amount actually received by the Lender
will equal the full amount the Lender would have received and retained had
no such withholding or deduction been required.
Moreover, if any Taxes are directly asserted against the Lender with respect to
any payment received by the Lender hereunder, the Lender may pay such Taxes and
the Borrower will promptly pay such additional amounts (including any penalties,
interest or expenses) as is necessary in order that the net amount received by
such person after the payment of such Taxes (including any Taxes on such
additional amount) shall equal the amount such person would have received had
not such Taxes been asserted.
If the Borrower fails to pay any Taxes when due to the appropriate taxing
authority or fails to remit to the Lender the required receipts or other
required documentary evidence, the Borrower shall indemnify the Lender for any
incremental Taxes or other liability (including interest, expenses or penalties)
that may become payable by the Lender as a result of any such failure, whether
or not such Taxes or liabilities were correctly or legally asserted. Payment
under this indemnity shall be made within thirty (30) days after the date the
Lender makes written demand therefor.
Upon the request of the Borrower, each Assignee Lender that is organized
under the laws of a jurisdiction other than the United States shall, prior to
the due date of any payment in respect of the Borrowings, execute and deliver to
the Borrower, on or about January 15 of each calendar year, one or more (as the
Borrower may reasonably request) United States Internal Revenue Service Forms
4224 or Forms 1001 or such other forms or documents (or successor forms or
documents), appropriately completed, as may be applicable to establish the
extent, if any, to which a payment to such Assignee Lender is exempt from
withholding or deduction of Taxes.
SECTION 5.7. PAYMENTS, COMPUTATIONS, ETC. Unless otherwise expressly
provided, all payments by the Borrower pursuant to this Agreement, the Note or
any other Loan Document shall be made by the Borrower without setoff, deduction
or counterclaim, not later than 11:00 a.m. (Chicago time) on the date due, in
U.S. Dollars in same day or immediately available funds, to such account with
the Lender in Chicago, Illinois as the Lender shall specify from time to time by
notice to the Borrower. Funds received after that time shall be deemed to have
been received by the Lender on the next succeeding Business Day and any
applicable interest or fee
50
shall continue to accrue. All interest shall be computed on the basis of the
actual number of days (including the first day but excluding the last day)
occurring during the period for which such interest is payable over a year
comprised of 360 days (or, in the case of interest on a Base Rate Loan (other
than when calculated with respect to the Federal Funds Rate), 365 days or, if
appropriate, 366 days). Whenever any payment to be made shall otherwise be due
on a day which is not a Business Day, such payment shall (except as otherwise
required by CLAUSE (c) of the definition of the term "Interest Period" with
respect to LIBO Rate Loans) be made on the next succeeding Business Day and such
extension of time shall be included in computing interest and fees, if any, in
connection with such payment.
SECTION 5.8. SETOFF. The Lender shall, upon the occurrence of any Default
described in CLAUSES (a) through (d) of SECTION 9.1.9 or upon the occurrence of
any other Event of Default, have the right to appropriate and apply to the
payment of the Obligations owing to it (whether or not then due), and (as
security for such Obligations) the Borrower hereby grants to the Lender a
continuing security interest in, any and all balances, credits, deposits,
accounts or moneys of the Borrower then or thereafter maintained with or
otherwise held by the Lender, including without limitation, the Proceeds
Account. The Lender agrees promptly to notify the Borrower after any such
setoff and application made by the Lender; PROVIDED, HOWEVER, that the failure
to give such notice shall not affect the validity of such setoff and
application. The rights of the Lender under this SECTION 5.8 are in addition to
other rights and remedies (including other rights of setoff under Applicable Law
or otherwise) which the Lender may have.
SECTION 5.9. USE OF PROCEEDS. The Borrower shall apply the proceeds of
each Borrowing in accordance with SECTION 2.7; without limiting the foregoing,
no proceeds of any Loan will be used to acquire any equity security of a class
which is registered pursuant to Section 12 of the Securities Exchange Act of
1934 or any "margin stock", as defined in F.R.S. Board Regulation U, X or G.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1. INITIAL CREDIT EXTENSION. The obligation of the Lender to
make the initial Credit Extension shall be subject to the prior or concurrent
satisfaction of each of the conditions precedent set forth in this SECTION 6.1.
SECTION 6.1.1. RESOLUTIONS, ETC. The Lender shall have received from the
Borrower and each of Borrower's Subsidiaries a certificate, dated not later than
the date of the initial Credit Extension, of the respective Secretary or
Assistant Secretary of each of the Borrower and the Borrower's Subsidiaries,
respectively, as to
51
(a) resolutions of the respective Boards of Directors of the
Borrower, or such Borrower's Subsidiary then in full force and effect
authorizing the execution, delivery and performance of this Agreement, the
Notes and each other Loan Document to be executed by it;
(b) the incumbency and signatures of those of its officers or Persons
authorized to act with respect to this Agreement, the Notes and each other
Loan Document executed by it;
(c) the Organic Documents of the Borrower or such Borrower's
Subsidiary; and
(d) evidence that each of the Borrower or such Borrower's Subsidiary
in good standing under the laws of the jurisdiction of its respective
organization and in each of the jurisdictions where the Mortgaged
Properties are located,
upon which certificates the Lender may conclusively rely until it shall have
received a further certificate of the Secretary of the Borrower canceling or
amending such prior certificate.
SECTION 6.1.2. DELIVERY OF NOTES. The Lender shall have received the
Notes duly executed and delivered by the Borrower.
SECTION 6.1.3. GUARANTIES. The Lender shall have received executed
counterparts of the Guaranties, dated as of the date hereof, duly executed by
each of the Borrower's Subsidiaries.
SECTION 6.1.4. PLEDGE AGREEMENTS. To the extent not previously delivered
in connection with the Existing Agreement, the Lender shall have received
executed counterparts of the Pledge Agreements, or Ratifications of Pledge
Agreements previously delivered under the Existing Agreement, dated as of the
date hereof, duly executed by the Borrower pledging all of its interest in the
capital stock of each of the Borrower's Subsidiaries, in each case together with
the certificates, evidencing all of the issued and outstanding shares of capital
stock pledged pursuant to the Pledge Agreements, which certificates shall in
each case be accompanied by undated stock powers duly executed in blank, or, if
any securities pledged pursuant to the Pledge Agreements are uncertificated
securities, confirmation and evidence satisfactory to the Lender that the
security interest in such uncertificated securities has been transferred to and
perfected by the Lender in accordance with Section 8-313 and Section 8-321 of
the Uniform Commercial Code, as in effect in the State of Illinois, and, as
applicable, with the evidence of completion (or satisfactory arrangement for the
completion) of all filings and recordings of the Pledge Agreements as may be
necessary, or in the reasonable opinion of the Lender, desirable, effectively to
create
52
a valid, perfected first priority lien against and security interest in the
collateral covered thereby.
SECTION 6.1.5. SECURITY AGREEMENT. The Lender shall have received
executed counterparts of a Security Agreement, or Ratifications of Security
Agreements previously delivered under the Existing Agreement, dated as of the
date hereof, duly executed by the Borrower and each of its Subsidiaries, as
applicable, together with
(a) executed copies of Uniform Commercial Code financing statements
(Form UCC-1), in proper form for filing, naming the Borrower (or its
Subsidiary, as applicable) as the debtor and the Lender as the secured
party, or other similar instruments or documents, filed under the Uniform
Commercial Code of all jurisdictions as may be necessary or, in the opinion
of the Lender, desirable to perfect the security interest of the Lender
pursuant to such Security Agreement; and
(b) executed copies of proper Uniform Commercial Code Form UCC-3
termination statements, if any, necessary to release all Liens and other
rights of any Person in any collateral described in such Security Agreement
previously granted by any Person together with such other Uniform
Commercial Code Form UCC-3 termination statements as the Lender may
reasonably request from the Borrower.
SECTION 6.1.6. CONSENTS AND MORTGAGE CONSENTS. The Lender shall have
received true and correct copies, certified by the Borrower, of all Mortgage
Consents and Consents required in connection with the Properties to be
encumbered by Mortgages delivered pursuant to SECTION 6.1.7 or the Security
Agreements delivered pursuant to SECTION 6.1.5, respectively.
SECTION 6.1.7. MORTGAGE. The Lender shall have received counterparts of a
Mortgage, or Amendments to Mortgages previously delivered under the Existing
Agreement, relating to the Hydrocarbon Interests and related Oil and Gas
Properties of the Borrower and its Subsidiaries that are included in the
Lender's determination of the initial Borrowing Base, dated as of a recent date,
duly executed by the Borrower and/or its Subsidiaries, as applicable, together
with
(a) evidence of the completion (or satisfactory arrangements for the
completion) of all recordings and filings of such Mortgage as may be
necessary or, in the reasonable opinion of the Lender, desirable
effectively to create a valid, perfected first priority Lien against the
Properties purported to be covered thereby;
(b) favorable mortgagee's title opinions in favor of the Lender (in
form and substance and issued by title counsel reasonably satisfactory to
the Lender,
53
substantially in the form of EXHIBIT I hereto), with respect to the
Property purporting to be covered by the Mortgage setting forth the working
interest and net revenue interest of the Borrower and/or its Subsidiaries
in such Properties and opining that the Borrower's and/or its Subsidiaries'
title to such property is good and marketable and valid and that the
interests created by the Mortgage constitute valid first Liens thereon free
and clear of all defects and encumbrances other than as approved by the
Lender; and
(c) such other approvals, opinions, or documents as the Lender may
reasonably request.
SECTION 6.1.8. OPINIONS OF COUNSEL. The Lender shall have received
opinions, dated the date of the initial Borrowing and addressed to the Lender,
from
(a) Xxxxxx & Xxxxxx, counsel to the Borrower and the Borrower's
Subsidiaries, substantially in the form of EXHIBIT H hereto;
(b) J. Xxxxxxx Xxxxxxx, Xx., as to the Mortgaged Properties located
in the Vicksburg Field, San Xxxxxxxx County, Texas and the Tidehaven Field,
Matagorda County, Texas; Xxxxx X. Xxxxxxx, as to the Mortgaged Properties
located n the Wolf Point, Hall Ranch and Blessing Fields, located in
Xxxxxxx, Xxxxxx and Matagorda Counties, Texas, respectively; and Xxxxxx X.
Xxxxxxxx, as to the Mortgaged Properties located in the Raymondville Field,
Willacy County, Texas, special title counsel to the Borrower, substantially
in the form of EXHIBIT I hereto.
SECTION 6.1.9. UCC-11S. The Lender shall have received certified copies
of Uniform Commercial Code Requests for Information or Copies (Form UCC-11), or
a similar search report certified by a party acceptable to the Lender, dated a
date reasonably near to the date of the initial Borrowing, listing all effective
financing statements which name the Borrower, its Subsidiaries, and each other
Obligor (under their present names and any previous names) as the debtor and
which are filed in the State of Texas, together with copies of such financing
statements (none of which shall cover any collateral described in the Existing
Mortgages).
SECTION 6.1.10. EVIDENCE OF INSURANCE. The Lender shall have received
certificates of insurance satisfactory to it evidencing the existence of all
insurance required to be maintained by the Borrower by this Agreement and the
other Loan Documents.
SECTION 6.1.11. ENGINEERING REPORTS. The Lender shall have received
Engineering Reports from (i) Netherland, Xxxxxx & Associates, dated as of
December 31, 1997, as to the Lapeyrouse Field, Terrebonne Parish, Louisiana;
(ii) Xxxxxxx & Associates, as of December 31, 1997, as to the Mortgaged
Properties listed on PART
54
A of SCHEDULE II; (iii) Netherland, Xxxxxx & Associates, dated as of August 1,
1998, as to the Mortgaged Properties listed on PART B of SCHEDULE II.
SECTION 6.1.12. ENVIRONMENTAL REPORT. The Lender shall have received the
Phase I environmental assessments prepared by Cornerstone Environmental
Resources, Inc. with respect to the Mortgaged Properties; a completed
environmental disclosure questionnaire and such other information with respect
to the ownership and past use of the Mortgaged Properties as the Lender may
reasonably request, and such reports and questionnaire shall be satisfactory in
form, substance and scope to the Lender.
SECTION 6.1.13. BUDGET. The Lender shall have received a budget for the
Borrower for the twelve (12) months immediately following July 1, 1998, in form,
scope and detail reasonably satisfactory to the Lender. The budget shall
contain, among other things, a quarterly projection of Capital Expenditures
showing the proposed use of proceeds from Loans, the use of proceeds from loans
made by Subordinated Creditors and the use of proceeds from Required Asset
Sales.
SECTION 6.1.14. APPROVED DEVELOPMENT PLAN. The Lender shall have received
the Approved Development Plan for the eighteen (18) months immediately following
the Effective Date, in form, scope and detail reasonably satisfactory to the
Lender.
SECTION 6.1.15. AMENDED AND RESTATED SECURITY DOCUMENTS. The documents,
instruments and agreements comprising or evidencing the collateral security for
the Existing Agreement shall each have been amended, or amended and restated to
provide that such documents, instruments and agreements secure the Obligations,
in each case pursuant to instruments in form and substance satisfactory to the
Lender and its counsel.
SECTION 6.1.16. ORRI CERTIFICATE, ETC. The Lender shall have received an
executed Certificate as to Overriding Royalty Interests, substantially in the
form of EXHIBIT K, and the executed Agreement as to Certain Tax Matters,
substantially in the form of EXHIBIT L.
SECTION 6.1.17. HEDGING AGREEMENTS. The Borrower shall have entered into
(and shall have delivered to the Lender copies of) each of the Hedging
Agreements required by SECTIONS 8.1.8 and 8.1.9.
SECTION 6.1.18. ASSIGNMENT. The Lender shall have received counterparts
of the Assignment with respect to those Oil and Gas Properties described on
SCHEDULE II, PART B, duly executed by the Borrower and the Borrower's
Subsidiaries, together with
55
(a) evidence of the completion (or satisfactory arrangements for the
completion) of all recordings and filings of the Assignment as may be
necessary or desirable to vest title to the Overriding Royalty Interest
described therein in favor of the Designee; and
(b) such title opinions or other assurances of title with respect to
the overriding royalties which are the subject of the Assignment as the
Lender may reasonably require.
SECTION 6.1.19. WARRANTS. The Lender or the Designee shall have received
the Warrant Documents, in each case executed and delivered by the Borrower.
SECTION 6.1.20. CLOSING FEES, EXPENSES, ETC. The Lender shall have
received all reasonable costs and expenses due and payable pursuant to
SECTIONS 3.3 and 10.3, if then invoiced.
SECTION 6.1.21. OTHER DOCUMENTS. The Lender shall have received such
other documents, including Approvals, as it may reasonably request.
SECTION 6.2. INCLUSION OF HYDROCARBON INTERESTS IN THE BORROWING BASE.
The inclusion of any additional Hydrocarbon Interests in the Borrowing Base is
subject to the following conditions having been satisfied and receipt by the
Lender of the following documents, in each case with respect to each Hydrocarbon
Interest and related Oil and Gas Properties which the Borrower requests be
included in the Borrowing Base, and each of which conditions and documents shall
be satisfactory to the Lender in form and substance:
SECTION 6.2.1. ENVIRONMENTAL REPORT. The Lender shall have
received Phase I environmental assessments as of a recent date prepared by an
environmental consulting firm as shall be acceptable to the Lender, a completed
environmental disclosure questionnaire and such other information with respect
to the ownership and past use of the Mortgaged Properties relating to such
Hydrocarbon Interests as the Lender may reasonably request, and such reports and
questionnaire shall be satisfactory in form, substance and scope to the Lender.
SECTION 6.2.2. MORTGAGE. The Lender shall have received counterparts of a
Mortgage relating to such Hydrocarbon Interests and related Oil and Gas
Properties, dated as of a recent date, duly executed by the Borrower and/or its
Subsidiaries, as applicable, together with
(a) evidence of the completion (or satisfactory arrangements for the
completion) of all recordings and filings of such Mortgage as may be
necessary or, in the reasonable opinion of the Lender, desirable
effectively to create a
56
valid, perfected first priority Lien against the Properties purported to be
covered thereby;
(b) favorable mortgagee's title opinions in favor of the Lender (in
form and substance and issued by title counsel reasonably satisfactory to
the Lender, substantially in the form of EXHIBIT I hereto), with respect to
the Property purporting to be covered by the Mortgage setting forth the
working interest and net revenue interest of the Borrower and/or its
Subsidiaries in such Properties and opining that the Borrower's and/or its
Subsidiaries' title to such property is good and marketable and valid and
that the interests created by the Mortgage constitute valid first Liens
thereon free and clear of all defects and encumbrances other than as
approved by the Lender; and
(c) such other approvals, opinions, or documents as the Lender may
reasonably request.
SECTION 6.2.3. UCC-11S. The Lender shall have received certified copies
of Uniform Commercial Code Requests for Information or Copies (Form UCC-11), or
a similar search report certified by a party acceptable to the Lender, dated as
of a recent date, listing all effective financing statements which name the
Borrower or its Subsidiaries (under their present names and any previous names)
as the debtor and which are filed in the jurisdictions in the State of Texas or
the state in which such Oil and Gas Properties are located and in which the
Mortgage referenced in SECTION 6.2.2. is to be filed, together with copies of
such financing statements (none of which shall cover any collateral described in
any such Mortgage).
SECTION 6.2.4. EVIDENCE OF INSURANCE. The Lender shall have received
certificates of insurance satisfactory to it evidencing the existence of all
insurance required to be maintained by the Borrower by this Agreement and the
other Loan Documents with respect to the Hydrocarbon Interests and related Oil
and Gas Properties being added to the Borrowing Base.
SECTION 6.2.5. ENGINEERING REPORTS. The Lender shall have received an
Engineering Report, dated as of a recent date from a petroleum engineer
reasonably acceptable to the Lender, as to the Hydrocarbon Interests being added
to the Borrowing Base.
SECTION 6.2.6. MATERIAL CONTRACTS AND RELATED CONSENTS; SECURITY
AGREEMENT. The Lender shall have received true and correct copies, certified by
the Borrower, and approved the form and substance of, each Material Contract
related to the Hydrocarbon Interests being added to the Borrowing Base. In
addition, the Lender shall have received duly executed counterparts of a
Security Agreement or, if applicable, amendments to an existing Security
Agreement which add any such Material Contract to the Collateral (as defined in
the Security Agreement), a Consent
57
and, as applicable, a Mortgage Consent, for each such Material Contract, dated
as of a recent date.
SECTION 6.2.7. GUARANTIES. The Lender shall have received duly executed
counterparts of a Guaranty from any Subsidiary of the Borrower which is adding
Hydrocarbon Interests to the Borrowing Base, unless such a Guaranty has already
been delivered to the Lender in connection with a previous addition to the
Borrowing Base or on the Effective Date.
SECTION 6.2.8. ADDITIONAL STOCK OR PARTNERSHIP PLEDGE. The Lender shall
have received executed counterparts of the Pledge Agreement, dated not later
than the date of such Loan, duly executed by the Borrower or the applicable
Guarantor pledging its interest in the capital stock or partnership interest, as
the case may be, of any Subsidiary which is adding Hydrocarbon Interests to the
Borrowing Base, unless such Pledge Agreement has already been delivered to the
Lender, accompanied by the original share certificate evidencing such capital
stock and executed stock powers (in blank) and the evidence of satisfactory
arrangement for the completion of all filings and recordings of the Pledge
Agreement as may be necessary or, in the reasonable opinion of the Lender,
desirable, effectively to create a valid, perfected first priority lien against
and security interest in the collateral covered thereby.
SECTION 6.2.9. OVERRIDING ROYALTY INTERESTS. To the extent that certain
new Properties (or new classifications of Properties) are considered by the
Lender in a redetermination of the Borrowing Base and the Collateral Value as a
result of drilling on the Starboard Properties, the Designee shall have received
an Assignment and a Certificate as to Overriding Royalty Interests with respect
to such Properties duly executed by the Borrower and the Borrower's
Subsidiaries, together with
(a) evidence of the completion (or satisfactory arrangements for the
completion) of all recordings and filings of the Assignment as may be
necessary or desirable to vest title to the Overriding Royalty Interest
described therein; and
(b) such title opinions or other assurances of title with respect to
the overriding royalties which are the subject of the Assignment as the
Lender may reasonably require.
SECTION 6.2.10. OTHER DOCUMENTS. The Lender shall have received such
other documents as it may reasonably request.
SECTION 6.3. ALL CREDIT EXTENSIONS. The obligation of the Lender to make
any Credit Extension shall be subject to the satisfaction of each of the
conditions precedent set forth in this SECTION 6.3.
58
SECTION 6.3.1. COMPLIANCE WITH WARRANTIES, NO DEFAULT, ETC. Both before
and after giving effect to any Credit Extension (but, if any Default of the
nature referred to in SECTION 9.1.5 shall have occurred with respect to any
other Indebtedness, without giving effect to the application, directly or
indirectly, of the proceeds of any borrowing) the following statements shall be
true and correct
(a) the representations and warranties set forth in ARTICLE VII
(excluding, however, those contained in SECTION 7.9) shall be true and
correct with the same effect as if then made (unless stated to relate
solely to an earlier date, in which case such representations and
warranties shall be true and correct as of such earlier date);
(b) except as disclosed by the Borrower to the Lender pursuant to
SECTION 7.9
(i) no labor controversy, litigation, arbitration or
governmental investigation or proceeding shall be pending or, to the
knowledge of the Borrower, threatened against the Borrower or any of
its Subsidiaries which has or might reasonably be expected to have a
Material Adverse Effect; and
(ii) no development shall have occurred in any labor controversy,
litigation, arbitration or governmental investigation or proceeding
disclosed pursuant to SECTION 7.9 which has or might reasonably be
expected to have a Material Adverse Effect; and
(c) no Default shall have then occurred and be continuing, and
neither the Borrower nor any other Obligor are in material violation of any
Applicable Law or court order or decree if such violation has or might
reasonably be expected to have a Material Adverse Effect.
SECTION 6.3.2. CREDIT REQUEST. The Lender shall have received a Borrowing
Request or Issuance Request, as the case may be, for such Credit Extension.
Each of the delivery of a Borrowing Request or an Issuance Request and the
acceptance by the Borrower of the proceeds of the Borrowing or the issuance of
the Letter of Credit as applicable, shall constitute a representation and
warranty by the Borrower that on the date of such Borrowing (both immediately
before and after giving effect to such Borrowing and the application of the
proceeds thereof) or the issuance of the Letter of Credit, as applicable, the
statements made in SECTION 6.3.1 are true and correct.
SECTION 6.3.3. SATISFACTORY LEGAL FORM. All documents executed or
submitted pursuant hereto by or on behalf of the Borrower or any of its
Subsidiaries shall be reasonably satisfactory in form and substance to the
Lender and its counsel; the
59
Lender and its counsel shall have received all information, approvals, opinions,
documents or instruments as the Lender or its counsel may reasonably request.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
In order to induce the Lender to enter into this Agreement and to make
Loans and to issue Letters of Credit hereunder, the Borrower represents and
warrants unto the Lender as set forth in this ARTICLE VII.
SECTION 7.1. ORGANIZATION, ETC. The Borrower is a Delaware corporation
and each of the Borrower's Subsidiaries is an Oklahoma corporation validly
organized and existing and in good standing under the laws of the jurisdiction
of its organization, is duly qualified to do business and is in good standing as
a foreign corporation in each jurisdiction where the nature of its business
requires such qualification, where the failure so to qualify would have a
Material Adverse Effect and has full power and authority and holds all requisite
governmental licenses, permits and other approvals to enter into and perform its
Obligations under this Agreement, the Notes and each other Loan Document to
which it is a party and to own and hold under lease its Property and to conduct
its business substantially as currently conducted by it, in each case where the
failure so to do would have a Material Adverse Effect. As of the Effective
Date, Old Esenjay is the owner of not less than 30% of the issued and
outstanding shares of the Borrower, and Aspect is the owner of not less than 25%
of the issued and outstanding shares of the Borrower. The Borrower is the sole
shareholder of each of the Borrower's Subsidiaries. As of the Effective Date,
the Borrower has no Subsidiaries other than as listed in SCHEDULE IV.
SECTION 7.2. DUE AUTHORIZATION, NON-CONTRAVENTION, ETC. The execution,
delivery and performance by the Borrower and each other Obligor of this
Agreement, the Notes and each other Loan Document executed or to be executed by
it are within the Borrower's and each such Obligor's corporate powers, have been
duly authorized by all necessary corporate action, and do not
(a) contravene the Borrower's or such Obligor's Organic Documents;
(b) contravene or result in any violation of or default under any
Applicable Law or any material contractual restriction, court decree or
order, in each case binding on or affecting the Borrower or any other
Obligor or any Properties, businesses, assets or revenues of the Borrower;
60
(c) result in, or require the creation or imposition of, any Lien on
(except for the Liens of the Loan Documents) any of the Borrower's or any
other Obligor's Properties, businesses, assets or revenues.
SECTION 7.3. GOVERNMENT APPROVAL, REGULATION, ETC. No authorization or
approval or other action by, and no notice to or filing with, any Government
Agency or other Person is required for the due execution, delivery or
performance by the Borrower or any other Obligor of this Agreement, the Notes or
any other Loan Document to which it is a party.
SECTION 7.4. INVESTMENT COMPANY ACT. Neither the Borrower, its
Subsidiaries nor any Affiliate thereof, is an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
SECTION 7.5. PUBLIC UTILITY HOLDING COMPANY ACT. Neither the Borrower nor
any of its Subsidiaries is a "holding company" or a "subsidiary company" of a
"holding company", or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company", within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
SECTION 7.6. VALIDITY, ETC. This Agreement constitutes, and the Notes and
each other Loan Document executed by the Borrower or any of its Subsidiaries
will, on the due execution and delivery thereof, constitute, the legal, valid
and binding obligations of the Borrower and such Subsidiaries, as applicable,
enforceable in accordance with their respective terms, and each Loan Document
executed pursuant hereto by each other Obligor will, on the due execution and
delivery thereof by such Obligor, be the legal, valid and binding obligation of
such Obligor enforceable in accordance with its terms, in each case subject to
the effect of any applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting creditors' rights generally.
SECTION 7.7. FINANCIAL INFORMATION. The audited consolidated balance
sheets of the Borrower and each of its consolidated Subsidiaries as at
December 31, 1997 and the related consolidated unaudited statements of
operations and cash flow of the Borrower and each of its Subsidiaries, copies of
which have been furnished to the Lender, have been prepared in accordance with
GAAP consistently applied, and present fairly the consolidated financial
condition of the corporations covered thereby as at the date thereof and the
results of their unaudited operations for the period then ended, and show all
material Indebtedness of the Borrower and its consolidated Subsidiaries, as of
the date thereof, including liabilities for taxes, material commitments and
Contingent Liabilities.
SECTION 7.8. NO MATERIAL ADVERSE CHANGE. Since the date of that certain
Prospectus dated as of July 16, 1998, wherein the Borrower offered for sale
61
4,000,000 shares of its common stock, a true and correct copy of which has been
delivered to the Lender, there has been no change in the financial condition,
operations, assets, business, Properties or prospects of the Borrower or its
Subsidiaries that has or might reasonably be expected to have a Material Adverse
Effect, except that the Borrower expects to report operating results in the
third quarter of 1998 comparable to those reported for the second quarter of
1998.
SECTION 7.9. LITIGATION, LABOR CONTROVERSIES, ETC. There is no pending
or, to the knowledge of the Borrower, threatened litigation, action, proceeding,
or labor controversy affecting the Borrower or any of its Subsidiaries, or any
of their respective Properties, businesses, assets or revenues, which has or
might reasonably be expected to have a Material Adverse Effect, except as
disclosed in ITEM 7.9 ("LITIGATION") of the Disclosure Schedule.
SECTION 7.10. OWNERSHIP OF PROPERTIES. Each of the Borrower and each of
its Subsidiaries has good and merchantable title to its Properties (including,
without limitation, all Hydrocarbon Interests), free and clear of all Liens
except (a) those referred to in the financial statements referred to in
SECTION 7.7, (b) as disclosed to the Lender in the DISCLOSURE SCHEDULE or (c) as
permitted by SECTION 8.2.3. After giving full effect to all Liens permitted
under SECTION 8.2.3, the Borrower and its Subsidiaries own the net interests in
Hydrocarbons produced from the Oil and Gas Properties as reflected in the most
recent Engineering Report, and neither the Borrower nor any of its Subsidiaries
is obligated to bear costs or expenses in respect of the Oil and Gas Properties
in excess of its working interest percentage as reflected in the most recent
Engineering Report.
SECTION 7.11. TAXES. Each of the Borrower and its Subsidiaries has filed
all Federal and other tax returns and reports required by Applicable Law to have
been filed by it and has paid all taxes and other governmental charges thereby
shown to be owing, except any such taxes or charges which are being diligently
contested in good faith by appropriate proceedings and for which adequate
reserves in accordance with GAAP shall have been set aside on its books.
SECTION 7.12. PENSION AND WELFARE PLANS. During the
twelve-consecutive-month period prior to the Effective Date and prior to the
date of any borrowing hereunder, no steps have been taken to terminate any
Pension Plan, and no contribution failure has occurred with respect to any
Pension Plan sufficient to give rise to a Lien under section 302(f) of ERISA.
No condition exists or event or transaction has occurred with respect to any
Pension Plan which might result in the incurrence by the Borrower or any member
of the Controlled Group of any material liability, fine or penalty. Except as
disclosed in ITEM 7.12 ("EMPLOYEE BENEFIT PLANS") of the Disclosure Schedule or
as otherwise reflected in the Financial Statements of the Borrower and its
consolidated Subsidiaries, neither the Borrower nor any member of the Controlled
Group has any contingent liability with respect to any post-retirement
62
benefit under a Welfare Plan, other than liability for continuation coverage
described in Part 6 of Title I of ERISA.
SECTION 7.13. COMPLIANCE WITH LAW. Neither the Borrower nor any of its
Subsidiaries (a) is in violation of any Applicable Law of, or the terms of any
Approval issued by, any Government Agency; or (b) has failed to obtain any
Approval necessary to ownership of any of its properties or the conduct of its
business (including without limitation any such authorization from the Federal
Energy Regulatory Commission or any state conservation commission or similar
body); which violation or failure could reasonably be expected to have a
Material Adverse Effect.
SECTION 7.14. CLAIMS AND LIABILITIES. Except as disclosed to the Lender
in ITEM 7.14 ("CLAIMS AND LIABILITIES") of the Disclosure Schedule, neither the
Borrower nor any of its Subsidiaries has accrued any liabilities under gas
purchase contracts for gas not taken, but for which it is liable to pay if not
made up and which, if not paid, would have a Material Adverse Effect. Except as
disclosed to the Lender in ITEM 7.14 of the Disclosure Schedule, no claims exist
against the Borrower or any of its Subsidiaries for gas imbalances which claims
if adversely determined would have a Material Adverse Effect. No purchaser of
product supplied by the Borrower or any of its Subsidiaries has any claim
against the Borrower or any of its Subsidiaries for product paid for, but for
which delivery was not taken as and when paid for, which claim if adversely
determined would have a Material Adverse Effect.
SECTION 7.15. NO PROHIBITION ON PERFECTION OF SECURITY DOCUMENTS. None of
the terms or provisions of any indenture, mortgage, deed of trust, agreement or
other instrument to which the Borrower or any of its Subsidiaries is a party or
by which the Borrower or any of its Subsidiaries or the property of the Borrower
or any of its Subsidiaries is bound prohibit the filing or recordation of any of
the Loan Documents or any other action which is necessary or appropriate in
connection with the perfection of the Liens evidenced and created by any of the
Loan Documents.
SECTION 7.16. SOLVENCY. Neither the Borrower nor any of its Subsidiaries
is "insolvent", as such term is used and defined in the United States Bankruptcy
Code, 11 U.S.C. Section 101, ET SEQ.
SECTION 7.17. ENVIRONMENTAL WARRANTIES. As a reasonable and prudent
operator of oil and gas producing properties, in the ordinary course of its
business, the Borrower has conducted, with respect to its Oil and Gas
Properties, and, on an ongoing basis, conducts a review of the effect of
Environmental Laws on the business, operations and Properties of the Borrower
and its Subsidiaries, in the course of which it identifies and evaluates
associated liabilities and costs (including any capital or operating
expenditures required for Remedial Action or other clean-up or closure of
Properties presently owned or operated, any capital or operating expenditures
required for Remedial Action or otherwise to achieve or maintain
63
compliance with environmental protection standards imposed by any Environmental
Law or as a condition of any Approval, license, permit or contract, any related
constraints on operating activities, including any periodic or permanent
shutdown of any facility or reduction in the level of or change in the nature of
operations conducted thereat and any actual or potential liabilities to third
parties, including employees, and any related costs and expenses). On the basis
of this review, the Borrower has reasonably concluded that, except as disclosed
in ITEM 7.17 ("ENVIRONMENTAL MATTERS") of the Disclosure Schedule, to the best
of its knowledge after due inquiry:
(a) all facilities and Property (including underlying groundwater)
owned, leased or operated by the Borrower or any of its Subsidiaries have
been, and continue to be, owned, leased or operated by the Borrower or any
of its Subsidiaries in compliance with all Environmental Laws where the
failure to do so could reasonably be expected to have a Material Adverse
Effect;
(b) there have been no past, and there are no pending or threatened
(i) claims, complaints, notices or inquiries to, or requests for
information received by, the Borrower or any of its Subsidiaries with
respect to any alleged violation of any Environmental Law, that,
singly or in the aggregate, have or may reasonably be expected to have
a Material Adverse Effect, or
(ii) claims, complaints, notices or inquiries to, or requests for
information received by, the Borrower or any of its Subsidiaries
regarding potential liability under any Environmental Law or under any
common law theories relating to operations or the condition of any
facilities or Property (including underlying groundwater) owned,
leased or operated by the Borrower or any of its Subsidiaries that,
singly or in the aggregate, have, or may reasonably be expected to
have a Material Adverse Effect;
(c) there have been no Releases of Hazardous Materials at, on or
under any Property now or previously owned or leased by the Borrower or any
of its Subsidiaries that, singly or in the aggregate, have, or may
reasonably be expected to have, a Material Adverse Effect;
(d) each of the Borrower or any of its Subsidiaries, as applicable,
has been issued and is in compliance with all permits, certificates,
approvals, licenses and other authorizations relating to environmental
matters and necessary or desirable for its business where the failure to do
so could reasonably be expected to have a Material Adverse Effect;
(e) no Property now or previously owned, leased or operated by the
Borrower or any of its Subsidiaries is listed or proposed for listing on
the
64
National Priorities List pursuant to CERCLA, or, to the extent that such listing
may, singly or in the aggregate, have, or may reasonably be expected to have a
Material Adverse Effect, on the CERCLIS or on any other similar federal or state
list of sites requiring investigation or clean-up;
(f) there are no underground storage tanks, active or abandoned,
including petroleum storage tanks, on or under any Property now or
previously owned, leased or operated by the Borrower or any of its
Subsidiaries that, singly or in the aggregate, have, or may reasonably be
expected to have, a Material Adverse Effect;
(g) neither the Borrower nor any Subsidiaries of the Borrower has
directly transported or directly arranged for the transportation of any
Hazardous Material to any location which is listed or proposed for listing
on the National Priorities List pursuant to CERCLA, or, to the extent that
such listing may, singly or in the aggregate, have, or may reasonably be
expected to have a Material Adverse Effect, on the CERCLIS or on any
similar federal or state list or which is the subject of federal, state or
local enforcement actions or other investigations which may lead to
material claims against the Borrower or any of its Subsidiaries for any
remedial work, damage to natural resources or personal injury, including
claims under CERCLA;
(h) there are no polychlorinated biphenyls, radioactive materials or
friable asbestos present at any Property now or previously owned or leased
by the Borrower or any of its Subsidiaries that, singly or in the
aggregate, have, or may reasonably be expected to have, a Material Adverse
Effect; and
(i) no condition exists at, on or under any property now or
previously owned or leased by the Borrower or any of its Subsidiaries
which, with the passage of time, or the giving of notice or both, would
give rise to material liability under any Environmental Law that, singly or
in the aggregate have, or may reasonably be expected to have a Material
Adverse Effect.
SECTION 7.18. REGULATIONS G, U AND X. Neither the Borrower nor any of its
Subsidiaries is engaged in the business of extending credit for the purpose of
purchasing or carrying margin stock, and no proceeds of any Loans will be used
for a purpose which violates, or would be inconsistent with, F.R.S. Board
Regulation G, U or X. Terms for which meanings are provided in F.R.S. Board
Regulation G, U or X or any regulations substituted therefor, as from time to
time in effect, are used in this Section with such meanings.
65
SECTION 7.19. YEAR 2000 COMPLIANCE.
(a) The Borrower is: (i) developing a review and assessment program
of all areas with its and each of its Subsidiaries' businesses and operations
(including those affected by suppliers and vendors) that could be adversely
affected by the "YEAR 2000 PROBLEM" (that is, the risk that computer
applications (as well as imbedded microchips) used by the Borrower or any of its
Subsidiaries (or any of their suppliers and vendors) may be unable to recognize
and perform properly date-sensitive functions involving certain dates prior to
and any date after December 31, 1999); (ii) developing a plan and a timetable
for addressing the Year 2000 Problem on a timely basis; and (iii) to date,
implementing that plan in accordance with that timetable.
(b) The Borrower reasonably believes that all computer applications
(including those of their suppliers and vendors) that are material to its or its
Subsidiaries' businesses and operations will, on a timely basis, be able to
perform properly date-sensitive functions for all dates before and after
January 1, 2000 (that is, be "YEAR 2000 COMPLIANT"), except to the extent that a
failure to do so could not reasonably be expected to have a Material Adverse
Effect."
SECTION 7.20. INSURANCE. The Borrower and its Subsidiaries have the
benefit of the insurance coverage described in the certificates of insurance
delivered pursuant to SECTION 6.1.10 and required to be maintained pursuant to
SECTION 8.1.4.
SECTION 7.21. ACCURACY OF INFORMATION. All factual information heretofore
or contemporaneously furnished by or on behalf of the Borrower or any of its
Subsidiaries in writing to the Lender for purposes of or in connection with this
Agreement or any transaction contemplated hereby (including without limitation
each Engineering Report) is, and all other such factual information hereafter
furnished by or on behalf of the Borrower or any of its Subsidiaries to the
Lender will be, true and accurate in every material respect on the date as of
which such information is dated or certified and as of the date of execution and
delivery of this Agreement by the Lender, and such information is not, or shall
not be, as the case may be, incomplete by omitting to state any material fact
necessary to make such information not misleading.
SECTION 7.22. TITLE WARRANTY. Assignor represents and warrants that the
Overriding Royalty Interest conveyed in the Assignment is free and clear of any
mortgages, deeds of trust, voluntary or contractual liens, pledges, security
interests, charges, conditional sales or other title retention documents, or
other encumbrances or burdens other than those in favor of Assignee and as
expressly set forth in Exhibit A to the Assignment, and Assignor hereby binds
itself, its successors and assigns to warrant and forever defend the title to
the Overriding Royalty Interest therein granted, conveyed, assigned, and
transferred unto Assignee, its successors and assigns, against the lawful claims
and demands of every person whomsoever
66
claiming or to claim the same or any part thereof, by, through or under Assignor
but not otherwise.
ARTICLE VIII
COVENANTS
SECTION 8.1. AFFIRMATIVE COVENANTS. The Borrower agrees with the Lender
that, until all Commitments have terminated and all Obligations have been paid
and performed in full, the Borrower and each of its Subsidiaries will perform
the obligations set forth in this SECTION 8.1.
SECTION 8.1.1. FINANCIAL INFORMATION, REPORTS, NOTICES, ETC. The Borrower
will furnish, or will cause to be furnished, to the Lender copies of the
following financial statements, reports, notices and information:
(a) as soon as available and in any event within 50 days after the
end of each of the first three Fiscal Quarters of each Fiscal Year of the
Borrower, consolidated and consolidating balance sheets of the Borrower and
its consolidated Subsidiaries as of the end of such Fiscal Quarter and
consolidated and consolidating statements of operations and cash flow of
the Borrower and its consolidated Subsidiaries for such Fiscal Quarter and
for the period commencing at the end of the previous Fiscal Year and ending
with the end of such Fiscal Quarter, certified by the chief financial
Authorized Officer of the Borrower;
(b) as soon as available and in any event within 95 days after the
end of each Fiscal Year of the Borrower, a copy of the annual audit report
for such Fiscal Year for the Borrower and its consolidated Subsidiaries,
including therein the audited consolidated and consolidating balance sheets
of the Borrower and its consolidated Subsidiaries as of the end of such
Fiscal Year and audited statements of operations and cash flow of the
Borrower and its consolidated Subsidiaries for such Fiscal Year, in the
case of such audited financials, each case certified (without any
Impermissible Qualification) in a manner reasonably acceptable to the
Lender by an independent public accountant acceptable to the Lender,
together with a certificate from the Chief Financial Officer of the
Borrower from such accountants containing a computation of, and showing
compliance with, each of the financial ratios and restrictions contained in
SECTION 8.2.4 and to the effect that, in making the examination necessary
for the signing of such annual report by such accountants, they have not
become aware of any Default that has occurred and is continuing, or, if
they have become aware of such Default, describing such Default and the
steps, if any, being taken to cure it;
67
(c) concurrently with the delivery of the financial statements
referred to in CLAUSES (a) and (b), a certificate, executed by the
Authorized Officer of the Borrower, showing (in reasonable detail and with
appropriate calculations and computations in all respects reasonably
satisfactory to the Lender) (i) compliance with the financial covenants set
forth in SECTION 8.2.4 and (ii) a comparison between the actions described
in the then current Approved Development Plan and the actual actions taken
in such period, and also certifying, to such Authorized Officer's best
knowledge, that no Default has occurred and is then outstanding;
(d) commencing November 30, 1999, and thereafter on or prior to
October 30th of each year, an Approved Development Plan for the Borrower
for the immediately following eighteen (18) month period, reasonably
satisfactory to the Lender, such plan to be substantially in the form of
EXHIBIT P;
(e) on or prior to December 31st of each calendar year, a budget for
the Borrower for the following calendar year in form, scope and detail
reasonably satisfactory to the Lender;
(f) no later than the date six (6) months after the Effective Date, a
budget for the Borrower for the twelve (12) month period immediately
following such date, in form, scope and detail reasonably satisfactory to
the Lender;
(g) as soon as possible and in any event within five (5) Business
Days after any responsible officer of the Borrower becomes aware of the
occurrence of each Default and any event which has or is reasonably likely
to have a Material Adverse Effect, a statement of Authorized Officer of the
Borrower setting forth details of such Default or event and the action
which the Borrower has taken and proposes to take with respect thereto;
(h) as soon as possible and in any event within five (5) Business
Days after any responsible officer of the Borrower becomes aware of (x) the
occurrence of any adverse development with respect to any litigation,
action, proceeding or labor controversy described in SECTION 7.9 or (y) the
commencement of any litigation, action, proceeding or labor controversy of
the type described in SECTION 7.9, notice thereof and, to the extent
reasonably requested by the Lender, copies of all documentation relating
thereto not subject to the attorney-client privilege;
(i) as soon as possible and in any event within ten (10) days after
any responsible officer of the Borrower or any of its Subsidiaries has
actual knowledge thereof, notice of
68
(i) any claim by any Person against the Borrower or any of its
Subsidiaries of nonpayment of, or
(ii) any attempt by any Person to collect upon or enforce
any accounts payable (that are more than 30 days past due) of the Borrower
or any of its Subsidiaries, in the case of any single account payable in
excess of $100,000, or in the case of all accounts payable in the aggregate
in excess of $250,000;
(j) upon, but in no event later than ten (10) days after, any
responsible officer of the Borrower or any of its Subsidiaries becomes
aware of (i) any and all enforcement, cleanup, removal or other
governmental or regulatory actions instituted, completed or threatened or
other environmental claims against the Borrower or any Subsidiary or any of
its Properties pursuant to any applicable Environmental Laws which could
have a Material Adverse Effect, and (ii) any environmental or similar
condition on any real property adjoining or in the vicinity of the property
of the Borrower or any Subsidiary that could reasonably be anticipated to
cause such property or any part thereof to be subject to any restrictions
on the ownership, occupancy, transferability or use of such property under
any Environmental Laws;
(k) as soon as available and in any event within sixty (60) days
after January 1, 1999 and January 1st of each calendar year, an Engineering
Report from an independent petroleum engineering firm acceptable to the
Lender in its reasonable judgment, and as soon as available and in any
event within sixty (60) days after July lst of each calendar year
commencing in 1999, an Engineering Report from the Borrower's internal
reserve engineers, unless the Lender, at least sixty (60) days before the
required delivery date of such Engineering Report, has requested that it be
prepared by an independent petroleum engineering firm reasonably acceptable
to the Lender;
(l) promptly after (i) the sending or filing thereof, copies of all
reports which the Borrower sends to any of its security holders, (ii) the
sending or filing thereof, all material reports and registration statements
which the Borrower or any of its Subsidiaries files with the Securities and
Exchange Commission or any national securities exchange, (iii) the filing
thereof, copies of all tariff and rate cases and other material reports
filed with any regulatory authority (other than routine operating reports),
and (iv) receipt thereof, copies of all notices received from any
regulatory authority concerning material noncompliance by the Borrower or
any of its Subsidiaries with any applicable regulations;
(m) immediately upon becoming aware of the institution of any steps
by the Borrower or any other Person to terminate any Pension Plan, or the
69
failure to make a required contribution to any Pension Plan if such failure
is sufficient to give rise to a Lien under section 302(f) of ERISA, or the
taking of any action with respect to a Pension Plan which could result in
the requirement that the Borrower furnish a bond or other security to the
PBGC or such Pension Plan, or the occurrence of any event with respect to
any Pension Plan which could result in the incurrence by the Borrower of
any material liability, fine or penalty, or any material increase in the
contingent liability of the Borrower with respect to any post-retirement
Welfare Plan benefit, notice thereof and copies of all documentation
relating thereto;
(n) promptly after the Borrower discovers or determines that any
computer application (including those of its suppliers or vendors) that is
material to the businesses or operations of the Borrower and its
Subsidiaries taken as a whole will not be Year 2000 Compliant on a timely
basis, notice thereof and a copy of the Borrower's plan for dealing with
such problem except to the extent such failure could not reasonably be
expected to have a Material Adverse Effect; and
(o) such other information respecting the condition or operations,
financial or otherwise, of the Borrower or any of its Subsidiaries as the
Lender may from time to time reasonably request including operational and
accounting information with respect to the Mortgaged Properties including
production volumes, revenues, operating costs, drilling and completion
reports and well test data.
SECTION 8.1.2. COMPLIANCE WITH LAWS, ETC. The Borrower will, and will
cause each of its Subsidiaries to, comply with all Applicable Laws, except where
failure to so comply would not be reasonably expected to have a Material Adverse
Effect, such compliance to include (without limitation):
(a) the maintenance and preservation of its corporate existence and
qualification as a foreign corporation; and
(b) the payment, before the same become delinquent, of all taxes,
assessments and governmental charges imposed upon it or upon its property
except to the extent being diligently contested in good faith by
appropriate proceedings and for which adequate reserves in accordance with
GAAP shall have been set aside on its books.
SECTION 8.1.3. MAINTENANCE, DEVELOPMENT AND SALE OF PROPERTIES.
(a) The Borrower will, and will cause each of its Subsidiaries to,
maintain (subject to any disposition permitted by SECTION 8.2.9), preserve,
protect and keep its Properties in good repair, working order and condition
70
(ordinary wear and tear excepted), and make necessary and proper repairs,
renewals and replacements so that its business carried on in connection
therewith may be properly conducted at all times in accordance with
standard industry practices. In particular, the Borrower will, and will
cause each of its Subsidiaries to, operate or cause to be operated its Oil
and Gas Properties as a reasonable and prudent operator.
(b) The Borrower shall use all reasonable efforts promptly to
complete the drilling and development program contemplated by the Approved
Development Plan. In addition, the Borrower shall use all reasonable
efforts to develop and bring into production in a prudent and businesslike
manner all proved developed non-producing reserves that the Lender has
considered in its determination of the Borrowing Base.
(c) The Borrower shall ensure that at all times it has available to
it, either through its employees or through independent contractors,
petroleum engineers with appropriate experience and expertise in the proper
operation and development of properties similar to the Mortgaged
Properties.
(d) From time-to-time, but not less than once each Fiscal Quarter
during the time any Tranche B Loan is outstanding, the Borrower shall
propose to the Lender revisions to the Approved Development Plan then in
effect, showing, among other things, revised projections of Capital
Expenditures for the eighteen (18) month period following such revision,
which revisions shall in all respects satisfactory to the Lender. Once
approved in writing by the Lender, the then existing Approved Development
Plan shall be amended and shall thereafter replace and supersede the prior
Approved Development Plan.
(e) Promptly after the drilling and completion of each well drilled
on the Oil and Gas Properties that have been considered by the Lender in
the determination or redetermination of the Borrowing Base or the
Collateral Value, the Borrower shall promptly request assignments of any
interests earned by virtue of such drilling and, within fifteen (15) days
after the earlier to occur of the receipt of such assignments or sixty (60)
days after first production from such well, shall deliver to the Lender:
(i) true and correct copies of any such assignments of record title
of the applicable Oil & Gas Properties into the Borrower or its
Subsidiary, as applicable,
(ii) true and correct copies of all required Consents and Approvals
(including copies of applications to the Mineral Board of the State of
Louisiana for the relevant Approvals) applicable to such assignments,
71
(iii) original, executed and acknowledged counterparts of an
Assignment from the Borrower or its Subsidiary, as applicable, to the
Designee (effective not later than the date of first production from
such well),
(iv) original, executed and acknowledged counterparts of a
supplemental Mortgage and related amendments to financing statements
and
(v) a favorable mortgagee's title opinion showing that the Borrower
or its Subsidiary, as applicable, is vested with good and marketable
title to interests in the applicable Mortgaged Property consistent
with the working interests and net revenue interest for such property
shown in the most recent Engineering Report and showing that the
interests created by such supplemental Mortgage constitute valid first
Liens thereon, free and clear of all defects and encumbrances other
than as approved by the Lender,
in each case in form and substance reasonably satisfactory to the Lender.
(f) The Borrower and each of its Subsidiaries shall, promptly after
the Effective Date, take all necessary actions and use its reasonable best
efforts to obtain appropriate Consents from the Mineral Board of the State
of Louisiana of the granting of the Assignment and the Mortgage with
respect to any State of Louisiana leases covered by such instruments.
(g) The Borrower will offer for sale and sell Oil and Gas Properties
of the Borrower and its Subsidiaries not containing Proven Reserves on a
schedule generating net sales proceeds at a cumulative rate of not less
than $3 million during each Fiscal Quarter after the Effective Date such
that, within fifteen (15) months after the Effective Date, the Borrower
shall have received net sales proceeds from such Required Asset Sales of
not less than $15 million.
SECTION 8.1.4. INSURANCE. The Borrower will, and will cause each of its
Subsidiaries to, maintain or cause to be maintained with responsible insurance
companies insurance with respect to its properties and business against such
casualties and contingencies and of such types and in such amounts as is
customary in the case of similar businesses (including, where appropriate, well
control, operator's extra expense and remediation insurance) and will furnish to
the Lender at reasonable intervals at the request of the Lender a certificate of
an Authorized Officer of the Borrower setting forth the nature and extent of all
insurance maintained by the Borrower and its Subsidiaries in accordance with
this SECTION 8.1.4. The following shall apply to the insurance required by this
SECTION 8.1.4:
(a) Each policy for property insurance covering the Mortgaged Property
shall show the Lender as loss payee;
(b) Each policy for liability insurance covering the Mortgaged Property
shall show the Lender as additional insured;
(c) Each insurance policy covering the Mortgaged Property shall provide
that at least thirty (30) days prior written notice of cancellation,
reduction in amount or other change in coverage, or of lapse shall be given
to the Lender by the insurer; and
(d) The Borrower shall, if so requested by the Lender, deliver to the
Lender the original or a certified copy of each insurance policy covering
the Mortgaged Property.
SECTION 8.1.5. BOOKS AND RECORDS. The Borrower will, and will cause each of
its Subsidiaries to, keep books and records which accurately reflect all of its
material business affairs and transactions and permit the Lender or any of its
respective representatives, at reasonable times (but in any event, within three
(3) Business Days after notice from the Lender and during all normal business
hours) and at reasonable intervals, to visit all of its offices, to discuss its
financial matters with its officers, directors and, after forty-eight (48) hours
notice to the Borrower and independent public accountant (and the Borrower
hereby authorizes such independent public accountant to discuss the Borrower's
and its Subsidiaries' financial matters with the Lender or its representatives
whether or not any representative of the Borrower is present) and to examine
(and, at the expense of the Borrower, photocopy extracts from) any of its books
or other corporate records. The Borrower shall pay any reasonable fees of such
independent public accountant incurred in connection with the Lender's exercise
of its rights pursuant to this Section. Furthermore, the Borrower will permit
the Lender, or its agents, at the cost and expense of the Borrower, to enter
upon the Oil and Gas Properties and all parts thereof, for the purpose of
investigating and inspecting the condition and operation thereof, and shall
permit reasonable access to the field offices and other offices, including the
principal place of business, of the Borrower to inspect and examine the Oil and
Gas Properties.
SECTION 8.1.6. ENVIRONMENTAL COVENANT. The Borrower will, and will cause
each of its Subsidiaries to,
(a) use, operate and maintain all of its facilities and Properties in
compliance with all Environmental Laws, keep all necessary permits,
approvals, certificates, licenses and other authorizations relating to
environmental matters in effect and remain in compliance therewith, and
handle all Hazardous Materials in compliance with all applicable
Environmental Laws where failure to do so would reasonably be expected to
have a Material Adverse Effect;
73
(b) (i) promptly notify the Lender, and if requested by the Lender, and
provide copies of all written claims, complaints, notices or inquiries
relating to the condition of its facilities and Properties or compliance
with Environmental Laws, (ii) use all reasonable efforts within ninety (90)
days to have dismissed with prejudice any actions or proceedings relating
to compliance with Environmental Laws which would or could in the
reasonable opinion of the Lender have a Material Adverse Effect, and (iii)
diligently pursue cure of any material underlying environmental problem
which forms the basis of any such claim, complaint, notice or inquiry; and
(c) provide such information and certifications which the Lender may
reasonably request from time to time to evidence compliance with this
Section 8.1.6.
SECTION 8.1.7. FURTHER ASSURANCES.
(a) The Borrower shall, and shall cause each of its Subsidiaries to,
upon the request of the Lender, take such actions and execute and deliver
such documents and instruments as the Lender shall require to ensure that
the Lender shall, at all times, have received currently effective, duly
executed Loan Documents encumbering Oil and Gas Properties of the Borrower
and its Subsidiaries constituting 90% of the Proven Reserves to which value
is given in the determination of the then current Borrowing Base and
Collateral Value (with accompanying letters in lieu of transfer orders) and
satisfactory title evidence in form and substance reasonably acceptable to
the Lender in its reasonable business judgment as to ownership of such Oil
and Gas Properties; PROVIDED that, upon thirty (30) days notice to the
Borrower, the Lender may require, and the Borrower and/or its Subsidiaries,
as applicable, shall execute, acknowledge and deliver to the Lender,
Mortgages effectively encumbering 100% of the Oil and Gas Properties of the
Borrower and its Subsidiaries to which value is given in the determination
of the then current Borrowing Base.
(b) If the Lender shall determine that, as of the date of any Borrowing
Base Redetermination, the Borrower or any of its Subsidiaries shall have
failed to comply with the preceding SUBSECTION 8.1.7(a), the Lender may
notify the Borrower in writing of such failure and, within thirty (30) days
from and after receipt of such written notice by the Borrower, the Borrower
or its Subsidiaries (as applicable) shall execute and deliver to the Lender
supplemental or additional Loan Documents, in form and substance reasonably
satisfactory to the Lender and its counsel, securing payment of the Notes
and the other Obligations and covering additional assets not then
encumbered by any Loan Documents
74
(together with current valuations, Engineering Reports, and title evidence
applicable to the additional assets collaterally assigned, each of which
shall be in form and substance reasonably satisfactory to the Lender) such
that the Lender shall have received currently effective duly executed Loan
Documents encumbering Oil and Gas Properties constituting at least 90% (or,
as provided in SUBSECTION 8.1.7(a), 100%) of the Proven Reserves of the
Borrower and its Subsidiaries to which value is given in the determination
of the then current Borrowing Base (with accompanying letters in lieu of
transfer orders) and satisfactory title evidence in form and substance
acceptable to the Lender in its reasonable business judgment as to
ownership of such Oil and Gas Properties.
(c) The Borrower shall ensure that all written information, exhibits,
certificates and reports furnished by or on behalf of the Borrower to the
Lender do not and will not contain any untrue statement of a material fact
and do not and will not omit to state any material fact or any fact
necessary to make the statements contained therein not misleading in light
of the circumstances in which made, and will promptly disclose to the
Lender and correct any defect or error that may be discovered therein or in
any Loan Document or in the execution, acknowledgment or recordation
thereof.
SECTION 8.1.8. HYDROCARBON HEDGING. On or before the date of the initial
Loans hereunder, the Borrower will enter into natural gas and crude oil Hedging
Agreements with counterparties and on such other terms as are satisfactory to
the Lender, that will enable the Borrower to obtain a net realized price of not
less than (a) $1.75 per MMBtu of natural gas and (b) $16.00 per barrel of oil
produced from its and each Borrower's Subsidiary's Hydrocarbon Interests on the
volumes set forth on SCHEDULE IV (being an amount not less than 50% and not more
than 70% of the estimated production (for the period commencing as of the
Effective Date and ending twelve months later) from proved developed producing
reserves attributable to the Hydrocarbon Interests of the Borrower and its
Subsidiaries as of the Effective Date), commencing no later than the date of the
initial Loans hereunder; PROVIDED, HOWEVER, that prior to the expiration of such
twelve month period, the Borrower shall enter into Hedging Agreements covering
the period beginning with the 13th month after the Effective Date and ending
with the 18th month after the Effective Date, with respect to the volumes to be
produced during such period.
SECTION 8.1.9. INTEREST RATE PROTECTION. On or before the date of the
initial Loans hereunder, the Borrower shall enter into Hedging Agreements, with
counterparties and on such other terms as are satisfactory to the Lender,
designed to ensure a maximum interest rate of (a) 9% on the notional amount
projected to be outstanding as Tranche A Loans and (b) 11% per annum on the
notional amount
75
projected to be outstanding as Tranche B Loans for all periods prior to the
Tranche B Availability Termination Date.
SECTION 8.1.10. INTERCREDITOR AGREEMENT. If the Borrower enters into any
binding agreement with a Subordinated Creditor, then the Borrower shall deliver
to the Lender, contemporaneously with the execution of such agreement with such
Subordinated Creditor, executed counterparts of an intercreditor agreement,
dated as of the date not later than ninety (90) days after the Effective Date
and satisfactory in form and substance to the Lender, duly executed by the
Borrower and each of its Subsidiaries, as applicable, and each of the
Subordinated Creditors together with such subordination agreements and related
documents and agreements as are necessary to implement such intercreditor
agreement. Notwithstanding any other provision of this Agreement to the
contrary, the Borrower's ability to request and the Lender's obligation to make
Tranche B Loans shall be limited to an aggregate principal amount of $4,250,000
until such time as (i) such intercreditor arrangements are implemented to the
satisfaction of the Lender, or (ii) the Borrower notifies the Lender in writing
that it has determined not to enter into financing arrangements with Duke Energy
Financial Services, Inc.
SECTION 8.1.11. MERGER OF CERTAIN SUBSIDIARIES. The Borrower shall, on or
before December 14, 1998, cause Frontier, Inc. and Frontier Exploration and
Production Corporation to be merged with and into the Borrower and shall deliver
to the Lender Certificates of Merger from the appropriate Government Agencies
evidencing such mergers.
SECTION 8.2. NEGATIVE COVENANTS. The Borrower agrees with the Lender that,
until all Commitments have terminated and all Obligations have been paid and
performed in full, the Borrower will perform the obligations set forth in this
SECTION 8.2.
SECTION 8.2.1. BUSINESS ACTIVITIES. The Borrower will not, and will not
permit its Subsidiaries to, engage in any business activity, except those
described in the first recital and such activities as may be incidental or
related thereto. Until the merger of Frontier, Inc. and Frontier Exploration and
Production Corporation with and into the Borrower as described in SECTION
8.1.11, the Borrower will not, and will not permit any of its Subsidiaries, to
conduct any business in such Subsidiaries other than as may be necessary to
manage and operate its existing properties and to implement such mergers.
SECTION 8.2.2. INDEBTEDNESS. The Borrower will not, and will not permit any
of its Subsidiaries to, create, incur, assume or suffer to exist or otherwise
become or be liable in respect of any Indebtedness, other than, without
duplication, the following:
(a) Indebtedness in respect of the Loans and other Obligations;
76
(b) Indebtedness in an aggregate principal amount not to exceed
$500,000 at any time outstanding which is incurred by the Borrower or any
of its Subsidiaries to a vendor of any assets to finance its acquisition of
such assets;
(c) unsecured Indebtedness incurred in the ordinary course of business
(including (i) open accounts extended by suppliers on normal trade terms in
connection with purchases of goods and services, and (ii) gas balancing,
but excluding Indebtedness incurred through the borrowing of money or
Contingent Liabilities);
(d) Hedging Obligations incurred pursuant to the Hedging Agreements
approved by the Lender pursuant to SECTIONS 8.1.8 and 8.1.9; and
(e) Contingent Obligations incurred to satisfy bonding requirements
imposed by any Government Agency not to exceed, in the aggregate, $100,000;
(f) Indebtedness of its Subsidiaries existing as of the Effective Date
which is identified in ITEM 8.2.2(f) of the Disclosure Schedule;
(g) Indebtedness in respect of Capitalized Lease Obligations in an
amount not to exceed $150,000 at any time outstanding;
(h) Indebtedness owed by the Borrower to any of the Subsidiaries or by
any Subsidiary of the Borrower to the Borrower or any Subsidiary;
(i) endorsements of negotiable instruments for collection in the
ordinary course of business;
(j) Indebtedness of the Borrower and its Subsidiaries which are
Investments to the extent permitted by SECTION 8.2.5(b);
(k) subordinated Indebtedness of the Borrower to Subordinated Creditors
which contains terms and conditions, including subordination provisions,
acceptable to the Lender;
(l) unsecured Indebtedness to Aspect in respect of geological and
geophysical services provided to the Borrower in an amount not to exceed
$3,000,000.00;
(m) any nonrecourse obligations of the Borrower to 420 Energy
Investments, Inc., a Delaware corporation, in an amount not to exceed
$864,000 plus accrued interest relating to the recoupment of the Borrower's
77
share of costs incurred in connection with a 3-D seismic program and
payable out of production which may be obtained from the Properties
involved in such program;
(n) additional Indebtedness not permitted by CLAUSES (a) through (m)
above, PROVIDED, HOWEVER, that the aggregate amount of all Indebtedness
incurred by the Borrower and its consolidated Subsidiaries pursuant to this
CLAUSE (n) shall not exceed $150,000 at any one time outstanding;
PROVIDED, HOWEVER, that no Indebtedness otherwise permitted by CLAUSE (b) shall
be permitted if, after giving effect to the incurrence thereof, any Default
shall have occurred and be continuing.
SECTION 8.2.3. LIENS. The Borrower will not, and will not permit any of the
Subsidiaries to create, incur, assume or suffer to exist any Lien upon any of
its Property, revenues or assets, whether now owned or hereafter acquired,
except:
(a) Liens securing payment of the Obligations, granted pursuant to any
Loan Document;
(b) Liens granted to secure payment of Indebtedness of the type
permitted and described in CLAUSE (b) of SECTION 8.2.2 and covering only
those assets acquired with the proceeds of such Indebtedness;
(c) Liens granted to secure payment of Indebtedness of the type
permitted and described in CLAUSE (n) of SECTION 8.2.2;
(d) Hydrocarbon production sales contracts;
(e) Liens for taxes, assessments or other governmental charges or
levies not at the time delinquent or thereafter payable without penalty or
being diligently contested in good faith by appropriate proceedings and for
which adequate reserves in accordance with GAAP shall have been set aside
on its books;
(f) Liens of carriers, warehousemen, mechanics, materialmen and
landlords incurred in the ordinary course of business for sums not overdue
or being diligently contested in good faith by appropriate proceedings and
for which adequate reserves in accordance with GAAP shall have been set
aside on its books; PROVIDED, that at no time shall such sums exceed in the
aggregate $100,000;
(g) Liens incurred in the ordinary course of business in connection
with workmen's compensation, unemployment insurance or other forms of
78
governmental insurance or benefits, or to secure performance of bonds,
licenses, statutory obligations, and performance bonds, tenders, statutory
obligations, leases and contracts (other than for borrowed money), all
other obligations of a like nature entered into in the ordinary course of
business or to secure obligations on surety or appeal bonds, all other
obligations of a like nature;
(h) zoning and similar covenants, restrictions, easements, servitudes,
permits, conditions, exceptions, reservations, minor rights, minor
encumbrances, minor irregularities in title or conventional rights of
reassignment prior to abandonment and similar restrictions and other
similar encumbrances or title defects which do not materially interfere
with the occupation, use and enjoyment by the Borrower of its assets in the
ordinary course of business as presently conducted, or materially impair
the value thereof for the purpose of such business;
(i) judgment Liens in existence less than thirty (30) days after the
entry thereof or with respect to which execution has been stayed or the
payment of which is covered in full (subject to a customary deductible) by
insurance maintained with responsible insurance companies;
(j) deposits of cash to secure insurance in the ordinary course of
business;
(k) banker's liens arising by operation of law securing fees and costs
of such banks, but not liens securing borrowed money;
(l) subordinated Liens on Hydrocarbon Interests of the Borrower and its
Subsidiaries consisting of Proven Reserves to the extent that the Lender
has a superior and senior Lien on such Properties;
(m) Liens in favor of operators and non-operators under joint operating
agreements or similar contractual arrangements arising in the ordinary
course of the business of the Borrower to secure amounts owing, which
amounts are not yet due or are being contested in good faith by appropriate
proceedings, if such reserve as may be required by GAAP shall have been
made therefor;
(n) production sales agreements, division orders, operating agreements
and other agreements customary in the oil and gas business for producing,
processing, gathering, transporting and selling Hydrocarbons;
(o) the terms any provisions of the leases, unit agreements,
assignments and other transfer of title documents in the chain of title
under which the Borrower acquired the relevant Properties;
79
(p) any Liens securing Indebtedness, neither assumed nor guaranteed by
the Borrower nor on which it customarily pays interest, existing upon real
estate or rights in or relating to real estate acquired by the Borrower for
substation, metering station, pump station, storage, gathering line,
transmission line, transportation line, distribution line, or right of way
purposes, and any Liens reserved in leases for rent and compliance with the
terms of the leases in the case of leasehold estates, so long as no default
has occurred in the payment or performance thereof, and to the extent that
any such Lien referred to in this clause does not materially impair the use
of the Properties covered by such Lien for the purposes for which such
Properties is held by the Borrower;
(q) the statutory Lien to secure payment of the proceeds of Hydrocarbon
production established by Texas Bus. & Com. Code SECTION.9.319 and similar
laws of other jurisdictions;
(r) rights reserved to or vested in any Government Agency by the terms
of any right, power, franchise, grant, license, or permit, or by any
provision of law, to terminate such right, power, franchise, grant,
license, or permit or to purchase, condemn, expropriate, or recapture or to
designate a purchaser of any of the Properties of the Borrower;
(s) rights of a common owner of any interest in real estate, rights of
way, or easements held by the Borrower and such common owner as tenant in
common or through other common ownership; and
(t) any lien securing nonrecourse obligations of the Borrower described
in SECTION 8.2.2(m).
SECTION 8.2.4. FINANCIAL CONDITION. The Borrower will not permit:
(a) Tangible Net Worth at any time to be less than $45,000,000, plus
(i) fifty percent (50%) of Consolidated Net Income (excluding the effects
of consolidated net losses) for all Fiscal Quarters beginning after the
Effective Date and treated as a single accounting period, plus (ii)
one-hundred percent (100%) of the net proceeds received by the Borrower or
its Subsidiaries from the sale of any Non-Redeemable Stock at any time
after the Effective Date;
(b) the Current Ratio at any time, commencing on October 1, 1998, to be
less than 1.1:1.0;
(c) the Debt to Capitalization Ratio at any time to be greater than
50%; or
80
(d) the Interest Coverage Ratio (i) for the Fiscal Quarter prior to and
including December 31, 1998, to be less than 1.0:1.0, (ii) for any two
consecutive Fiscal Quarters prior to and including March 31, 1999, to be
less than 1.0:1.0, (iii) for the Fiscal Quarter prior to and including June
30, 1999, to be less than 3.0:1.0, and (iv) for any four consecutive Fiscal
Quarters after June 30, 1999, to be less than 3.0:1.0.
The Borrower shall not, and shall not suffer or permit any Subsidiary to, make
any significant change in accounting treatment or reporting practices, except as
required by GAAP, or, without the consent of the Lender, such consent not to be
unreasonably withheld, change the fiscal year of the Borrower or of any
Subsidiary.
SECTION 8.2.5. INVESTMENTS. The Borrower will not, and will not permit any
of its Subsidiaries to, make, incur, assume or suffer to exist any Investment in
any other Person, except:
(a) Cash Equivalent Investments;
(b) without duplication, Investments permitted as Indebtedness pursuant
to SECTION 8.2.2;
(c) without duplication, Investments in the nature of Capital
Expenditures;
(d) to the extent the formation or acquisition of any Subsidiary is
permitted hereunder, Investments in such Subsidiary; and
(e) Investments permitted by SECTION 8.2.8; PROVIDED, HOWEVER, that
(f) any Investment which when made complies with the requirements of
the definition of the term "CASH EQUIVALENT INVESTMENT" may continue to be
held notwithstanding that such Investment if made thereafter would not
comply with such requirements; and
(g) no Investment otherwise permitted by CLAUSE (b) shall be permitted
to be made if, immediately before or after giving effect thereto, any
Default shall have occurred and be continuing.
81
SECTION 8.2.6. RESTRICTED PAYMENTS, ETC. On and at all times after the
Effective Date:
(a) the Borrower will not, and will not permit any of its Subsidiaries
(other than a wholly-owned Subsidiary) to, declare, pay or make any
dividend or distribution (in cash, property or obligations) on any class of
equity (now or hereafter outstanding) of the Borrower or such Subsidiary or
on any options, warrants or other rights with respect to any interest or
shares of any class of capital stock (now or hereafter outstanding) of the
Borrower or such Subsidiary or apply any of its funds, property or assets
to the purchase, redemption, sinking fund or other retirement of, any class
of capital stock (now or hereafter outstanding) of the Borrower, or
options, warrants or other rights with respect to any interest or shares of
or in any class of capital stock (now or hereafter outstanding) of the
Borrower or such Subsidiary (such dividends, distributions or applications
being called "DISTRIBUTION PAYMENTS") other than Distribution Payments
which do not cause the Borrower to be in violation of the Restricted
Payment Tests; and
(b) the Borrower will not permit any Subsidiary to make any
Distribution Payments other than to the Borrower; and
(c) the Borrower will not, and will not permit its Subsidiaries to,
make any deposit for any of the foregoing purposes.
SECTION 8.2.7. RENTAL OBLIGATIONS. The Borrower will not, and will not
permit any of its Subsidiaries to, enter into at any time any arrangement
(excluding oil and gas leases entered into in the ordinary course of business)
which involves the leasing by the Borrower or any Subsidiary from any lessor of
any real or personal property (or any interest therein), except arrangements
which, together with all other such arrangements which shall then be in effect,
will not require the payment of an aggregate amount of rentals by the Borrower
or any Subsidiary in excess of (excluding escalations resulting from a rise in
the consumer price or similar index) $250,000 for any Fiscal Year or $1,250,000
during the full remaining term of such arrangements; PROVIDED, HOWEVER, that any
calculation made for purposes of this SECTION 8.2.7 shall exclude any amounts
(i) required to be expended for maintenance and repairs, insurance, taxes,
assessments, and other similar charges and (ii) any amounts relating to
Capitalized Lease Obligations.
SECTION 8.2.8. CONSOLIDATION, MERGER, ETC. The Borrower will not, and will
not permit any of its Subsidiaries to, liquidate or dissolve, consolidate with,
or merge into or with, any other partnership or corporation, unless, in the case
of such consolidation or merger, the Borrower is the surviving entity and
Principal Shareholders retain control over the Borrower. The Borrower will not
create any Subsidiary except with the prior written consent of the Lender.
82
SECTION 8.2.9. ASSET DISPOSITIONS, ETC. The Borrower will not, and will not
permit any of its Subsidiaries to, sell, transfer, lease, contribute or
otherwise convey, or grant options, warrants or other rights with respect to,
all or substantially all of the assets of the Borrower or any of its
Subsidiaries in any one transaction or in any series of transactions, whether or
not related; and the Borrower will not, and will not permit any of its
Subsidiaries to, sell, transfer, lease, contribute or otherwise convey, or grant
options, warrants or other rights with respect to, less than all or any
substantial part of its assets (including accounts receivable) to any Person
other than
(a) farmouts under standard industry terms of Properties not holding
Proven Reserves;
(b) abandonment of Properties not capable of producing Hydrocarbons in
paying quantities after the expiration of their primary terms;
(c) if such assets are not in the Borrowing Base, such sale, transfer,
lease, contribution or conveyance is for cash or other consideration having
a value at least equal to the fair market value of such assets;
(d) if such assets are in the Borrowing Base, the Borrower complies
with the terms of SECTION 3.1.2 and such sale, transfer, lease,
contribution or conveyance is for cash in an amount at least equal to the
fair market value of such assets;
(e) Required Asset Sales; or
(f) as permitted by SECTION 2.7 of the Mortgages.
SECTION 8.2.10. MODIFICATION OF CERTAIN DOCUMENTS. Except with respect to
amendments that do not directly and materially affect the rights of Lender under
the Loan Documents, the Borrower will not amend its Organic Documents or consent
to any amendment, supplement or other modification of any of the terms or
provisions contained in, or applicable to, the Material Contracts, in each case
without the prior written consent of the Lender.
SECTION 8.2.11. TRANSACTIONS WITH AFFILIATES. The Borrower will not, and
will not permit any of its Subsidiaries to, enter into, or cause, suffer or
permit to exist any arrangement or contract with any of its other Affiliates
unless such arrangement or contract is fair and equitable to the Borrower and is
an arrangement or contract of the kind which would be entered into by a prudent
Person in the position of the Borrower or such Subsidiary with a Person which is
not one of its Affiliates.
83
SECTION 8.2.12. NEGATIVE PLEDGES, RESTRICTIVE AGREEMENTS, ETC. The Borrower
will not, and will not permit any of its Subsidiaries to, enter into any
agreement (excluding this Agreement, any other Loan Document and any agreement
governing any Indebtedness permitted by CLAUSES (b) or (e) of SECTION 8.2.2 as
in effect on the Effective Date as to the assets financed with the proceeds of
such Indebtedness) prohibiting
(a) the creation or assumption of any Lien upon its properties,
revenues or assets, whether now owned or hereafter acquired (other than
those assets subject to Liens permitted by SECTION 8.2.3(b)), or the
ability of the Borrower or any other Obligor to amend or otherwise modify
this Agreement or any other Loan Document; or
(b) the ability of any Subsidiary to make any payments, directly or
indirectly, to the Borrower by way of dividends, advances, repayments of
loans or advances, reimbursements of management and other intercompany
charges, expenses and accruals or other returns on investments, or any
other agreement or arrangement which restricts the ability of any such
Subsidiary to make any payment, directly or indirectly, to the Borrower.
SECTION 8.2.13. TAKE OR PAY CONTRACTS. Except as disclosed to the Lender in
ITEM 8.2.13 of the Disclosure Schedule, and except for reservation charges
payable for reservations of capacity in gathering systems and pipelines incurred
in the ordinary course of business on an arm's length basis for volumes
reasonably expected to be produced from the Borrowers' Properties to be
transported through such systems and pipelines, the Borrower will not, and will
not permit any of its Subsidiaries to, enter into or be a party to any
arrangement for the purchase of materials, supplies, other property (including
without limitation Hydrocarbons), or services if such arrangement requires that
payment be made by the Borrower or such Subsidiary regardless of whether such
materials, supplies, other property, or services are delivered or furnished to
it.
ARTICLE IX
EVENTS OF DEFAULT
SECTION 9.1. LISTING OF EVENTS OF DEFAULT. Each of the following events or
occurrences described in this SECTION 9.1 shall constitute an "EVENT OF
DEFAULT".
SECTION 9.1.1. NON-PAYMENT OF OBLIGATIONS. The Borrower shall default in
the payment or prepayment when due of any principal of any Loan; the Borrower
shall default in the payment when due of any Reimbursement Obligation or Hedging
84
Obligation under a Hedging Agreement in effect between the Borrower and the
Lender or an Affiliate of the Lender; or the Borrower shall default (and such
default shall continue unremedied for a period of five (5) days) in the payment
when due of any interest on any Loan or any fee or of any other Obligation.
SECTION 9.1.2. BREACH OF WARRANTY. Any representation or warranty of the
Borrower or any other Obligor made or deemed to be made hereunder or in any
other Loan Document executed by it or any other writing or certificate furnished
by or on behalf of the Borrower or any other Obligor to the Lender for the
purposes of or in connection with this Agreement or any such other Loan Document
(including any certificates delivered pursuant to ARTICLE VI) is or shall be
incorrect when made in any material respect.
SECTION 9.1.3. NON-PERFORMANCE OF CERTAIN COVENANTS AND OBLIGATIONS. The
Borrower shall default in the due performance and observance of any of its
obligations under SECTION 3.1.2, SECTION 8.1 (other than 8.1.2, 8.1.3 and 8.1.6)
or SECTION 8.2.
SECTION 9.1.4. NON-PERFORMANCE OF OTHER COVENANTS AND OBLIGATIONS. The
Borrower or any other Obligor shall default in the due performance and
observance of any other agreement contained herein or in any other Loan Document
executed by it, and such default shall continue unremedied for a period of
fifteen (15) days after notice thereof shall have been given to the Borrower by
the Lender.
SECTION 9.1.5. DEFAULT ON OTHER INDEBTEDNESS.
(a) A default shall occur in the payment when due (subject to any
applicable grace period), whether by acceleration or otherwise, of any
Indebtedness (including any subordinated indebtedness permitted by SECTION
8.2.2 and any Hedging Agreements in effect between the Borrower and the
Lender or any Affiliate of the Lender, but excluding Indebtedness described
in SECTION 9.1.1) of the Borrower, any consolidated Subsidiary or other
Obligor having a principal amount, individually or in the aggregate, in
excess of $50,000, or a default shall occur in the performance or
observance of any obligation or condition with respect to such Indebtedness
if the effect of such default is to accelerate the maturity of any such
Indebtedness or such default shall continue unremedied for any applicable
period of time sufficient to permit any holder of such Indebtedness, or any
trustee or agent for such holders, to cause such Indebtedness to become due
and payable prior to its expressed maturity.
(b) A failure to pay when due any royalty, overriding royalty or
similar interest burdening the Oil and Gas Properties of the Borrower, in
the aggregate, in excess of $50,000.
85
SECTION 9.1.6. JUDGMENTS. Any judgment, decree, arbitration award or order
for the payment of money in excess of $50,000 in excess of valid and collectible
insurance in respect thereof the payment of which is not being disputed or
contested by the insurer or insurers shall be rendered against the Borrower, any
consolidated Subsidiary, or other Obligor and either
(a) enforcement proceedings shall have been commenced by any creditor
upon such judgment or order; or
(b) there shall be any period of ten (10) consecutive days during which
a stay of enforcement of such judgment or order, by reason of a pending
appeal or otherwise, shall not be in effect.
SECTION 9.1.7. PENSION PLANS. Any of the following events shall occur with
respect to any Pension Plan
(a) the institution of any steps by the Borrower, any member of its
Controlled Group or any other Person to terminate a Pension Plan if, as a
result of such termination, the Borrower or any such member could be
required to make a contribution to such Pension Plan, or could reasonably
expect to incur a liability or obligation to such Pension Plan; or
(b) a contribution failure occurs with respect to any Pension Plan
sufficient to give rise to a Lien under Section 302(f) of ERISA.
SECTION 9.1.8. CONTROL OF THE BORROWER. Any Change in Control shall occur.
SECTION 9.1.9. BANKRUPTCY, INSOLVENCY, ETC. The Borrower or any other
Obligor shall
(a) become insolvent or generally fail to pay, or admit in writing its
inability or unwillingness to pay, debts as they become due;
(b) apply for, consent to, or acquiesce in, the appointment of a
trustee, receiver, sequestrator or other custodian for the Borrower or any
other Obligor or any property of any thereof, or make a general assignment
for the benefit of creditors;
(c) in the absence of such application, consent or acquiescence, permit
or suffer to exist the appointment of a trustee, receiver, sequestrator or
other custodian for the Borrower or any other Obligor or for a substantial
part of the property of any thereof, and such trustee, receiver,
sequestrator or other custodian shall not be discharged within sixty (60)
days, PROVIDED that the Borrower and each other Obligor hereby expressly
authorizes the Lender to
86
appear in any court conducting any relevant proceeding during such 60-day
period to preserve, protect and defend its rights under the Loan Documents;
(d) permit or suffer to exist the commencement of any bankruptcy,
reorganization, debt arrangement or other case or proceeding under any
bankruptcy or insolvency law, or any dissolution, winding up or liquidation
proceeding, in respect of the Borrower or any other Obligor, and, if any
such case or proceeding is not commenced by the Borrower or such other
Obligor, such case or proceeding shall be consented to or acquiesced in by
the Borrower or such other Obligor or shall result in the entry of an order
for relief or shall remain for sixty (60) days undismissed, PROVIDED that
the Borrower and each other Obligor hereby expressly authorizes the Lender
to appear in any court conducting any such case or proceeding during such
60-day period to preserve, protect and defend its rights under the Loan
Documents; or
(e) take any action authorizing, or in furtherance of, any of the
foregoing.
SECTION 9.1.10. IMPAIRMENT OF SECURITY, ETC. Any Loan Document, or any Lien
granted thereunder, shall (except in accordance with its terms), in whole or in
part, terminate, cease to be effective or cease to be the legally valid, binding
and enforceable obligation of any Obligor party thereto; the Borrower, any other
Obligor or any other party shall, directly or indirectly, contest in any manner
such effectiveness, validity, binding nature or enforceability; or any Lien
securing any Obligation shall, in whole or in part, cease to be a perfected
first priority Lien, subject only to those exceptions expressly permitted by
such Loan Document.
SECTION 9.1.11. MATERIAL ADVERSE EFFECT. Any Material Adverse Effect shall
occur.
SECTION 9.2. ACTION IF BANKRUPTCY. If any Event of Default described in
CLAUSES (a) through (d) of SECTION 9.1.9 shall occur with respect to the
Borrower or any other Obligor, the Commitments (if not theretofore terminated)
shall automatically terminate and the outstanding principal amount of all
outstanding Loans and all other Obligations shall automatically be and become
immediately due and payable, without notice or demand.
SECTION 9.3. ACTION IF OTHER EVENT OF DEFAULT. If any Event of Default
(other than any Event of Default described in CLAUSES (a) through (d) of SECTION
9.1.9 with respect to the Borrower or any other Obligor) shall occur for any
reason, whether voluntary or involuntary, and be continuing, the Lender, may by
notice to the Borrower declare all or any portion of the outstanding principal
amount of the Loans and other Obligations to be due and payable and/or the
Commitments (if not theretofore terminated) to be terminated, whereupon the full
unpaid amount of such Loans and
87
other Obligations which shall be so declared due and payable shall be and
become immediately due and payable, without further notice, demand or
presentment, and/or, as the case may be, the Commitments shall terminate.
SECTION 9.4. RIGHTS NOT EXCLUSIVE. The rights provided for in this
Agreement and the other Loan Documents are cumulative and are not exclusive of
any other rights, powers, privileges or remedies provided by Applicable Law or
in equity, or under any other instrument, document or agreement now existing or
hereafter arising.
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.1. WAIVERS, AMENDMENTS, ETC.
(a) The provisions of this Agreement and of each other Loan Document
may from time to time be amended, modified or waived, if such amendment,
modification or waiver is in writing and consented to by the Borrower and
the Lender. No failure or delay on the part of the Lender in exercising any
power or right under this Agreement or any other Loan Document shall
operate as a waiver thereof, nor shall any single or partial exercise of
any such power or right preclude any other or further exercise thereof or
the exercise of any other power or right. No notice to or demand on the
Borrower in any case shall entitle it to any notice or demand in similar or
other circumstances. No waiver or approval by the Lender under this
Agreement or any other Loan Document shall, except as may be otherwise
stated in such waiver or approval, be applicable to subsequent
transactions. No waiver or approval hereunder shall require any similar or
dissimilar waiver or approval thereafter to be granted hereunder.
(b) This Agreement is an amendment and restatement of, and replaces and
supersedes the Existing Agreement; PROVIDED, HOWEVER, that no right,
interest, claim or cause of action of any kind of the Lender which may have
existed under the Existing Agreement shall in any way be released,
modified, compromised or waived by virtue of this Agreement superseding and
replacing the Existing Agreement.
SECTION 10.2. NOTICES.
(a) All notices and other communications provided to any party hereto
under this Agreement or any other Loan Document shall be in writing and
shall be hand delivered or sent by overnight courier, certified mail
(return receipt requested), or telecopy to such party at its address or
telecopy number set forth
88
on the signature pages hereof or set forth in the Lender Assignment Notice
or at such other address or telecopy number as may be designated by such
party in a notice to the other parties. Without limiting any other means by
which a party may be able to provide that a notice has been received by the
other party, a notice shall be deemed to be duly received (a) if sent by
hand, on the date when left with a responsible person at the address of the
recipient; (b) if sent by telefax, on the date of receipt by the sender of
an acknowledgment or transmission reports generated by the machine from
which the telefax was sent indicating that the telefax was sent in its
entirety to the recipient's telefax number.
(b) All such notices, requests and communications shall, when
transmitted by overnight delivery, or faxed, be effective when delivered
for overnight (next-day) delivery, or transmitted in legible form by
facsimile machine, respectively, or if mailed, upon the third Business Day
after the date deposited into the U.S. mail, or if delivered, upon
delivery.
(c) Any agreement of the Lender herein to receive certain notices by
telephone or facsimile is solely for the convenience and at the request of
the Borrower. The Lender shall be entitled to rely on the authority of any
Person purporting to be a Person authorized by the Borrower to give such
notice and the Lender shall not have any liability to the Borrower or other
Person on account of any action taken or not taken by the Lender in
reliance upon such telephonic or facsimile notice. The obligation of the
Borrower to repay the Loans shall not be affected in any way or to any
extent by any failure by the Lender to receive written confirmation of any
telephonic or facsimile notice or the receipt by the Lender of a
confirmation which is at variance with the terms understood by the Lender
to be contained in the telephonic or facsimile notice.
SECTION 10.3. PAYMENT OF COSTS AND EXPENSES. The Borrower agrees to pay
within thirty (30) days after written demand all reasonable expenses of the
Lender (including the reasonable fees and out-of-pocket expenses of internal and
external counsel to the Lender and of local counsel, if any, who may be retained
by counsel to the Lender) in connection with
(a) the negotiation, preparation, execution and delivery of this
Agreement and of each other Loan Document, including schedules and
exhibits, and any amendments, waivers, consents, supplements or other
modifications to this Agreement or any other Loan Document as may from time
to time hereafter be required, whether or not the transactions contemplated
hereby are consummated,
(b) the filing, recording, refiling or rerecording of the Mortgages,
the Security Agreements, the Pledge Agreements and/or any Uniform
Commercial
89
Code financing statements relating thereto and all amendments, supplements
and modifications to, and all releases and terminations of, any thereof and
any and all other documents or instruments of further assurance required to
be filed or recorded or refiled or rerecorded by the terms hereof or of the
Mortgages, the Security Agreements and the Pledge Agreements, and
(c) the preparation and review of the form of any document or
instrument relevant to this Agreement or any other Loan Document.
The Borrower further agrees to pay, and to save the Lender harmless from all
liability for, any stamp or other taxes (other than any income or franchise tax
of the Lender) which may be payable in connection with the execution or delivery
of this Agreement, the borrowings hereunder, the issuance of the Notes, the
issuance of the Letters of Credit, or any other Loan Documents. The Borrower
also agrees to reimburse the Lender within thirty (30) days after written demand
for all reasonable out-of-pocket expenses (including attorneys' fees and legal
expenses of internal and external attorneys, and the expenses of any accountant,
engineer or other expert retained or utilized in connection therewith) incurred
by the Lender in connection with (x) the negotiation of any restructuring or
"work-out", whether or not consummated, of any Obligations and (y) the
enforcement of any Obligations. All requests for payment under this SECTION 10.3
shall be accompanied by invoices containing reasonable details.
SECTION 10.4. INDEMNIFICATION. In consideration of the execution and
delivery of this Agreement by the Lender and the extension of the Commitments,
the Borrower hereby indemnifies, exonerates and holds the Lender, any Issuer and
each of their respective officers, directors, employees and agents
(collectively, the "INDEMNIFIED PARTIES") free and harmless from and against any
and all actions, causes of action, suits, losses, costs, liabilities and
damages, and expenses incurred in connection therewith (irrespective of whether
any such Indemnified Party is a party to the action for which indemnification
hereunder is sought), including reasonable attorneys' fees and disbursements
(collectively, the "INDEMNIFIED LIABILITIES"), incurred by the Indemnified
Parties or any of them as a result of, or arising out of, or relating to
(a) this Agreement, any Loan Document or any document contemplated by
or referred to herein;
(b) any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of any Loan, including any
Acquisition, or the use of any Letter of Credit;
(c) any investigation, litigation or proceeding related to any
acquisition or proposed acquisition by the Borrower or any of its
Subsidiaries of all or any
90
portion of the stock or assets of any Person, whether or not the Lender is
party thereto;
(d) any investigation, litigation or proceeding related to any
environmental cleanup, audit, compliance or other matter relating to any
Environmental Law or the condition of any facility or Property owned,
leased or operated by the Borrower or any of its Subsidiaries;
(e) the presence on or under, or the escape, seepage, leakage,
spillage, discharge, emission, discharging or releases from, any facility
or Property owned, leased or operated by the Borrower or any of its
Subsidiaries thereof of any Hazardous Material (including any losses,
liabilities, damages, injuries, costs, expenses or claims asserted or
arising under any Environmental Law), regardless of whether caused by, or
within the control of, the Borrower or any of its Subsidiaries; or
(f) any misrepresentation, inaccuracy or breach in or of SECTION 7.17
or SECTION 8.1.6,
except for any such Indemnified Liabilities arising for the account of a
particular Indemnified Party by reason of the relevant Indemnified Party's gross
negligence or wilful misconduct. If and to the extent that the foregoing
undertaking may be unenforceable for any reason, the Borrower hereby agrees to
make the maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities which is permissible under Applicable Law. The
obligations in this SECTION 10.4 shall survive payment of all other Obligations.
At the election of any Indemnified Party, the Borrower shall defend such
Indemnified Party using legal counsel satisfactory to such Indemnified Party in
such Person's sole discretion, at the sole cost and expense of the Borrower. All
amounts owing under this SECTION 10.4 shall be paid within thirty (30) days
after written demand.
SECTION 10.5. SURVIVAL. The obligations of the Borrower under SECTIONS
10.3 and 10.4 shall in each case survive any termination of this Agreement, the
payment in full of all Obligations and the termination of all Commitments. The
representations and warranties made by each Obligor in this Agreement and in
each other Loan Document shall survive the execution and delivery of this
Agreement and each such other Loan Document.
SECTION 10.6. SEVERABILITY. Any provision of this Agreement or any other
Loan Document which is prohibited or unenforceable in any jurisdiction shall, as
to such provision and such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions of
this Agreement or such Loan Document or affecting the validity or enforceability
of such provision in any other jurisdiction.
91
SECTION 10.7. HEADINGS. The various headings of this Agreement and of each
other Loan Document are inserted for convenience only and shall not affect the
meaning or interpretation of this Agreement or such other Loan Document or any
provisions hereof or thereof.
SECTION 10.8. EXECUTION IN COUNTERPARTS, EFFECTIVENESS, ETC. This Agreement
may be executed by the parties hereto in several counterparts, each of which
shall be executed by the Borrower and the Lender and be deemed to be an original
and all of which shall constitute together but one and the same agreement. This
Agreement shall become effective when counterparts hereof are executed on behalf
of the Borrower and the Lender. This Agreement is made and entered into for the
sole protection and legal benefit of the Borrower and the Lender and Persons
indemnified hereunder, and their permitted successors and assigns, and no other
Person shall be a direct or indirect legal beneficiary of, or have any direct or
indirect cause of action or claim in connection with, this Agreement or any of
the other Loan Documents.
SECTION 10.9. GOVERNING LAW; ENTIRE AGREEMENT. THIS AGREEMENT, THE NOTES
AND EACH OTHER LOAN DOCUMENT (OTHER THAN THE MORTGAGES OR AS EXPRESSLY PROVIDED
IN ANY SUCH DOCUMENT) SHALL EACH BE DEEMED TO BE A CONTRACT MADE UNDER AND
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF ILLINOIS. This Agreement, the
Notes and the other Loan Documents constitute the entire understanding among the
parties hereto with respect to the subject matter hereof and supersede any prior
agreements, written or oral, with respect thereto.
SECTION 10.10. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and assigns; PROVIDED, HOWEVER, that:
(a) the Borrower may not assign or transfer its rights or obligations
hereunder without the prior written consent of the Lender; and
(b) the rights of sale, assignment and transfer of the Lender are
subject to SECTION 10.11.
SECTION 10.11. SALE AND TRANSFER OF LOANS AND NOTES; PARTICIPATIONS IN
LOANS AND NOTES. The Lender may assign, or sell participations in, its Loans and
Commitments to one or more other Persons in accordance with this SECTION 10.11.
SECTION 10.11.1. ASSIGNMENTS. The Lender may at any time assign and
delegate to one or more Persons, including without limitation, commercial banks
or other financial institutions (each Person to whom such assignment and
delegation is to be made, being hereinafter referred to as an "ASSIGNEE
LENDER"), all or any fraction of the Lender's total Loans and Commitments (which
assignment and delegation shall
92
be of a constant, and not a varying, percentage of all the Lender's Loans and
Commitments) in a minimum aggregate amount of $1,000,000 (or the entire
remaining amount of the Lender's Loans and Commitments); PROVIDED, HOWEVER, that
the Lender is required at all times to maintain Loans, Letter of Credit
Outstandings and Commitments hereunder in an aggregate amount of $1,000,000
(unless the Lender shall have reduced its Loans, Letter of Credit Outstandings
and Commitments to zero); PROVIDED, FURTHER, HOWEVER, that the Borrower and each
other Obligor shall be entitled to continue to deal solely and directly with the
Lender in connection with the interests so assigned and delegated to an Assignee
Lender until
(a) written notice of such assignment and delegation, together with
payment instructions, addresses and related information with respect to
such Assignee Lender, shall have been given to the Borrower by the Lender
and such Assignee Lender,
(b) such Assignee Lender shall have executed and delivered to the
Borrower and the Lender a Lender Assignment Notice, accepted by the Lender,
and
(c) the processing fees described below shall have been paid.
From and after the date that the Assignee Lender delivers such Lender Assignment
Notice, (x) the Assignee Lender thereunder shall be deemed automatically to have
become a party hereto and to the extent that rights and obligations hereunder
have been assigned and delegated to such Assignee Lender in connection with such
Lender Assignment Notice, shall have the rights and obligations of a Lender
hereunder and under the other Loan Documents, and (y) the assignor Lender, to
the extent that rights and obligations hereunder have been assigned and
delegated by it in connection with such Lender Assignment Notice, shall be
released from its obligations hereunder and under the other Loan Documents.
Within five Business Days after its receipt of notice that the Lender has
received an executed Lender Assignment Notice and the Borrower has received from
the Lender execution copies of appropriate Notes, the Borrower shall execute and
deliver to the relevant Assignee Lender new Notes evidencing such Assignee
Lender's assigned Loans and Commitments and, if the assignor Lender has retained
Loans and Commitments hereunder, replacement Notes in the principal amount of
the Loans and Commitments retained by the assignor Lender hereunder (each such
Note to be in exchange for, but not in payment of, the corresponding Note then
held by such assignor Lender). The assignor Lender shall xxxx the predecessor
Note "exchanged" and deliver it to the Borrower. Accrued interest on that part
of the predecessor Note evidenced by the new Notes, and accrued fees, shall be
paid as provided in the Lender Assignment Notice. Accrued interest on that part
of the predecessor Note evidenced by the replacement Notes shall be paid to the
assignor Lender. Accrued interest and accrued fees shall be paid at the same
time or times provided in the predecessor Notes and in this Agreement. Such
assignor Lender or
93
such Assignee Lender must also pay a processing fee to the Lender upon delivery
of any Lender Assignment Notice in the amount of $2,500. Any attempted
assignment and delegation not made in accordance with this SECTION 10.11.1 shall
be null and void. Nothing contained in this Agreement shall prohibit any Lender
from pledging or assigning any Note to any Federal Reserve Bank in accordance
with Applicable Law.
SECTION 10.11.2. PARTICIPATIONS. The Lender may at any time sell to one
or more Persons, including without limitation commercial banks or other
financial institutions (each of such Persons being herein called a
"PARTICIPANT") participating interests in any of the Loans, Commitments, or
other interests of the Lender hereunder; PROVIDED, HOWEVER, that
(a) no participation contemplated in this SECTION 10.11.2 shall relieve
the Lender from its Commitments or its other obligations hereunder or under
any other Loan Document,
(b) the Lender shall remain solely responsible for the performance of
its Commitments and such other obligations,
(c) the Borrower and each other Obligor shall continue to deal solely
and directly with the Lender in connection with the Lender's rights and
obligations under this Agreement and each of the other Loan Documents, and
(d) the Borrower shall not be required to pay any amount under SECTION
5.2 or SECTION 10.3 that is greater than the amount which it would have
been required to pay had no participating interest been sold.
The Borrower acknowledges and agrees that each Participant, for purposes of
SECTIONS 5.1 and 5.2 (except as provided in SECTION 10.11.2(d)), 10.3 and 10.4,
shall be considered a Lender.
SECTION 10.12. FORUM SELECTION AND CONSENT TO JURISDICTION. ANY LITIGATION
BASED HEREON, OR 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 ORAL OR WRITTEN) OR ACTIONS OF THE LENDER OR THE BORROWER SHALL BE
BROUGHT AND MAINTAINED IN THE COURTS OF THE STATE OF ILLINOIS OR IN THE UNITED
STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS; PROVIDED, HOWEVER,
THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY
BE BROUGHT, AT THE LENDER'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH
COLLATERAL OR OTHER PROPERTY MAY BE FOUND. THE BORROWER HEREBY EXPRESSLY AND
IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF ILLINOIS
AND OF THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF
94
ILLINOIS FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE AND
IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION
WITH SUCH LITIGATION. THE BORROWER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE
OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR
WITHOUT THE STATE OF ILLINOIS. THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE
OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN
ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT THE BORROWER HAS OR
HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY
LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT,
ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS
PROPERTY, THE BORROWER HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS
OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
SECTION 10.13. WAIVER OF JURY TRIAL. THE LENDER AND THE BORROWER HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR 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 ORAL OR WRITTEN) OR
ACTIONS OF THE LENDER OR THE BORROWER. THE BORROWER ACKNOWLEDGES AND AGREES THAT
IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH
OTHER PROVISION OF EACH OTHER LOAN DOCUMENT TO WHICH IT IS A PARTY) AND THAT
THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER ENTERING INTO THIS
AGREEMENT AND EACH SUCH OTHER LOAN DOCUMENT.
SECTION 10.14. NOTICE THIS WRITTEN AGREEMENT TOGETHER WITH THE OTHER LOAN
DOCUMENTS REPRESENTS 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.
95
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
ESENJAY EXPLORATION, INC.,
a Delaware corporation
By /s/ Xxxxxxx Xxxxxxx
-------------------------------------
Name: Xxxxxxx Xxxxxxx
Title: President
All notices should be sent to:
One Xxxxx Center
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Fax: (000) 000-0000
1100 CCNB Center South
000 X. Xxxxx Xxxxxx,
Xxxxx 0000
Xxxxxx Xxxxxxx, Xxxxx 00000
Fax: (000) 000-0000
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By
-------------------------------------
Title: Vice President
Address: 000 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
All notices should be sent to:
000 Xxxx Xxxxxx,
Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Fax: (000) 000-0000
96
SCHEDULE I
DISCLOSURE SCHEDULE
ITEM 7.9 LITIGATION.
The Borrower is a party in a lawsuit filed on April 16, 1998 in the 28th
Judicial District Court of Nueces County, Texas, No. 98-01884-00-0-A. A true
and correct copy of the petition and the Borrower's answer has been delivered to
the Lender. Said lawsuit was brought by Xxxx Xxxxx Xxxxxxxxx ("XXXXXXXXX") as
Plaintiff and Esenjay Petroleum Corporation ("EPC") and Frontier Natural Gas
Corporation ("FRONTIER") as Defendant. The original lawsuit was filed against
EPC in 1995 by Plaintiff who suffered serious and disabling personal injury
while working on a wellsite owned and operated by Defendant EPC. The case was
tried to a jury which, on or about July 2, 1997, returned a verdict for Xxxx
Xxxxx Xxxxxxxxx for actual damages and, in addition, for an additional $30
million in punitive damages. After the application of the statutorily mandated
maximum caps on punitive damages, the court entered its judgment for exemplary
damages in favor of the Plaintiff against Defendant EPC in the amount of
$6,003,231.60. Following the entry of judgment, Plaintiff agreed to a
settlement of said lawsuit. Under the terms of the settlement, Plaintiff agreed
to, and did give up right to the recovery of punitive damages in return for
EPC's agreement to implement a safety plan. Such agreement was consummated by
the entry of an Agreed Judgment. As part of the agreement for the safety plan,
Plaintiff agreed to, and did pay the sum of $14,902.50 to an engineer for the
development of a safety plan which was furnished to EPC on or about the 19th day
of January, 1998. Plaintiff believes and alleges that EPC has failed, refused
and neglected to implement the safety plan. Plaintiff believes and alleges that
EPC, in fact, never had any intention of implementing the safety plan.
Plaintiff believes and alleges that EPC knew they would be merging with Frontier
and forming a new entity which would be operated by the same principals
(although under a different corporate name), without the safety plan which EPC
had promised to implement. The case, No. 98-01884-00-0-A, is ongoing and the
Borrower believes that it will ultimately be resolved at no loss (other than
defense costs) to the Borrower. The Borrower has hired its own safety expert
and prepared a plan with the same general outline as the original EPC plan. The
plans are currently being compared and analyzed and are in the process of being
reviewed by all parties.
ITEM 7.12 EMPLOYEE BENEFIT PLANS.
None
ITEM 7.14 CLAIMS AND LIABILITIES.
None
ITEM 7.17 ENVIRONMENTAL MATTERS.
None
ITEM 8.2.2(f) EXISTING INDEBTEDNESS.
None
ITEM 8.2.13 TAKE OR PAY CONTRACTS.
None
SCHEDULE II
Certain Oil and Gas Properties
97
SCHEDULE II
PART A - EXISTING MORTGAGED PROPERTIES:
WELL NAME LOCATION COUNTY STATE
Xxxxxxxx "1-C"#3 SEC 1-32S-35W Xxxxxxx Kansas
Xxxxxxxx #1-64 SEC 64-1S-2W Xxxxxxxxx.W. Louisiana
Xxxxx #1-6 SEC 6-9N-3W Cleveland Oklahoma
XxXxxxxxxx, XX#0 XXX 00-X-XXXX Xxxxx Xxxxx
Xxxxxx #1,3,4&5 SEC 24-B-CCSD Upton Texas
Xxxx Heirs #0-00 XXX 00-X-XXXX Xxxxx Xxxxx
Xxxxx"D" #1,2,3 SEC 23-B-CCSD Upton Texas
Xxxxxxxx,D#2-22 SEC 22-B-CCSD Upton Texas
SCHEDULE II
PART B - NEW MORTGAGED PROPERTIES:
Lease Name Field Name County State Operator
A S Xxxxxx 1 Blessing Matagorda Texas Xxxxx Oil
XxXxxxxxxx 1 Geronimo San Xxxxxxxx Texas Esenjay Exploration
Xxxxx-Xxxx 0 Xxxx Xxxxx Xxxxxx Xxxxx Xxx X. Xxxxxx
Xxxxx-Xxxx 0 Xxxx Xxxxx Xxxxxx Xxxxx Esenjay Exploration
Yturria 1 Raymondville Willacy Texas Esenjay Exploration
Yturria 2 Raymondville Willacy Texas Esenjay Exploration
Yturria 3 Raymondville Willacy Texas Esenjay Exploration
Yturria 4 Raymondville Willacy Texas Esenjay Exploration
PHS 1 Tidehaven Matagorda Texas Esenjay Exploration
ST 76 1 Wolf Point Xxxxxxx Texas Esenjay Exploration
WELL NAME LOCATION COUNTY STATE
Xxxxxx "D" #1-28 SEC 28-3N-2W Garvin Oklahoma
Xxxxxxx #4-15 SEC 15-2N-1W Garvin Oklahoma
Xxxxxx #1,3,4&5 SEC 24-B-CCSD Upton Texas
98
SCHEDULE II
PART C - STARBOARD PROPERTIES:
All Lands located within the area outlined by a heavy line on the attached plat
entitled "Exhibit "A" - Fina Oil and Chemical Company, U.S. Exploration
Division, 3-D Seismic Participation Agreement dated May 30, 1996, insofar and
only insofar as xxxxx drilled are completed to produce from the following
reserves:
The Netherland, Xxxxxx & Associates, Inc. (NS&A) reserve report which was
prepared for Frontier Natural Gas Corporation (FNGC) and dated March 4, 1998
identified five well locations in the Lapeyrouse Field in Terrebonne Parish,
Louisiana which were attributable to FNGC's interest in the field as of December
31, 1997. Those locations were identified on the work maps prepared by NS&A's
technical staff in conjunction with the above-referenced evaluation, and were
spotted/identified on those maps as:
Location 1, containing proved undeveloped reserves in the mapped formations
identified on those work maps as the "HH", "10930", "10875", and "10850."
Location 2, containing proved undeveloped reserves in the mapped formations
identified on those work maps as the "Xxxxx B" and the "Xxxxxxxx B" (referenced
in the 3/4/98 report as "Expsito B").
Location 2N, containing proved undeveloped reserves in the mapped formations
identified on those work maps as the "Xxxxxxxx C" and the "Xxxxxxxx B"
(referenced in the 3/4/98 report as "Expsito C" and "Expsito B").
Location 3, containing proved undeveloped reserves in the mapped formation
identified on those work maps as the "Pelican A".
Location 6, containing proved undeveloped reserves in the mapped formations
identified on those work maps as the "Xxxxx" and the "Pelican A".
The Starboard Properties include any well or xxxxx drilled and completed from
those proved undeveloped reserves irrespective of the Starboard location or
number of xxxxx drilled.
SCHEDULE II
PART D - OTHER DEVELOPMENT PROPERTIES:
See attached Pages
SCHEDULE III
Subsidiaries
1. Frontier Acquisition Corporation, an Oklahoma corporation
2. Frontier, Inc., an Oklahoma corporation (formerly known as Frontier
National Gas Corporation)
3. Frontier Exploration and Production Corporation, an Oklahoma corporation
Note: Frontier, Inc., an Oklahoma corporation (formerly known as Frontier
National Gas Corporation) and Frontier Exploration and Production Corporation,
an Oklahoma corporation, each a Subsidiary of the Borrower, will merge with and
into the Borrower.
99
SCHEDULE IV
Minimum Hedging Volumes
4.7 MMBtu/day of natural gas
EXISTING SECURITY DOCUMENTS
NO. JURISDICTION DEBTOR SECURED PARTY DOCUMENT FILE NO. DATE
1. Federal Frontier, Inc., Bank of America Illinois Mortgage, Deed of Rejected N/A
Bureau of Frontier Acquisition Trust, Assignment, See
Land Corporation Security Agreement and Attach-
Management, and Frontier Exploration & Financing Statement for ment
Santa Fe, Production Corporation Major County, Oklahoma
New Mexico
2. Alabama Frontier Exploration and Legacy Resources Co., L.P. Release of UCC 94-45932 95-45932 4/25/96
Secretary of Production Corporation filed 11/9/95
State
3. Alabama Frontier Inc., Bank of America Illinois, UCC-1 Financing 96-18104 4/25/96
Secretary of Frontier Acquisition as Agent Statement
State Corporation and Frontier
Exploration and Production
Corporation
4. Alabama Frontier Inc., Bank of America Illinois, UCC-3 changing address 96-18104 10/02/96
Secretary of Frontier Acquisition as Agent of Debtors B96-18104
State Corporation and Frontier
Exploration and Production
Corporation
5. Mobile Frontier Exploration and Legacy Resources Co., L.P. Release of Lien claimed Real Property 4/12/96
County, Production Corporation in Affidavit filed in Book 4349,
Alabama Real Property Book Page 0397;
4311, Page 715 on File No.
November 28, 1995, 96-024070
referring to JOA
recorded on Real
Property Records Book
4281, Page 1414; and
release of UCC E33333
filed 12/6/95 (Legacy)
6. Mobile Frontier Inc., Bank of America Illinois, UCC-1 Financing E35772 04/12/96
County, Frontier Acquisition as Agent Statement
Alabama Corporation and Frontier
Exploration and Production
Corporation
7. Mobile Frontier Inc., Bank of America Illinois, UCC-3 changing address E35772 10/04/96
County, Frontier Acquisition as Agent of Debtors No.
Alabama Corporation and Frontier 96068851
Exploration and Production 3/20/97
Corporation 00000000
8. Mobile Frontier Inc., Bank of America Illinois Mortgage, Deed of Real Property 04/12/96
County, Frontier Acquisition Trust, Assignment, Book 4349,
Alabama Corporation and Frontier Security Agreement and Page 0351;
Exploration and Production Financing Statement File No.
Corporation 00-000000
9. Mobile Frontier Inc., Bank of America Illinois UCC-3 changing address Real Property
County, Frontier Acquisition of Debtors Book 4349,
Alabama Corporation and Frontier Page 0351;
Exploration and Production File No.
Corporation 00-000000
10. Mobile Frontier Exploration and N/A Mortgage Recordation Real Property N/A
County, Production Corporation, Tax Order Book 4349,
Alabama Petitioner Page 0395
11. Kansas Frontier Natural Gas Waldorf Corporation Release of UCC 1818957 2210745 01/18/96
Secretary of Corporation filed 7/28/92
State
12. Kansas Frontier, Inc., Bank of America Illinois, UCC-1 Financing 2210746 01/18/96
Secretary of Frontier Acquisition As Agent Statement
State Corporation, Frontier (Mortgage, Deed of
Exploration and Production Trust, Assignment,
Corporation Security Agreement and
Financing Statement)
13. Kansas Frontier, Inc., Bank of America Illinois, UCC-3 changing address 2210746 10/02/96
Secretary of Frontier Acquisition As Agent of Debtors No.
State Corporation, Frontier 2286626
Exploration and Production
Corporation
14. Xxxxxxx Centran Corporation and Waldorf Corporation Partial Release of Book 166, 01/19/96
County, Frontier Natural Gas Mortgage filed at Book Page 518
Kansas Corporation 149, Page 690 on
7/28/92
15. Xxxxxxx Centran Corporation and Waldorf Corporation Release of UCC 1774 2981 01/19/96
County, Frontier Natural Gas filed on 7/28/92
Kansas Corporation
16. Xxxxxxx Frontier, Inc., Bank of America Illinois Mortgage, Deed of Book 166, 01/19/96
County, Frontier Acquisition Trust, Assignment, Page 545
Kansas Corporation, Frontier Security Agreement and (Register of
Exploration and Production Financing Statement Deeds)
Corporation
17. Xxxxxxx Frontier, Inc., Bank of America Illinois UCC-3 changing address Book 166, NOTE:
County, Frontier Acquisition of Debtors Page 545 Rejected,
Kansas Corporation, Frontier no
Exploration and Production original
Corporation filing in
UCC
records
18. West Frontier, Inc., Bank of America Illinois, UCC-1 Financing 4691 01/24/96
Xxxxxxxxx Frontier Acquisition as Agent Statement
Parish, Corporation, Frontier (Mortgage, Deed of
Louisiana Exploration and Production Trust, Assignment,
Corporation Security Agreement and
Financing Statement)
19. West Frontier, Inc., Bank of America Illinois, UCC-3 changing address 4691 10/02/96
Xxxxxxxxx Frontier Acquisition as Agent of Debtors #4854
Parish, Corporation, Frontier
Louisiana Exploration and Production
Corporation
20. West Frontier, Inc., Bank of America Illinois Mortgage, Deed of Mtg. Book 01/24/96
Xxxxxxxxx Frontier Acquisition Trust, Assignment, 85A,
Parish, Corporation, Frontier Security Agreement and Page 401,
Louisiana Exploration and Production Financing Statement Conv. Book
Corporation 126,
Page 677,
File No.
60641
100
NO. JURISDICTION DEBTOR SECURED PARTY DOCUMENT FILE NO. DATE
21. West Frontier, Inc., Bank of America Illinois UCC-3 changing address Mtg. Book 10/02/96
Xxxxxxxxx Frontier Acquisition of Debtors 85A, #4853
Parish, Corporation, Frontier Page 401,
Louisiana Exploration and Production Conv. Book
Corporation 126,
Page 677,
File No.
60641
22. XxXxxxxx Frontier Natural Gas Corp. Guaranty Bank & Trust Co. Release of Mortgage, 324090 01/17/96
County, Doc. No. 321698 filed
North 2/21/95
Dakota
23. North Dakota Frontier Natural Gas Guaranty Bank & Trust Co. Release of UCC 95- 96-000568501 01/29/96
Secretary of Corporation 489473 filed 2/22/95
State
24. Oklahoma Centran Corporation and Waldorf Corporation Release of UCC N00559 N00559 01/19/96
Central Frontier Natural Gas Corp. filed 2/12/92
Filing
25. Oklahoma Frontier Exploration and Legacy Resources Co., L.P. Release of UCC 59561 59561 01/19/96
Central Production Corporation filed 11/9/95
Filing
26. Oklahoma Frontier Natural Gas Guaranty Bank & Trust Co. Release of UCC 007790 007790 01/19/96
Central Corporation filed 2/13/95
Filing
27. Oklahoma Frontier, Inc., Bank of America Illinois, UCC-1 Financing N00253 01/22/96
Central Frontier Acquisition as Agent Statement (Mortgage,
Filing Corporation, Frontier Deed of Trust,
Exploration and Production Assignment, Security
Corporation Agreement and Financing
Statement)
28. Oklahoma Frontier, Inc., Bank of America Illinois, UCC-3 Partial Release N00253 07/10/96
Central Frontier Acquisition as Agent
Filing Corporation, Frontier
Exploration and Production
Corporation
29. Oklahoma Frontier, Inc., Bank of America Illinois, UCC-3 changing address N00253 10/03/96
Central Frontier Acquisition as Agent of Debtors #051709
Filing Corporation, Frontier
Exploration and Production
Corporation
30. Oklahoma Frontier, Inc., Bank of America Illinois, UCC-3 - Partial Release N00253 NOTE:
Central Frontier Acquisition as Agent and Uniform Commercial No record
Filing Corporation, Frontier Code Termination found
Exploration and Production Statement
Corporation
31. Oklahoma Frontier, Inc., Bank of America Illinois, UCC-3 - Partial Release N00252 NOTE:
Central Frontier Acquisition as Agent and Uniform Commercial No record
Filing Corporation, Frontier Code Termination found
Exploration and Production Statement
Corporation
32. Oklahoma Frontier Natural Gas Bank of America Illinois, UCC-1 Financing N00252 01/22/96
Secretary of Corporation as Agent Statement (Pledge
State Agreement)
33. Oklahoma Frontier Natural Gas Bank of America Illinois, UCC-3 Partial Release N00252 07/10/96
Secretary of Corporation as Agent
State
34. Oklahoma Frontier Natural Gas Bank of America Illinois, UCC-3 changing address N00252 10/03/96
Secretary of Corporation as Agent of Debtor #051708
State
35. Beaver Frontier Natural Gas Corp. Guaranty Bank & Trust Co. Release of Mortgage Book 959, 01/17/96
County, filed Book 0941, Page Page 380,
Oklahoma 001 on 2/13/95 File No.
G0333
36. Beaver Frontier Natural Gas Guaranty Bank & Trust Co. Release of UCC 000057 10 01/17/96
County, Corporation filed 2/13/95
Oklahoma
37. Xxxxxx Centran Corporation and Waldorf Corporation Release of UCC 112 112 01/19/96
County, Frontier Natural Gas filed 2/12/92
Oklahoma Corporation
38. Xxxxxx Centran Corporation and Waldorf Corporation Partial Release of Book 714, 01/19/96
County, Frontier Natural Gas Mortgage filed at Book Page 162,
Oklahoma Corporation 632, Page 422 on File No. 0275
2/12/92
39. Canadian Frontier Natural Gas Corp. Guaranty Bank & Trust Co. Release of Mortgage Book 1975, 01/17/96
County, filed Book 1919, Page Page 846
Oklahoma 811 on 2/13/95
40. Canadian Frontier Natural Gas Corp. Guaranty Bank & Trust Co. Release of UCC 0181 0181 01/17/96
County, filed 2/13/95
Oklahoma
101
NO. JURISDICTION DEBTOR SECURED PARTY DOCUMENT FILE NO. DATE
41. Cleveland Frontier Natural Gas Corp. Guaranty Bank & Trust Co. Release of Mortgage Book 2698, 01/24/96
County, filed Book 2616, Page Page 312,
Oklahoma 670 on 2/16/95 File No.
94235
42. Cleveland Frontier Natural Gas Guaranty Bank & Trust Co. Release of UCC 300, 300 01/24/96
County, Corporation filed 2/16/95
Oklahoma
43. Cleveland Frontier, Inc., Bank of America Illinois, UCC-1 Financing 135 01/24/96
County, Frontier Acquisition as Agent Statement
Oklahoma Corporation and Frontier (Mortgage, Deed of
Exploration and Production Trust, Assignment,
Corporation Security Agreement and
Financing Statement)
44. Cleveland Frontier, Inc., Bank of America Illinois, UCC-3 changing address 135 10/09/96
County, Frontier Acquisition as Agent of Debtors (file
Oklahoma Corporation and Frontier #2068-
Exploration and Production Ameri
Corporation Search)
45. Cleveland Frontier, Inc., Bank of America Illinois Mortgage, Deed of Book 2698, 01/24/96
County, Frontier Acquisition Trust, Assignment, Page 335,
Oklahoma Corporation and Frontier Security Agreement and File No.
Exploration and Production Financing Statement 94237
Corporation
46. Cleveland Frontier, Inc., Bank of America Illinois UCC-3 changing address Book 2698, 10/09/96
County, Frontier Acquisition of Debtors Page 335, file
Oklahoma Corporation and Frontier File No. #128282
Exploration and Production 94237 bk.2772
Corporation pg. 24
47. Xxxxx County, Frontier Natural Gas Corp. Guaranty Bank & Trust Co. Release of Mortgage Book 1041, 01/24/96
Oklahoma filed Book 1024, Page Page 202,
183 on 2/13/95 File No.
000264
48. Xxxxx County, Frontier Natural Gas Guaranty Bank & Trust Co. Release Book 6, 2032 01/24/96
Oklahoma Corporation Page 182,
File No. 2508
49. Xxxxx Centran Corporation and Waldorf Corporation Release of UCC 1034, 2033 01/24/96
County, Frontier Natural Gas Corp. Book 6, Page 135 filed
Oklahoma 2/12/92
50. Xxxxx County, Centran Corporation and Waldorf Corporation Partial Release of Book 1041, 01/24/96
Oklahoma Frontier Natural Gas Mortgage filed at Book Page 203,
Corporation 934, Page 12 on 2/12/92 File No.
000265
51. Xxxxx Frontier, Inc., Bank of America Illinois, UCC-1 Financing Book 6, 01/24/96
County, Frontier Acquisition as Agent Statement Page 196,
Oklahoma Corporation and Frontier (Mortgage, Deed of File No. 2921
Exploration and Production Trust, Assignment,
Corporation Security Agreement and
Financing Statement)
52. Xxxxx Frontier, Inc., Bank of America Illinois, UCC-3 Partial Release Book 6, 07/05/96
County, Frontier Acquisition as Agent Page 196,
Oklahoma Corporation and Frontier File No. 2921
Exploration and Production
Corporation
53. Xxxxx Frontier, Inc., Bank of America Illinois, UCC-3 changing address Book 6, 10/03/96
County, Frontier Acquisition as Agent of Debtors Page 196, file no.
Oklahoma Corporation and Frontier File No. 2921 3207
Exploration and Production Book 6,
Corporation Page 205
54. Xxxxx County, Frontier, Inc., Bank of America Illinois Mortgage, Deed of Book 1041, 01/24/96
Oklahoma Frontier Acquisition Trust, Assignment, Page 228,
Corporation and Frontier Security Agreement and File No.
Exploration and Production Financing Statement 000267
Corporation
55. Xxxxx County, Frontier, Inc., Bank of America Illinois UCC-3 - Partial Release Book 1050, 07/05/96
Oklahoma Frontier Acquisition and Uniform Commercial Page 123-131,
Corporation and Frontier Code Termination File No.
Exploration and Production Statement 001896
Corporation
56. Xxxxx County, Frontier, Inc., Bank of America Illinois UCC-3 changing address Book 1041, 10/09/96
Oklahoma Frontier Acquisition of Debtors Page 228, file no.
Corporation and Frontier File No. 002754,
Exploration and Production 000267 bk.1054,
Corporation pg. 457
57. Xxxxx County, Frontier Natural Gas Corp. Guaranty Bank & Trust Co. Release of Mortgage Book 2834, 01/18/96
Oklahoma filed Book 2765, Page Page 92,
129-131 on 2/13/95 File No.
117667
58. Xxxxx County, Frontier Natural Gas Guaranty Bank & Trust Co. Release of UCC 000205H 000205H 01/18/96
Oklahoma Corporation filed 2/13/95
59. Xxxxx County, Frontier, Inc., Bank of America Illinois, UCC-1 Financing Book 2834, 01/18/96
Oklahoma Frontier Acquisition as Agent Statement Page 154,
Corporation and Frontier (Mortgage, Deed of File No.
Exploration and Production Trust, Assignment, 117669,
Corporation Security Agreement and UCC #000110I
Financing Statement)
60. Xxxxx County, Frontier, Inc., Bank of America Illinois, UCC-3 Partial Release Book 2834,
Oklahoma Frontier Acquisition as Agent Page 154,
Corporation and Frontier File No.
Exploration and Production 117669,
Corporation UCC #000110I
102
NO. JURISDICTION DEBTOR SECURED PARTY DOCUMENT FILE NO. DATE
61. Xxxxx County, Frontier, Inc., Bank of America Illinois, UCC-3 changing address Book 2834, 10/09/96
Oklahoma Frontier Acquisition as Agent of Debtors Page 154, #130255
Corporation and Frontier File No. Bk.2890
Exploration and Production 117669, pg. 342
Corporation UCC #000110I
62. Xxxxx County, Frontier, Inc., Bank of America Illinois UCC-3 - Partial Release Book 2834,
Oklahoma Frontier Acquisition and Uniform Commercial Page 93,
Corporation and Frontier Code Termination File No.
Exploration and Production Statement 117669
Corporation
63. Xxxxx County, Frontier, Inc., Bank of America Illinois Mortgage, Deed of Book 2834, 01/18/96
Oklahoma Frontier Acquisition Trust, Assignment, Page 93,
Corporation and Frontier Security Agreement and File No.
Exploration and Production Financing Statement 117668
Corporation
64. Xxxxx County, Frontier, Inc., Bank of America Illinois, UCC-3 Partial Release Book 2834,
Oklahoma Frontier Acquisition as Agent Page 154,
Corporation and Frontier File No.
Exploration and Production 117668
Corporation
65. Xxxxx County, Frontier, Inc., Bank of America Illinois UCC-3 changing address Book 2834, 10/09/96
Oklahoma Frontier Acquisition of Debtors Page 93, #130256
Corporation and Frontier File No. bk 2890
Exploration and Production 117668 pg. 363
Corporation
66. Xxxxx County, Frontier, Inc., Bank of America Illinois UCC-3 - Partial Release Book 2834,
Oklahoma Frontier Acquisition and Uniform Commercial Page 93,
Corporation and Frontier Code Termination File No.
Exploration and Production Statement 117668
Corporation
67. Major County, Centran Corporation and Waldorf Corporation Release of UCC 9546 9546 01/24/96
Oklahoma Frontier Natural Gas filed 2/12/92
Corporation
68. Major County, Centran Corporation and Waldorf Corporation Partial Release of Book 1400, 01/24/96
Oklahoma Frontier Natural Gas Mortgage filed Book Page 54,
Corporation 1257 of Misc., Page 174 File No.
on 2/12/92 42995
69. Major County, Frontier Natural Gas Corp. Guaranty Bank & Trust Co. Release of Mortgage Book 1400, 01/24/96
Oklahoma filed Book 1378, Page Page 71,
181 on 2/13/95 File No.
42996
70. Major County, Frontier Natural Gas Guaranty Bank & Trust Co. Release of UCC filed Book 1400, 01/24/96
Oklahoma Corporation Book 1378, Page 184, Page 72,
File Xx. 00000 Xxxx Xx.
00000
71. Major County, Frontier, Inc., Frontier Bank of America Illinois, UCC-1 Financing 2142 01/24/96
Oklahoma Acquisition Corporation as Agent Statement
and Frontier Exploration (Mortgage, Deed of
and Production Corporation Trust, Assignment,
Security Agreement and
Financing Statement)
72. Major County, Frontier, Inc., Frontier UCC-3 changing address 2142 10/03/96
Oklahoma Acquisition Corporation Bank of America Illinois, of Debtors #2512
and Frontier Exploration as Agent
and Production Corporation
73. Major County, Frontier, Inc., Frontier Bank of America Illinois, UCC-3 Partial Release 2142 07/05/96
Oklahoma Acquisition Corporation as Agent
and Frontier Exploration
and Production Corporation
74. Major County, Frontier, Inc., Frontier Bank of America Illinois, UCC-3 - Partial Release 2142 07/05/96
Oklahoma Acquisition Corporation as Agent and Uniform Commercial Book 1410
and Frontier Exploration Code Termination Pgs. 189-199
and Production Corporation Statement File No.
44853
75. Major County, Frontier, Inc., Bank of America Illinois Mortgage, Deed of Book 1400, 01/24/96
Oklahoma Frontier Acquisition Trust, Assignment, Page 112,
Corporation and Frontier Security Agreement and File No.
Exploration and Production Financing Statement 43000
Corporation
76. Major County, Frontier, Inc., Bank of America Illinois UCC-3 Partial Release For Book 07/05/96
Oklahoma Frontier Acquisition 1400,
Corporation and Frontier Page 112,
Exploration and Production File No.
Corporation 43000; filed
as Doc. #
44852
77. Major County, Frontier, Inc., Bank of America Illinois Partial Release and Book 1410, 07/05/96
Oklahoma Frontier Acquisition Uniform Commercial Code Page 189-
Corporation and Frontier Termination Statement 199, File No.
Exploration and Production 44853
Corporation
78. Major County, Frontier, Inc., Bank of America Illinois UCC-3 changing address Book 1400, 10/03/96
Oklahoma Frontier Acquisition of Debtors Page 112, #45744
Corporation and Frontier File No.
Exploration and Production 43000
Corporation
79. Major County, Frontier, Inc., Bank of America Illinois UCC-3 - Partial Release Book 1400, 07/05/96
Oklahoma Frontier Acquisition and Uniform Commercial Page 112,
Corporation and Frontier Code Termination File No.
Exploration and Production Statement 43000
Corporation
80. Xxxxx County, Frontier Natural Gas Corp. Guaranty Bank & Trust Co. Release of Mortgage Book 1090, 01/16/96
Oklahoma filed Book 1064, Page 0167,
Page 0382 on 2/14/95 File No.
96000457
103
NO. JURISDICTION DEBTOR SECURED PARTY DOCUMENT FILE NO. DATE
81. Xxxxx County, Frontier Natural Gas Guaranty Bank & Trust Co. Release of UCC 000255 106 01/16/96
Oklahoma Corporation filed 2/14/95
82. Xxxxx Xxxxx Frontier Natural Gas Corp. Guaranty Bank & Trust Co. Release of Mortgage Book 1482, 01/17/96
County, filed Book 1455, Page Page 550,
Oklahoma 585-587 on 2/13/95 File No.
02595
83. Xxxxx Xxxxx Frontier Natural Gas Xxxxxxxx Xxxx & Xxxxx Xx. Xxxxxxx xx XXX 00000 Book 1482, 01/17/96
County, Corporation filed Book 1455, Page Page 551,
Oklahoma 588 on 2/13/95 File No.
02596
84. Texas Frontier Natural Gas Guaranty Bank & Trust Co. Release of UCC 95- 95-032535 01/17/96
Secretary of Corporation 032535 on 2/17/95
State
85. Texas Centran Corporation and Waldorf Corporation Release of UCC 92- 92-027252 01/17/96
Secretary of Frontier Natural Gas 027252 filed 2/12/92
State Corporation
86. Texas Frontier, Inc., Bank of America Illinois, UCC-1 Financing 96-008789 01/17/96
Secretary of Frontier Acquisition as Agent Statement
State Corporation and Frontier (Mortgage, Deed of
Exploration and Production Trust, Assignment,
Corporation Security Agreement and
Financing Statement)
87. Texas Frontier, Inc., Bank of America Illinois, UCC-3 changing address 96-008789 10/02/96
Secretary of Frontier Acquisition as Agent of Debtors (S10026)
State Corporation and Frontier
Exploration and Production
Corporation
88. Coke County, Frontier Natural Gas Guaranty Bank & Trust Co. Release of UCC 2834 Previously N/A
Texas Corporation filed 2/21/95 Terminated
on 5/18/95
89. Xxxxxxxx Frontier Natural Gas Guaranty Bank & Trust Co. Release of UCC 25-1995 25-1995 02/05/96
County, Corporation filed 2/24/95
Texas
90. Xxxxxxxx Frontier Natural Gas Guaranty Bank & Trust Co. Release of Deed of Real No. 451, 01/16/96
County, Corporation Trust filed Vol. 1381, Vol. 1470,
Texas Page 168 on 2/24/95 Page 230
91. Upton County, Centran Corporation and Waldorf Corporation Release UCC 107413 Vol. 643, 01/18/96
Texas Frontier Natural Gas filed 2/12/92 Page 179,
Corporation File No.
116396
92. Upton County, Centran Corporation and Waldorf Corporation Release of Deed of Vol. 643, 01/18/96
Texas Frontier Natural Gas Trust file no. 107413, Page 112,
Corporation Book 586, Page 818 on File No.
2/12/92 116392
93. Upton County, Frontier Natural Gas Guaranty Bank & Trust Co. Release of Deed of Vol. 643, 01/18/96
Texas Corporation Trust filed Vol. 631, Page 111,
Page 293 on 2/17/95 File No.
116391
94. Upton County, Frontier Natural Gas Guaranty Bank & Trust Co. Release of UCC 4000 4000 01/18/96
Texas Corporation filed 2/17/95
95. Upton County, Frontier, Inc. N/A Certified Copy of Name Vol. 643, 01/18/96
Texas Change Page 119,
File No.
116393
96. Upton County, Frontier, Inc., Bank of America Illinois Mortgage, Deed of Vol. 643, 01/18/96
Texas Frontier Acquisition Trust, Assignment, Page 134,
Corporation and Frontier Security Agreement and File No.
Exploration and Production Financing Statement 116395
Corporation
97. Upton County, Frontier, Inc., Bank of America Illinois UCC-3 changing address Vol. 643, 10/04/96
Texas Frontier Acquisition of Debtors Page 134, #117999
Corporation and Frontier File No. vol. 652
Exploration and Production 116395 pg. 404
Corporation
104
SCHEDULE VI
CERTAIN CONSENTS AND MORTGAGE CONSENTS
Those consents to assignment (including assignments to the Borrower and the
Assignment to the Designee of overriding royalty interests in certain of the
Borrower's Oil and Gas Properties) and consents to the granting of deeds of
trust as identified by the title examiners delivering opinions as to the
Borrower's title to the Mortgaged Properties.
105
