--------------------------------------------------------------------------------
EXHIBIT 10.20
CREDIT AGREEMENT
BETWEEN
HARKEN EXPLORATION COMPANY, XPLOR ENERGY, INC.,
HARKEN ENERGY WEST TEXAS, INC., HARKEN SOUTHWEST CORPORATION
SOUTH COAST EXPLORATION CO., XPLOR ENERGY SPV-1, INC.,
XXXXXXXXX ENERGY, INC.
AND
BANK ONE, TEXAS, NATIONAL ASSOCIATION
AS AGENT AND LENDER
AND
THE LENDERS SIGNATORY HERETO
AUGUST 11, 2000
--------------------------------------------------
REDUCING REVOLVING LINE OF CREDIT OF UP TO $100,000,000
--------------------------------------------------
--------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS AND INTERPRETATION
1.1 Terms Defined Above.................................. 1
1.2 Additional Defined Terms............................. 1
1.3 Undefined Financial Accounting Terms................. 15
1.4 References........................................... 15
1.5 Articles and Sections................................ 15
1.6 Number and Gender.................................... 15
1.7 Incorporation of Exhibits............................ 16
ARTICLE II TERMS OF FACILITY
2.1 Revolving Line of Credit............................. 16
2.2 Letter of Credit Facility............................ 17
2.3 Use of Loan Proceeds................................. 18
2.4 Interest............................................. 18
2.5 Repayment of Loans and Interest...................... 19
2.6 Outstanding Amounts.................................. 19
2.7 Time, Place, and Method of Payments.................. 19
2.8 Pro Rata Treatment; Adjustments...................... 20
2.9 Borrowing Base Determinations........................ 21
2.10 Mandatory Prepayments................................ 21
2.11 Voluntary Prepayments and Conversions of Loans....... 22
2.12 Commitment Fee....................................... 22
2.13 Engineering Fee...................................... 22
2.14 Facility Fee......................................... 22
2.15 Letter of Credit Fee................................. 22
2.16 Loans to Satisfy Obligations of Borrower............. 23
2.17 Security Interest in Accounts; Right of Offset....... 23
2.18 General Provisions Relating to Interest.............. 23
2.19 Yield Protection..................................... 24
2.20 Limitation on Types of Loans......................... 26
2.21 Illegality........................................... 26
2.22 Regulatory Change.................................... 27
2.23 Limitations on Interest Periods...................... 27
2.24 Letters in Lieu of Transfer Orders................... 27
2.25 Power of Attorney.................................... 27
ARTICLE III CONDITIONS
3.1 Receipt of Loan Documents and Other Items............ 28
3.2 Each Loan............................................ 30
-i-
ARTICLE IV REPRESENTATIONS AND WARRANTIES
4.1 Due Authorization.................................... 31
4.2 Corporate Existence.................................. 31
4.3 Valid and Binding Obligations........................ 31
4.4 Security Instruments................................. 32
4.5 Title to Assets...................................... 32
4.6 Scope and Accuracy of Financial Statements........... 32
4.7 No Material Misstatements............................ 32
4.8 Liabilities, Litigation, and Restrictions............ 32
4.9 Authorizations; Consents............................. 32
4.10 Compliance with Laws................................. 32
4.11 ERISA................................................ 33
4.12 Environmental Laws................................... 33
4.13 Compliance with Federal Reserve Regulations.......... 34
4.14 Investment Company Act Compliance.................... 34
4.15 Public Utility Holding Company Act Compliance........ 34
4.16 Proper Filing of Tax Returns; Payment of Taxes Due... 34
4.17 Refunds.............................................. 34
4.18 Gas Contracts........................................ 34
4.19 Intellectual Property................................ 34
4.20 Casualties or Taking of Property..................... 35
4.21 Locations of Borrower................................ 35
4.22 Subsidiaries......................................... 35
4.23 Existing Indebtedness; No Defenses................... 35
ARTICLE V AFFIRMATIVE COVENANTS
5.1 Maintenance and Access to Records.................... 35
5.2 Quarterly Financial Statements; Compliance
Certificates....................................... 35
5.3 Annual Financial Statements.......................... 36
5.4 Oil and Gas Reserve Reports.......................... 36
5.5 Title Opinions; Title Defects........................ 36
5.6 Notices of Certain Events............................ 36
5.7 Letters in Lieu of Transfer Orders; Division Orders.. 38
5.8 Additional Information............................... 38
5.9 Compliance with Laws................................. 38
5.10 Payment of Assessments and Charges................... 38
5.11 Maintenance of Corporate Existence and Good Standing. 38
5.12 Payment of Notes; Performance of Obligations......... 38
5.13 Further Assurances................................... 38
5.14 Initial Fees and Expenses of Counsel to Agent........ 39
5.15 Subsequent Fees and Expenses of Agent and/or Lenders. 39
5.16 Operation of Oil and Gas Properties.................. 39
5.17 Maintenance and Inspection of Properties............. 39
5.18 Maintenance of Insurance............................. 39
5.19 INDEMNIFICATION...................................... 40
ARTICLE VI NEGATIVE COVENANTS
-ii-
Page
6.1 Indebtedness......................................... 41
6.2 Contingent Obligations............................... 42
6.3 Liens................................................ 42
6.4 Sales of Assets...................................... 42
6.5 Leasebacks........................................... 42
6.6 Loans or Advances.................................... 42
6.7 Investments.......................................... 42
6.8 Dividends and Distributions.......................... 42
6.9 Issuance of Stock; Changes in Corporate Structure.... 43
6.10 Transactions with Affiliates......................... 43
6.11 Lines of Business.................................... 43
6.12 ERISA Compliance..................................... 43
6.13 Current Ratio....................................... 43
6.14 Tangible Net Worth................................... 43
6.15 Total Liabilities to Tangible Net Worth Ratio........ 43
6.16 Debt Service Coverage Ratio.......................... 43
6.17 Guarantor's Compliance............................... 43
ARTICLE VII EVENTS OF DEFAULT
7.1 Enumeration of Events of Default..................... 44
7.2 Remedies............................................. 46
ARTICLE VIII THE AGENT
8.1 Appointment.......................................... 47
8.2 Waivers, Amendments.................................. 47
8.3 Delegation of Duties................................. 47
8.4 Exculpatory Provisions............................... 47
8.5 Reliance by Agent.................................... 48
8.6 Notice of Default.................................... 48
8.7 Non-Reliance on Agent and Other Lenders.............. 48
8.8 Indemnification...................................... 49
8.9 Restitution.......................................... 50
8.10 Agent in Its Individual Capacity..................... 50
8.11 Successor Agent...................................... 50
8.12 Applicable Parties................................... 50
ARTICLE IX MISCELLANEOUS
9.1 Assignments; Participations.......................... 51
9.2 Survival of Representations, Warranties, and
Covenants.......................................... 52
9.3 Notices and Other Communications..................... 52
9.4 Parties in Interest.................................. 53
9.5 Rights of Third Parties.............................. 53
9.6 Renewals; Extensions................................. 54
9.7 No Waiver; Rights Cumulative......................... 54
9.8 Survival Upon Unenforceability....................... 54
9.9 Amendments; Waivers.................................. 54
-iii-
Page
9.10 Controlling Agreement................................ 54
9.11 Disposition of Collateral............................ 54
9.12 GOVERNING LAW........................................ 54
9.13 JURISDICTION AND VENUE............................... 55
9.14 WAIVER OF RIGHTS TO JURY TRIAL....................... 55
9.15 ENTIRE AGREEMENT..................................... 55
9.16 Release by Borrower.................................. 55
9.17 Counterparts......................................... 56
LIST OF EXHIBITS
Exhibit I -- Form of Note
Exhibit II -- Form of Borrowing Request
Exhibit III -- Form of Compliance Certificate
Exhibit IV -- Form of Opinion of Counsel
Exhibit V -- Facility Amounts
Exhibit VI -- Disclosures
Exhibit VII -- Form of Assignment Agreement
-iv-
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is made and entered into this 11th day of
August, 2000, by and between HARKEN EXPLORATION COMPANY, a Delaware corporation,
XPLOR ENERGY, INC., a Texas corporation, HARKEN ENERGY WEST TEXAS, INC., a
Delaware corporation, HARKEN SOUTHWEST CORPORATION, a New Mexico corporation,
XPLOR ENERGY SPV-1, INC., an Oklahoma corporation, and XXXXXXXXX ENERGY, INC., a
Texas corporation, (collectively the "Borrower"), each lender that is signatory
hereto or becomes a signatory hereto as provided in Section 9.1, (individually,
together with its successors and assigns, a "Lender", and collectively together
with their respective successors and assigns, the "Lenders"), and BANK ONE,
TEXAS, NATIONAL ASSOCIATION, a national banking association, as agent for the
Lenders (in such capacity, together with its successors in such capacity
pursuant to the terms hereof, the "Agent").
W I T N E S S E T H:
In consideration of the mutual covenants and agreements herein
contained, the Borrower and the Lender hereby agree as follows, amending and
restating in its entirety the Credit Agreement dated as of December 31, 1998, by
and between the Borrower and Christiana Bank Og Kreditkasse ASA (the "Existing
Lender"), as heretofore amended, restated, or supplemented (the "Existing Credit
Agreement").
ARTICLE I
DEFINITIONS AND INTERPRETATION
1.1 Terms Defined Above. As used in this Credit Agreement, the terms
"Agent," "Borrower," "Lender," "Lenders," "Existing Credit Agreement" and
"Existing Lender" shall have the meaning assigned to them hereinabove.
1.2 Additional Defined Terms. As used in this Credit Agreement, each
of the following terms shall have the meaning assigned thereto in this Section,
unless the context otherwise requires:
"Additional Costs" shall mean costs which the Lender determines are
attributable to its obligation to make or its making or maintaining any
LIBO Rate Loan, or any reduction in any amount receivable by the Lender in
respect of any such obligation or any LIBO Rate Loan, resulting from any
Regulatory Change which (a) changes the basis of taxation of any amounts
payable to the Lender under this Agreement or the Note in respect of any
LIBO Rate Loan (other than taxes imposed on the overall net income of the
Lender), (b) imposes or modifies any reserve, special deposit, minimum
capital, capital rates, or similar requirements relating to any extensions
of credit or other assets of, or any deposits with or other liabilities of,
the
Lender (including LIBO Rate Loans and Dollar deposits in the London
interbank market in connection with LIBO Rate Loans), or any commitments of
the Lender hereunder, (c) increases the Assessment Rate, or (d) imposes any
other condition affecting this Agreement or any of such extensions of
credit, liabilities, or commitments.
"Adjusted LIBO Rate" shall mean, for any LIBO Rate Loan, an interest
rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
determined by the Lender to be equal to the sum of the LIBO Rate for such
Loan plus the Applicable Margin, but in no event exceeding the Highest
Lawful Rate.
"Affiliate" shall mean any Person directly or indirectly controlling,
or under common control with, the Borrower and includes any Subsidiary of
the Borrower and any "affiliate" of the Borrower within the meaning of Reg.
(S)240.12b-2 of the Securities Exchange Act of 1934, as amended, with
"control," as used in this definition, meaning possession, directly or
indirectly, of the power to direct or cause the direction of management,
policies or action through ownership of 50% or more of the voting
securities, contract, voting trust, or membership in management or in the
group appointing or electing management or otherwise through formal or
informal arrangements or business relationships.
"Agreement" shall mean this Credit Agreement, as it may be amended,
supplemented, or restated from time to time.
"Applicable Lending Office" shall mean, for each type of Loan, the
lending office of the Lender (or an affiliate of the Lender) designated for
such type of Loan on the signature pages hereof or such other office of the
Lender (or an affiliate of the Lender) as the Lender may from time to time
specify to the Borrower as the office by which Loans of such type are to be
made and maintained.
"Applicable Margin" shall mean as to each LIBO Rate Loan, 235 basis
points.
"Assessment Rate" shall mean, for any Interest Period, the average
rate (rounded upwards if necessary to the nearest 1/100 of 1%) charged by
the Federal Deposit Insurance Corporation (or any successor thereto) to the
Lender for deposit insurance for Dollar time deposits with the Lender at
the Principal Office during such Interest Period, as determined by the
Lender.
"Assignment" shall mean the Assignment of Notes, Liens, Security
Interests, and Other Rights, in form and substance satisfactory to the
Lenders, executed by the Existing Lender, assigning to the Agent for the
benefit of the Lenders, the Existing Note, the indebtedness evidenced
thereby, the Liens securing the Existing Note, and the rights of the
Existing Lender under the Existing Loan Documents, and financing statement
changes constituent thereto.
2
"Available Commitment" shall mean, at any time, an amount equal to the
remainder, if any, of (a) the Borrowing Base in effect at such time minus
(b) the Loan Balance at such time plus the L/C Exposure at such time.
"Borrowing Base" shall mean, at any time, the amount determined by the
Lenders in accordance with Section 29 and then in effect.
"Borrowing Request" shall mean each written request, in substantially
the form attached hereto as Exhibit , by the Borrower to the Agent for a
borrowing, conversion, or prepayment pursuant to Sections 21 or 211, each
of which shall:
(a) be signed by a Responsible Officer of the Borrower;
(b) when requesting a borrowing, be accompanied by a Compliance
Certificate;
(c) specify the amount and type of Loan requested, and, as
applicable, the Loan to be converted or prepaid and the date of the
borrowing, conversion, or prepayment (which shall be a Business Day);
(d) when requesting a Floating Rate Loan, be delivered to the
Lender no later than 10:00 a.m., Central Standard or Daylight Savings
Time, as the case may be, in Houston, Texas, on the Business Day of
the requested borrowing, conversion, or prepayment;
(e) when requesting a LIBO Rate Loan, be delivered to the Lender
no later than 10:00 a.m., Central Standard or Daylight Savings Time,
as the case may be, in Houston, Texas, two Business Days preceding the
requested borrowing, conversion, or prepayment and designate the
Interest Period requested with respect to such Loan.
"Business Day" shall mean (a) for all purposes other than as covered
by clause (b) of this definition, a day other than a Saturday, Sunday,
legal holiday for commercial banks under the laws of the State of Texas, or
any other day when banking is suspended in the State of Texas, and (b) with
respect to all requests, notices, and determinations in connection with,
and payments of principal and interest on, LIBO Rate Loans, a day which is
a Business Day described in clause (a) of this definition and which is a
day for trading by and between banks for Dollar deposits in the London
interbank market.
"Closing Date" shall mean the effective date of this Agreement.
"Code" shall mean the United States Internal Revenue Code of 1986, as
amended from time to time.
3
"Collateral" shall mean the Mortgaged Properties and any other
Property now or at any time used or intended as security for the payment or
performance of all or any portion of the Obligations.
"Commitment" shall mean the obligation of the Lenders, subject to
applicable provisions of this Agreement, to make Loans to or for the
benefit of the Borrower pursuant to Section 21 and to issue Letters of
Credit pursuant to Section 2.15.
"Commitment Amount" shall mean, subject to the applicable provisions
of this Agreement, at any time, the lesser of (a) the sum of the Facility
Amounts of the Lenders, or (b) the Borrowing Base in effect at such time.
"Commitment Fee" shall mean each fee payable to the Lenders by the
Borrower pursuant to Section 212.
"Commitment Period" shall mean the period from and including the
Closing Date to but not including the Commitment Termination Date.
"Commitment Termination Date" shall mean the date which is three years
following the Closing Date.
"Commodity Hedge Agreement" shall mean any crude oil, natural gas, or
other hydrocarbon floor, collar, cap, price protection, or swap agreement,
in form and substance with a Person acceptable to the Agent, including the
Existing Lender.
"Commonly Controlled Entity" shall mean any Person which is under
common control with the Borrower or the Guarantor within the meaning of
Section 4001 of ERISA.
"Compliance Certificate" shall mean each certificate, substantially in
the form attached hereto as Exhibit , executed by a Responsible Officer of
the Borrower and furnished to the Agent from time to time in accordance
with Sections 52 and 5.3.
"Contingent Obligation" shall mean, as to any Person, any obligation
of such Person guaranteeing or in effect guaranteeing any Indebtedness,
leases, dividends, or other obligations of any other Person (for purposes
of this definition, a "primary obligation") in any manner, whether directly
or indirectly, including, without limitation, any obligation of such
Person, regardless of whether such obligation is contingent, (a) to
purchase any primary obligation or any Property constituting direct or
indirect security therefor, (b) to advance or supply funds (i) for the
purchase or payment of any primary obligation, or (ii) to maintain working
or equity capital of any other Person in respect of any primary obligation,
or otherwise to maintain the net worth or solvency of any other Person, (c)
to purchase Property, securities or services primarily for the purpose of
assuring the owner of any primary obligation of the ability of the Person
primarily liable for such primary obligation to make payment thereof, or
(d) otherwise to assure or hold harmless the owner of any such primary
4
obligation against loss in respect thereof, with the amount of any
Contingent Obligation being deemed to be equal to the stated or
determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the
maximum reasonably anticipated liability in respect thereof as determined
by such Person in good faith.
"Current Assets" shall mean all assets which would, in accordance with
GAAP, be included as current assets on a consolidated balance sheet of the
Guarantor as of the date of calculation, plus any amounts available under
this Credit Agreement.
"Current Liabilities" shall mean all liabilities which would, in
accordance with GAAP, be included as current liabilities on a consolidated
balance sheet of the Guarantor as of the date of calculation.
"Debt Service" shall mean quarterly net Interest Expense plus current
maturity of long term debt other than revolver with Lender plus 5% of
outstanding balance of revolver at the end of each quarter.
"Default" shall mean any event or occurrence which with the lapse of
time or the giving of notice or both would become an Event of Default.
"Default Rate" shall mean a per annum interest rate equal to the Prime
Rate plus three percent (3%), but in no event exceeding the Highest Lawful
Rate.
"Dollars" and "$" shall mean dollars in lawful currency of the United
States of America.
"EBITDA" shall mean, for any period, Net Income of the Guarantor for
such period plus Interest Expense, federal and state income taxes,
depreciation, amortization, and other non-cash expenses for such period
deducted in the determination of Net Income for such period excluding any
gains or losses from the exchange or redemption of European Notes.
"Engineering Fee" shall mean each fee payable to the Agent by the
Borrower pursuant to Section 2.13.
"Environmental Complaint" shall mean any written complaint, claim,
citation, notice of environmental report or investigation, or other notice
by any Governmental Authority or any other Person with respect to alleged
violations of Environmental Laws, regarding (a) air emissions, (b) spills,
releases, or discharges to soils, any improvements located thereon, surface
water, groundwater, or the sewer, septic, waste treatment, storage, or
disposal systems servicing any Property of the Borrower, (c) solid or
liquid waste disposal, (d) the use, generation, storage, transportation, or
disposal of any Hazardous Substance, or (e) other environmental, health, or
safety matters affecting any Property of the Borrower or the business
conducted thereon.
5
"Environmental Laws" shall mean (a) the following federal laws as they
may be cited, referenced, and amended from time to time: the Clean Air
Act, the Clean Water Act, the Safe Drinking Water Act, the Comprehensive
Environmental Response, Compensation and Liability Act, the Endangered
Species Act, the Resource Conservation and Recovery Act, the Occupational
Safety and Health Act, the Hazardous Materials Transportation Act, the
Superfund Amendments and Reauthorization Act, and the Toxic Substances
Control Act; (b) any and all equivalent environmental statutes of any state
in which Property of the Borrower is situated, as they may be cited,
referenced and amended from time to time; (c) any rules or regulations
promulgated under or adopted pursuant to the above federal and state laws;
and (d) any other equivalent federal, state, or local statute or any
requirement, rule, regulation, code, ordinance, or order adopted pursuant
thereto, including, without limitation, those relating to the generation,
transportation, treatment, storage, recycling, disposal, handling, or
release of Hazardous Substances.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations thereunder and
interpretations thereof.
"European Notes" shall mean the Harken Energy Corporation $85,000,000
5% Senior Convertible Notes due 2003 described in the Trust Indenture dated
May, 1998, between Harken Energy Corporation and Marine Midland Bank,
Trustee.
"Event of Default" shall mean any of the events specified in Section
7.1.
"Existing Loan Documents" shall mean the Loan Documents, as such term
is defined in the Existing Credit Agreement, in existence on the Closing
Date immediately prior to the Assignment.
"Existing Note" shall mean the Note, as such term is defined in the
Existing Credit Agreement, in existence on the Closing Date immediately
prior to the Assignment.
"Existing Security Instruments" shall mean the Security Instruments,
as such term is defined in the Existing Credit Agreement, in existence on
the Closing Date immediately prior to the Assignment.
"Facility Amount" shall mean, for each Lender, the amount set forth
opposite the name of such Lender on Exhibit IV under the caption "Facility
Amounts," as modified from time to time to reflect assignments permitted by
Section 9.1 or otherwise pursuant to the terms hereof and to give effect to
any written request of the Borrower (any such request being irrevocable,
absent written agreement of the Agent and the Required Lenders, which
written agreement may be expressly conditioned on the payment of a fee
(other than with respect to a reduction) by the Borrower to the Agent, for
the account of the Lenders) to a reduction in the sum of the then existing
Facility Amounts of the Lenders.
6
"Facility Fee" shall mean the fee payable to the Lenders by the
Borrower pursuant to Section 2.14.
"Final Maturity" shall mean the date which is three years following
the Commitment Termination Date.
"Financial Statements" shall mean statements of the financial
condition of the Guarantor as at the point in time and for the period
indicated and consisting of at least a balance sheet and related statements
of operations, common stock and other stockholders' equity, and cash flows
on a consolidated basis with the Guarantor and, when required by applicable
provisions of this Agreement to be audited, accompanied by the unqualified
certification of a nationally-recognized firm of independent certified
public accountants or other independent certified public accountants
acceptable to the Lender and footnotes to any of the foregoing, all of
which shall be prepared in accordance with GAAP consistently applied and in
comparative form with respect to the corresponding period of the preceding
fiscal period.
"Floating Rate" shall mean an interest rate per annum equal to the
Prime Rate from time to time in effect, but in no event exceeding the
Highest Lawful Rate.
"Floating Rate Loan" shall mean any Loan and any portion of the Loan
Balance which the Borrower has requested, in the initial Borrowing Request
for such Loan or a subsequent Borrowing Request for such portion of the
Loan Balance, bearing interest at the Floating Rate, or which pursuant to
the terms hereof is otherwise required to bear interest at the Floating
Rate.
"GAAP" shall mean generally accepted accounting principles established
by the Financial Accounting Standards Board or the American Institute of
Certified Public Accountants and in effect in the United States from time
to time.
"Governmental Authority" shall mean any nation, country, commonwealth,
territory, government, state, county, parish, municipality, or other
political subdivision and any entity exercising executive, legislative,
judicial, regulatory, or administrative functions of or pertaining to
government.
"Guarantor" shall mean Harken Energy Corporation, a Delaware
corporation.
"Guaranty" shall mean the Guaranty dated the Closing Date executed by
the Guarantor in favor of the Lender, guaranteeing the payment and
performance of the Obligations, as it may be ratified, amended, restated,
or supplemented from time to time.
"Hazardous Substances" shall mean flammables, explosives, radioactive
materials, hazardous wastes, asbestos, or any material containing asbestos,
7
polychlorinated biphenyls (PCBs), toxic substances or related materials,
petroleum, petroleum products, associated oil or natural gas exploration,
production, and development wastes, or any substances defined as "hazardous
substances," "hazardous materials," "hazardous wastes," or "toxic
substances" under the Comprehensive Environmental Response, Compensation
and Liability Act, as amended, the Superfund Amendments and Reauthorization
Act, as amended, the Hazardous Materials Transportation Act, as amended,
the Resource Conservation and Recovery Act, as amended, the Toxic
Substances Control Act, as amended, or any other law or regulation now or
hereafter enacted or promulgated by any Governmental Authority.
"Highest Lawful Rate" shall mean the maximum non-usurious interest
rate, if any (or, if the context so requires, an amount calculated at such
rate), that at any time or from time to time may be contracted for, taken,
reserved, charged, or received under applicable laws of the State of Texas
or the United States of America, whichever authorizes the greater rate, as
such laws are presently in effect or, to the extent allowed by applicable
law, as such laws may hereafter be in effect and which allow a higher
maximum non-usurious interest rate than such laws now allow.
"Indebtedness" shall mean, as to any Person, without duplication, (a)
all liabilities (excluding reserves for deferred income taxes, deferred
compensation liabilities, and other deferred liabilities and credits) which
in accordance with GAAP would be included in determining total liabilities
as shown on the liability side of a balance sheet, (b) all obligations of
such Person evidenced by bonds, debentures, promissory notes, or similar
evidences of indebtedness, (c) all other indebtedness of such Person for
borrowed money, and (d) all obligations of others, to the extent any such
obligation is secured by a Lien on the assets of such Person (whether or
not such Person has assumed or become liable for the obligation secured by
such Lien).
"Insolvency Proceeding" shall mean application (whether voluntary or
instituted by another Person) for or the consent to the appointment of a
receiver, trustee, conservator, custodian, or liquidator of any Person or
of all or a substantial part of the Property of such Person, or the filing
of a petition (whether voluntary or instituted by another Person)
commencing a case under Title 11 of the United States Code, seeking
liquidation, reorganization, or rearrangement or taking advantage of any
bankruptcy, insolvency, debtor's relief, or other similar law of the United
States, the State of Texas, or any other jurisdiction.
"Insolvent" or "Insolvency" shall mean, with respect to any
Multiemployer Plan, that such Plan is insolvent within the meaning of such
term as used in Section 4245 of ERISA.
"Intellectual Property" shall mean patents, patent applications,
trademarks, tradenames, copyrights, technology, know-how, and processes.
8
"Interest Expense" shall mean, for any period, the net interest
expense (including, without limitation, interest expense attributable to
capitalized leases) of the Guarantor for such period, determined in
accordance with GAAP.
"Interest Period" shall mean, subject to the limitations set forth in
Section 223, with respect to any LIBO Rate Loan, a period commencing on the
date such Loan is made or converted from a Loan of another type pursuant to
this Agreement or the last day of the next preceding Interest Period with
respect to such Loan and ending on the numerically corresponding day in the
calendar month that is one, two, three, or, subject to availability, six
months thereafter, as the Borrower may request in the Borrowing Request for
such Loan.
"Investment" in any Person shall mean any stock, bond, note, or other
evidence of Indebtedness, or any other security (other than current trade
and customer accounts) of, investment or partnership interest in or loan
to, such Person.
"L/C Exposure" shall mean, at any time, the aggregate maximum amount
available to be drawn under outstanding Letters of Credit at such time.
"Letter of Credit" shall mean any standby letter of credit issued by
any of the Issuing Lenders for the account of the Borrower pursuant to
Section 2.2.
"Letter of Credit Application" shall mean the standard letter of
credit application employed by any of the Issuing Lenders from time to time
in connection with letters of credit.
"Letter of Credit Fee" shall mean each fee payable to the Issuing
Lenders by the Borrower pursuant to Section 215 upon or in connection with
the issuance of a Letter of Credit.
"LIBO Rate" means, with respect to a LIBO Rate Loan for the relevant
Interest Period, the applicable British Banker's Association Interest
Settlement Rate for deposits in U.S. dollars appearing on Reuters Screen
FRBD as of 11:00 a.m. (London time) two Business Days prior to the first
day of such Interest Period, and having a maturity equal to such Interest
Period, provided that, (i) if Reuters Screen FRBD is not available to the
Lender for any reason, the applicable LIBO rate for the relevant Interest
Period shall instead be the applicable British Bankers' Association
Interest Settlement Rate for deposits in U.S. dollars as reported by any
other generally recognized financial information service as of 11:00 a.m.
(London time) two Business Days prior to the first day of such Interest
Period, and having a maturity equal to such Interest Period, and (ii) if no
such British Bankers' Association Interest Settlement Rate is available to
the Lender, the applicable LIBO Rate for the relevant Interest Period shall
instead be the rate determined by the Lender to be the rate at which Lender
or one of its Affiliate banks offers to place deposits in U.S. dollars with
first-class banks in the London interbank market at approximately 11:00
a.m. (London time) two Business Day prior to the first day of such Interest
Period, in the
9
approximate amount of Agent's relevant LIBO Rate Loan and having a maturity
equal to such Interest Period.
"LIBO Rate Loan" shall mean any Loan and any portion of the Loan
Balance which the Borrower has requested, in the initial Borrowing Request
for such Loan or a subsequent Borrowing Request for such portion of the
Loan Balance, bearing interest at the Adjusted LIBO Rate and which is
permitted by the terms hereof to bear interest at the Adjusted LIBO Rate.
"Lien" shall mean any interest in Property securing an obligation owed
to, or a claim by, a Person other than the owner of such Property, whether
such interest is based on common law, statute, or contract, and including,
but not limited to, the lien or security interest arising from a mortgage,
ship mortgage, encumbrance, pledge, security agreement, conditional sale or
trust receipt, or a lease, consignment, or bailment for security purposes
(other than true leases or true consignments), liens of mechanics,
materialmen, and artisans, maritime liens and reservations, exceptions,
encroachments, easements, rights of way, covenants, conditions,
restrictions, leases, and other title exceptions and encumbrances affecting
Property which secure an obligation owed to, or a claim by, a Person other
than the owner of such Property (for the purpose of this Agreement, the
Borrower shall be deemed to be the owner of any Property which it has
acquired or holds subject to a conditional sale agreement, financing lease,
or other arrangement pursuant to which title to the Property has been
retained by or vested in some other Person for security purposes), and the
filing or recording of any financing statement or other security instrument
in any public office.
"Limitation Period" shall mean any period while any amount remains
owing on the Note and interest on such amount, calculated at the applicable
interest rate, plus any fees or other sums payable under any Loan Document
and deemed to be interest under applicable law, would exceed the amount of
interest which would accrue at the Highest Lawful Rate.
"Loan" shall mean any loan made by any Lender to or for the benefit of
the Borrower pursuant to this Agreement and any payment made by the Issuing
Lender under a Letter of Credit.
"Loan Balance" shall mean, at any time, the outstanding principal
balance of the Notes plus the L/C Exposure at such time.
"Loan Documents" shall mean this Agreement, the Assignment, the Notes,
the Letter of Credit Applications, the Letters of Credit, the Security
Instruments, and all other documents and instruments now or hereafter
delivered pursuant to the terms of or in connection with this Agreement,
the Notes, the Letter of Credit Applications, the Letters of Credit, or the
Security Instruments, and all renewals and extensions of, amendments and
supplements to, and restatements of, any or all of the foregoing from time
to time in effect.
10
"Material Adverse Effect" shall mean (a) any material adverse effect
on the business, operations, properties, condition (financial or
otherwise), or prospects of the Borrower, (b) any material adverse effect
upon the business operations, properties, condition (financial or
otherwise), or prospects of the Borrower or the Guarantor which increases
the risk that any of the Obligations will not be repaid as and when due, or
(c) any material adverse effect upon the Collateral.
"Mortgaged Properties" shall mean all Oil and Gas Properties of the
Borrower subject to a perfected first-priority Lien in favor of the Agent
for the benefit of the Lenders, subject only to Permitted Liens, as
security for the Obligations.
"Multiemployer Plan" shall mean a Plan which is a multiemployer plan
as defined in Section 4001(a)(3) of ERISA.
"Net Income" shall mean, for any period, the net income of the
Guarantor for such period, determined in accordance with GAAP excluding any
gains or losses from the exchange or redemption of European Notes.
"Notes" shall mean, collectively, each of the promissory notes of the
Borrower payable to a Lender in the amount of the Facility Amount of such
Lender in the form attached hereto as Exhibit I with all blanks in such
form completed appropriately, together with all renewals, extensions for
any period, increases, and rearrangements thereof.
"Obligations" shall mean, without duplication, (a) all Indebtedness
evidenced by the Notes, (b) the Reimbursement Obligations, (c) the undrawn,
unexpired amount of all outstanding Letters of Credit, (d) the obligation
of the Borrower for the payment of Commitment Fees, Facility Fees, Letter
of Credit Fees, and Engineering Fees, (c) the obligations of the Guarantor
under the Guaranty, (d) all obligations and liabilities whether now
existing or hereafter arising of the Borrower to the Lenders in connection
with any Commodity Hedge Agreement or Rate Management Transaction, and (e)
all other obligations and liabilities of the Borrower or the Guarantor to
the Lenders, now existing or hereafter incurred, under, arising out of or
in connection with any Loan Document, and to the extent that any of the
foregoing includes or refers to the payment of amounts deemed or
constituting interest, only so much thereof as shall have accrued, been
earned and which remains unpaid at each relevant time of determination.
"Oil and Gas Properties" shall mean fee, leasehold, or other interests
in or under mineral estates or oil, gas, and other liquid or gaseous
hydrocarbon leases with respect to Properties situated in the United States
or in United States territorial waters offshore from any State of the
United States, including, without limitation, overriding royalty and
royalty interests, leasehold estate interests, net profits interests,
production payment interests, and mineral fee interests, together with
contracts executed in connection therewith and all tenements,
hereditaments, appurtenances and Properties appertaining, belonging,
affixed, or incidental thereto.
11
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA or any entity succeeding to any
or all of its functions under ERISA.
"Percentage Share" shall mean, as to each Lender, the percentage such
Lender's Facility Amount constitutes of the sum of the Facility Amounts of
all Lenders.
"Permitted Liens" shall mean (a) Liens for taxes, assessments, or
other governmental charges or levies not yet due or which (if foreclosure,
distraint, sale, or other similar proceedings shall not have been
initiated) are being contested in good faith by appropriate proceedings,
and such reserve as may be required by GAAP shall have been made therefor,
(b) Liens in connection with workers' compensation, unemployment insurance
or other social security (other than Liens created by Section 4068 of
ERISA), old-age pension, or public liability obligations which are not yet
due or which are being contested in good faith by appropriate proceedings,
if such reserve as may be required by GAAP shall have been made therefor,
(c) Liens in favor of vendors, carriers, warehousemen, repairmen,
mechanics, workmen, materialmen, construction, or similar Liens arising by
operation of law in the ordinary course of business in respect of
obligations which are not yet due or which are being contested in good
faith by appropriate proceedings, if such reserve as may be required by
GAAP shall have been made therefor, (d) 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, (e) Liens under
production sales agreements, division orders, operating agreements, and
other agreements customary in the oil and gas business for processing,
producing, and selling hydrocarbons securing obligations not constituting
Indebtedness and provided that such Liens do not secure obligations to
deliver hydrocarbons at some future date without receiving full payment
therefor within 90 days of delivery, (f) easements, rights of way,
restrictions, and other similar encumbrances, and minor defects in the
chain of title which are customarily accepted in the oil and gas financing
industry, none of which interfere with the ordinary conduct of the business
of the Borrower or materially detract from the value or use of the Property
to which they apply, and (g) Liens in favor of the Agent and Lenders and
other Liens expressly permitted under the Security Instruments.
"Person" shall mean an individual, corporation, partnership, trust,
unincorporated organization, government, any agency or political
subdivision of any government, or any other form of entity.
"Plan" shall mean, at any time, any employee benefit plan which is
covered by ERISA and in respect of which the Borrower, the Guarantor, or
any Commonly Controlled Entity is (or, if such plan were terminated at such
time, would under
12
Section 4069 of ERISA be deemed to be) an "employer" as defined in Section
3(5) of ERISA.
"Prime Rate" shall mean a rate per annum equal to the prime rate of
interest announced from time to time by Lender or its parent (which is not
necessarily the lowest rate charged to any customer), changing when and as
said prime rate changes.
"Principal Office" shall mean the principal office of the Agent in
Houston, Texas, presently located at 910 Xxxxxx, 0/xx/ Xxxxx, Xxxxxxx,
Xxxxx 00000-0000.
"Prohibited Transaction" shall have the meaning assigned to such term
in Section 4975 of the Code.
"Property" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, tangible or intangible.
"Rate Management Transaction" shall mean any transaction (including an
agreement with respect thereto) now existing or hereafter entered into
between Borrower and the Agent and/or the Lenders which is a rate swap,
basis swap, forward rate transaction, commodity swap, commodity option,
equity or equity index swap, equity or equity index option, bond option,
interest rate option, foreign exchange transaction, cap transaction, floor
transaction, collar transaction, forward transaction, currency swap
transaction, cross-currency rate swap transaction, currency option or any
other similar transaction (including any option with respect to any of
these transactions) or any combination thereof, whether linked to one or
more interest rates, foreign currencies, commodity prices, equity prices or
other financial measures.
"Regulation D" shall mean Regulation D of the Board of Governors of
the Federal Reserve System, as the same may be amended or supplemented from
time to time.
"Regulatory Change" shall mean the passage, adoption, institution, or
amendment of any federal, state, local, or foreign Requirement of Law
(including, without limitation, Regulation D), or any interpretation,
directive, or request (whether or not having the force of law) of any
Governmental Authority or monetary authority charged with the enforcement,
interpretation, or administration thereof, occurring after the Closing Date
and applying to a class of banks including the Lender or its Applicable
Lending Office.
"Reimbursement Obligation" shall mean the obligation of the Borrower
to provide to the Lenders or reimburse the Lenders for any amounts payable,
paid, or incurred by the Issuing Lenders with respect to Letters of Credit.
"Release of Hazardous Substances" shall mean any emission, spill,
release, disposal, or discharge, except in accordance with Environmental
Laws and any valid permit, license, certificate, or approval of the
relevant Governmental Authority, of
13
any Hazardous Substance into or upon (a) the air, (b) soils or any
improvements located thereon, (c) surface water or groundwater, or (d) the
sewer or septic system, or the waste treatment, storage, or disposal system
servicing any Property of the Borrower.
"Reorganization" shall mean, with respect to any Multiemployer Plan,
that such Plan is in reorganization within the meaning of such term in
Section 4241 of ERISA.
"Reportable Event" shall mean any of the events set forth in Section
4043(b) of ERISA, other than those events as to which the thirty-day notice
period is waived under subsections .13, .14, .16, .18, .19 or .20 of PBGC
Reg. (S)2615.
"Required Lenders" shall mean, Lenders (including the Agent) holding
at more than 66 2/3% of the then Loan Balance, or, if there is no Loan
Balance, Lenders (including the Agent) having more than 66 2/3% of the
aggregate amount of the Commitments.
"Requirement of Law" shall mean, as to any Person, the certificate or
articles of incorporation and by-laws or other organizational or governing
documents of such Person, and any applicable law, treaty, ordinance, order,
judgment, rule, decree, regulation, or determination of an arbitrator,
court, or other Governmental Authority, including, without limitation,
rules, regulations, orders, and requirements for permits, licenses,
registrations, approvals, or authorizations, in each case as such now exist
or may be hereafter amended and are applicable to or binding upon such
Person or any of its Property or to which such Person or any of its
Property is subject.
"Reserve Report" shall mean each report delivered to the Agent
pursuant to Section 5.4.
"Reserve Requirement" means, with respect to an Interest Period, the
maximum aggregate reserve requirement (including all basic, supplemental,
marginal and other reserves) which is imposed under Regulation D on
Eurocurrency liabilities.
"Responsible Officer" shall mean, as to any Person, its President,
Chief Executive Officer, Chief Financial Officer, or any Vice President.
"Security Instruments" shall mean the Existing Security Instruments
and the security instruments executed and delivered in satisfaction of the
condition set forth in Section 3.1(g), and all other documents and
instruments at any time executed as security for all or any portion of the
Obligations, as such instruments may be amended, restated, or supplemented
from time to time.
"Single Employer Plan" shall mean any Plan which is covered by Title
IV of ERISA, but which is not a Multiemployer Plan.
14
"Subsidiary" shall mean, as to any Person, a corporation of which
shares of stock having ordinary voting power (other than stock having such
power only by reason of the happening of a contingency) to elect a majority
of the board of directors or other managers of such corporation are at the
time owned, or the management of which is otherwise controlled, directly or
indirectly through one or more intermediaries, or both, by such Person.
"Superfund Site" shall mean those sites listed on the Environmental
Protection Agency National Priority List and eligible for remedial action
or any comparable state registries or list in any state of the United
States.
"Tangible Net Worth" shall mean (a) total assets, as would be
reflected on a balance sheet of the Guarantor prepared on a consolidated
basis and in accordance with GAAP, exclusive of Intellectual Property,
experimental or organization expenses, franchises, licenses, permits, and
other intangible assets, treasury stock, unamortized underwriters' debt
discount and expenses, and goodwill minus (b) total liabilities, as would
be reflected on a balance sheet of the Guarantor prepared on a consolidated
basis and in accordance with GAAP.
"Transferee" shall mean any Person to which a Lender has sold,
assigned, transferred, or granted a participation in any of the
Obligations, as authorized pursuant to Section 91, and any Person
acquiring, by purchase, assignment, transfer, or participation, from any
such purchaser, assignee, transferee, or participant, any part of such
Obligations.
"UCC" shall mean the Uniform Commercial Code as from time to time in
effect in the State of Texas.
1.3 Undefined Financial Accounting Terms. Undefined financial
accounting terms used in this Agreement shall be defined according to GAAP at
the time in effect.
1.4 References. References in this Agreement to Exhibit, Article, or
Section numbers shall be to Exhibits, Articles, or Sections of this Agreement,
unless expressly stated to the contrary. References in this Agreement to
"hereby," "herein," "hereinafter," "hereinabove," "hereinbelow," "hereof,"
"hereunder" and words of similar import shall be to this Agreement in its
entirety and not only to the particular Exhibit, Article, or Section in which
such reference appears.
1.5 Articles and Sections. This Agreement, for convenience only, has
been divided into Articles and Sections; and it is understood that the rights
and other legal relations of the parties hereto shall be determined from this
instrument as an entirety and without regard to the aforesaid division into
Articles and Sections and without regard to headings prefixed to such Articles
or Sections.
1.6 Number and Gender. Whenever the context requires, reference
herein made to the single number shall be understood to include the plural; and
likewise, the plural shall be understood to include the singular. Definitions
of terms defined in the singular or plural shall be
15
equally applicable to the plural or singular, as the case may be, unless
otherwise indicated. Words denoting sex shall be construed to include the
masculine, feminine and neuter, when such construction is appropriate; and
specific enumeration shall not exclude the general but shall be construed as
cumulative.
1.7 Incorporation of Exhibits. The Exhibits attached to this
Agreement are incorporated herein and shall be considered a part of this
Agreement for all purposes.
ARTICLE II
TERMS OF FACILITY
2.1 Revolving Line of Credit. (a) Upon the terms and conditions
(including, without limitation, the right of the Lenders to decline to make any
Loan so long as any Default or Event of Default exists) and relying on the
representations and warranties contained in this Agreement, the Lenders agree,
during the Commitment Period, to make Loans, in immediately available funds at
the Applicable Lending Office or the Principal Office, to or for the benefit of
the Borrower, from time to time on any Business Day designated by the Borrower
following receipt by the Agent of a Borrowing Request; provided, however, no
Loan shall exceed the then existing Available Commitment.
(b) Subject to the terms of this Agreement, during the Commitment
Period, the Borrower may borrow, repay, and reborrow and convert Loans of one
type or with one Interest Period into Loans of another type or with a different
Interest Period. Except for prepayments made pursuant to Section 210, each
borrowing, conversion, and prepayment of principal of Loans shall be in an
amount at least equal to $100,000. Each borrowing, prepayment, or conversion of
or into a Loan of a different type or, in the case of a LIBO Rate Loan, having a
different Interest Period, shall be deemed a separate borrowing, conversion, and
prepayment for purposes of the foregoing, one for each type of Loan or Interest
Period. Anything in this Agreement to the contrary notwithstanding, the
aggregate principal amount of LIBO Rate Loans having the same Interest Period
shall be at least equal to $100,000; and if any LIBO Rate Loan would otherwise
be in a lesser principal amount for any period, such Loan shall be a Floating
Rate Loan during such period.
(c) The Loans shall be made and maintained at the Applicable Lending
Office or the Principal Office of each Lender and shall be evidenced by the Note
of such Lender.
(d) Not later than 2:00 p.m., Central Standard or Daylight Savings
Time, as the case may be, on the date specified for each borrowing, each Lender
shall make available an amount equal to its Percentage Share of the Loan to be
made on such date to the Agent, at an account designated by the Agent, in
immediately available funds, for the account of the Borrower. The amount so
received by the Agent shall, subject to the terms and conditions hereof, be made
available to the Borrower in immediately available funds at the Principal Office
by the end of that Business Day.
16
(e) The failure of any Lender to make any Loan required to be made by
it hereunder shall not relieve any other Lender of its obligation to make any
Loan required to be made by it, and no Lender shall be responsible for the
failure of any other Lender to make any Loan.
(f) The face amounts of the Notes have been established as an
administrative convenience and do not commit any Lender to advance funds
hereunder in excess of the then current Borrowing Base.
2.2 Letter of Credit Facility. (a) Upon the terms and conditions and
relying on the representations and warranties contained in this Agreement, the
Agent, as issuing bank for the Lenders, agrees from the date of this Agreement
until the date which is thirty days prior to the Commitment Termination Date, to
issue following the receipt, not less than three Business Days prior to the
requested date for issuance of the relevant Letter of Credit, on behalf of the
Lenders in their respective Percentage Shares Letters of Credit for the account
of the Borrower and/or the benefit of any Subsidiary of the Borrower and to
renew and extend such Letters of Credit. Letters of Credit shall be issued,
renewed, or extended from time to time on any Business Day designated by the
Borrower following the receipt in accordance with the terms hereof by the Agent
of the written (or oral, confirmed promptly in writing) request by a Responsible
Officer of the Borrower and a Letter of Credit Application. Letters of Credit
shall be issued in such amounts as the Borrower may request; provided, however,
that (i) no Letter of Credit shall have an expiration date which is more than
365 days after the issuance thereof or subsequent to Final Maturity, (ii) each
automatically renewable Letter of Credit shall provide that it may be terminated
by the Agent at its then current expiry date by not less than 30 days' written
notice by the Agent to the beneficiary of such Letter of Credit, and (iii) the
Agent shall not be obligated to issue any Letter of Credit if (A) the face
amount thereof would exceed the Available Commitment, or (B) after giving effect
to the issuance thereof, (B) the L/C Exposure, when added to the Loan Balance
then outstanding, would exceed the Commitment Amount, or (C) the L/C Exposure
would exceed $3,000,000, other than with respect to required Commodity Hedge
Agreements and Rate Management Transactions.
(b) Prior to any payment in respect of any Letter of Credit, each
Lender shall be deemed to be a participant through the Agent with respect to the
relevant Letter of Credit in the obligation of the Agent, as the issuer of such
Letter of Credit, in an amount equal to the Percentage Share of such Lender of
the maximum amount which is or at any time may become available to be drawn
thereunder. Upon delivery by such Lender of funds requested pursuant to Section
2.2(c), such Lender shall be treated as having purchased a participating
interest in an amount equal to such funds delivered by such Lender to the Agent
in the obligation of the Borrower to reimburse the Agent, as the issuer of such
Letter of Credit, for any amounts payable, paid, or incurred by the Agent, as
the issuer of such Letter of Credit, with respect to such Letter of Credit.
(c) Each Lender shall be unconditionally and irrevocably liable,
without regard to the occurrence of any Default or Event of Default, to the
extent of the Percentage Share of such Lender at the time of issuance of each
Letter of Credit, to reimburse, on demand, the Agent, as the issuer of such
Letter of Credit, for the amount of each Letter of Credit payment under such
Letter of Credit.
17
(d) EACH LENDER AGREES TO SEVERALLY INDEMNIFY THE AGENT, AS THE ISSUER
OF EACH LETTER OF CREDIT, AND THE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
ATTORNEYS-IN-FACT AND AFFILIATES OF THE AGENT (TO THE EXTENT NOT REIMBURSED BY
THE BORROWER AND WITHOUT LIMITING THE OBLIGATION OF THE BORROWER TO DO SO),
RATABLY ACCORDING TO THE PERCENTAGE SHARE OF SUCH LENDER AT THE TIME OF ISSUANCE
OF SUCH LETTER OF CREDIT, FROM AND AGAINST ANY AND ALL LIABILITIES, CLAIMS,
OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS,
EXPENSES AND DISBURSEMENTS OF ANY KIND WHATSOEVER WHICH MAY AT ANY TIME
(INCLUDING, WITHOUT LIMITATION, ANY TIME FOLLOWING THE PAYMENT AND PERFORMANCE
OF ALL OBLIGATIONS AND THE TERMINATION OF THIS AGREEMENT) BE IMPOSED ON,
INCURRED BY OR ASSERTED AGAINST THE AGENT AS THE ISSUER OF SUCH LETTER OF CREDIT
OR ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR
AFFILIATES IN ANY WAY RELATING TO OR ARISING OUT OF THIS AGREEMENT OR SUCH
LETTER OF CREDIT OR ANY ACTION TAKEN OR OMITTED BY THE AGENT AS THE ISSUER OF
SUCH LETTER OF CREDIT OR ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
ATTORNEYS-IN-FACT OR AFFILIATES UNDER OR IN CONNECTION WITH ANY OF THE
FOREGOING, INCLUDING, WITHOUT LIMITATION, ANY LIABILITIES, CLAIMS, OBLIGATIONS,
LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES AND
DISBURSEMENTS IMPOSED, INCURRED OR ASSERTED AS A RESULT OF THE NEGLIGENCE,
WHETHER SOLE OR CONCURRENT, OF THE AGENT AS THE ISSUER OF SUCH LETTER OF CREDIT
OR ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR
AFFILIATES; PROVIDED THAT NO LENDER (OTHER THAN THE AGENT AS THE ISSUER OF A
LETTER OF CREDIT) SHALL BE LIABLE FOR THE PAYMENT OF ANY PORTION OF SUCH
LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS,
COSTS, EXPENSES OR DISBURSEMENTS RESULTING FROM THE GROSS NEGLIGENCE WHETHER
SOLE OR CONCURRENT OR WILLFUL MISCONDUCT OF THE AGENT AS THE ISSUER OF A LETTER
OF CREDIT. THE AGREEMENTS IN THIS SECTION 2.2(D) SHALL SURVIVE THE PAYMENT AND
PERFORMANCE OF ALL OBLIGATIONS AND THE TERMINATION OF THIS AGREEMENT.
2.3 Use of Loan Proceeds. (a) As of the date hereof, indebtedness in
the amount of $10,500,000 principal and $29,568.14 of interest is outstanding
under the Existing Note. The Agent shall use proceeds of the initial Loan to
purchase such indebtedness and all interest and expenses accrued thereon. Such
indebtedness shall be renewed, extended, and rearranged pursuant to the terms of
this Agreement, the Note, and the relevant Borrowing Request and shall for all
purposes be deemed a borrowing hereunder. Proceeds of all subsequent Loans
shall be used for acquisitions and development of additional domestic reserves
of the Borrower. In addition, with Lender's consent, consent subject to
Lender's credit approval process, Guarantor may use no more than 25% of the
Borrowing Base for Guarantor's general corporate purposes, including exploration
and development internationally, and the issuance of Letters of Credit.
(b) Letters of Credit shall be used solely for general corporate
purposes.
18
2.4 Interest. Subject to the terms of this Agreement (including,
without limitation, Section 218), interest on the Loans shall accrue and be
payable at a rate per annum equal to the Floating Rate for each Floating Rate
Loan and the Adjusted LIBO Rate for each LIBO Rate Loan. Interest on all
Floating Rate Loans shall be computed on the basis of a year of 365 or 366 days,
as the case may be, and actual days elapsed (including the first day but
excluding the last day) during the period for which payable. Interest on all
LIBO Rate Loans shall be computed on the basis of a year of 360 days, and actual
days elapsed (including the first day but excluding the last day) during the
period for which payable. Notwithstanding the foregoing, interest on past-due
principal and, to the extent permitted by applicable law, past-due interest,
shall accrue at the Default Rate, computed on the basis of a year of 365 or 366
days, as the case may be, and actual days elapsed (including the first day but
excluding the last day) during the period for which payable, and shall be
payable upon demand by the Lender at any time as to all or any portion of such
interest. In the event that the Borrower fails to select the duration of any
Interest Period for any LIBO Rate Loan within the time period and otherwise as
provided herein, such Loan (if outstanding as a LIBO Rate Loan) will be
automatically converted into a Floating Rate Loan on the last day of the then
current Interest Period for such Loan or (if outstanding as a Floating Rate
Loan) will remain as, or (if not then outstanding) will be made as, a Floating
Rate Loan. Interest provided for herein shall be calculated on unpaid sums
actually advanced and outstanding pursuant to the terms of this Agreement and
only for the period from the date or dates of such advances until repayment.
2.5 Repayment of Loans and Interest. Accrued and unpaid interest on
each outstanding Floating Rate Loan shall be due and payable monthly commencing
on the first day of August, 2000, and continuing on the first day of each
calendar month thereafter while any Floating Rate Loan remains outstanding, the
payment in each instance to be the amount of interest which has accrued and
remains unpaid in respect of the relevant Loan. Accrued and unpaid interest on
each outstanding LIBO Rate Loan shall be due and payable on the last day of the
Interest Period for such LIBO Rate Loan and, in the case of any Interest Period
in excess of three months, on the day of the third calendar month following the
commencement of such Interest Period corresponding to the day of the calendar
month on which such Interest Period commenced, the payment in each instance to
be the amount of interest which has accrued and remains unpaid in respect of the
relevant Loan. The Loan Balance, together with all accrued and unpaid interest
thereon, shall be due and payable at Final Maturity. At the time of making each
payment hereunder or under the Notes, the Borrower shall specify to the Agent
the Loans or other amounts payable by the Borrower hereunder to which such
payment is to be applied. In the event the Borrower fails to so specify, or if
an Event of Default has occurred and is continuing, the Agent may apply such
payment as it may elect in its sole discretion.
2.6 Outstanding Amounts. The outstanding principal balance of the
Notes reflected by the notations by the Lenders on their records shall be deemed
rebuttably presumptive evidence of the principal amount owing on such Note. The
liability for payment of principal and interest evidenced by the Note shall be
limited to principal amounts actually advanced and outstanding pursuant to this
Agreement and interest on such amounts calculated in accordance with this
Agreement.
2.7 Time, Place, and Method of Payments. All payments required
pursuant to this Agreement or the Notes shall be made in lawful money of the
United States of America and in immediately available funds, shall be deemed
received by the Agent on the next Business Day
19
following receipt if such receipt is after 2:00 p.m., in Houston, Texas, on any
Business Day, and shall be made at the Principal Office. Except as provided to
the contrary herein, if the due date of any payment hereunder or under the Notes
would otherwise fall on a day which is not a Business Day, such date shall be
extended to the next succeeding Business Day, and interest shall be payable for
any principal so extended for the period of such extension.
2.8 Pro Rata Treatment; Adjustments. (a) Except to the extent
otherwise expressly provided herein, (i) each Loan pursuant to this Agreement
shall be made from the Lenders pro rata in accordance with their respective
Percentage Shares, (ii) each reduction of the sum of the Facility Amounts of the
Lenders at the request of the Borrower, as well as any subsequent increase in
the sum of the Facility Amounts of the Lenders at the request of the Borrower
and with written agreement of the Agent and the Required Lenders shall serve to
adjust the Facility Amounts of the Lenders pro rata in accordance with the
Facility Amounts of the Lenders in effect immediately prior to any such
adjustment, (iii) each payment by the Borrower of fees shall be made for the
account of the Lenders pro rata in accordance with their respective Percentage
Shares, (iv) each payment of principal of Loans shall be made for the account of
the Lenders pro rata in accordance with their respective shares of the Loan
Balance, and (v) each payment of interest on Loans shall be made for the account
of the Lenders pro rata in accordance with their respective shares of the
aggregate amount of interest due and payable to the Lenders.
(b) The Agent shall distribute all payments with respect to the
Obligations to the Lenders promptly upon receipt in like funds as received. In
the event that any payments made hereunder by the Borrower at any particular
time are insufficient to satisfy in full the Obligations due and payable at such
time, such payments shall be applied (i) first, to fees and expenses due
pursuant to the terms of this Agreement or any other Loan Document, (ii) second,
to accrued interest, (iii) third, to the balance of the Loans, and (iv) last, to
any other Obligations.
(c) If any Lender (for purposes of this Section, a "Benefitted
Lender") shall at any time receive any payment of all or part of its portion of
the Obligations, or receive any Collateral in respect thereof (whether
voluntarily or involuntarily, by set-off, pursuant to events or proceedings of
the nature referred to in Section 7.1(f) or Section 7.1(g), or otherwise) in an
amount greater than such Lender was entitled to receive pursuant to the terms
hereof, such Benefitted Lender shall purchase for cash from the other Lenders
such portion of the Obligations of such other Lenders, or shall provide such
other Lenders with the benefits of any such Collateral or the proceeds thereof,
as shall be necessary to cause such Benefitted Lender to share the excess
payment or benefits of such Collateral or proceeds with each of the Lenders
according to the terms hereof. If all or any portion of such excess payment or
benefits is thereafter recovered from such Benefitted Lender, such purchase
shall be rescinded and the purchase price and benefits returned by such Lender,
to the extent of such recovery, but without interest. The Borrower agrees that
each such Lender so purchasing a portion of the Obligations of another Lender
may exercise all rights of payment (including rights of set-off) with respect to
such portion as fully as if such Lender were the direct holder of such portion.
If any Lender ever receives, by voluntary payment, exercise of rights of set-off
or banker's lien, counterclaim, cross-action or otherwise, any funds of the
Borrower to be applied to the Obligations, or receives any proceeds by
realization on or with respect to any Collateral, all such funds and proceeds
shall be forwarded immediately to the Agent for distribution in accordance with
the terms of this Agreement.
20
2.9 Borrowing Base Determinations. (a) The Borrowing Base as of the
Closing Date is acknowledged by the Borrower and the Lenders to be $22,000,000.
Commencing on August 1, 2000 and continuing thereafter on the first day of each
calendar month through the Commitment Termination Date, the amount of the
Borrowing Base shall be reduced by $450,000.
(b) The Borrowing Base shall be redetermined semi-annually on the
basis of information supplied by the Borrower in compliance with the provisions
of this Agreement, including, without limitation, Reserve Reports, and all other
information available to the Lenders. In addition, the Lenders shall, in the
normal course of business following a request of the Borrower, redetermine the
Borrowing Base; provided, however, the Lenders shall not be obligated to respond
to more than three such requests during any calendar year, and in no event shall
the Lenders be required to redetermine the Borrowing Base more than once in any
three-month period, including, without limitation, each scheduled semi-annual
redetermination provided for above. Notwithstanding the foregoing, the Lenders
may redetermine the Borrowing Base and the amount by which the Borrowing Base
shall be reduced each calendar month as set forth in Section 2.9 (a) at any time
and from time to time.
(c) Upon each determination of the Borrowing Base by the Lenders, the
Agent shall notify the Borrower orally (confirming such notice promptly in
writing) of such determination, and the Borrowing Base and the monthly
amortization amount by which the Borrowing Base shall be reduced so communicated
to the Borrower shall become effective upon receipt of such written notification
and shall remain in effect until the next subsequent determination of the
Borrowing Base and the monthly amortization amount by which the Borrowing Base
shall be reduced or increased.
(d) The Borrowing Base shall represent the determination by the
Lenders, in accordance with the applicable definitions and provisions herein
contained and their customary lending practices for loans of this nature, of the
value, for loan purposes, of the Mortgaged Properties, subject, in the case of
any increase in the Borrowing Base, to the credit approval process of the
Lenders. Furthermore, the Borrower acknowledges that the determination of the
Borrowing Base contains an equity cushion (market value in excess of loan
value), which is acknowledged by the Borrower to be essential for the adequate
protection of the Lenders.
2.10 Mandatory Prepayments. If at any time the sum of the Loan
Balance and the L/C Exposure exceeds the Borrowing Base then in effect, the
Borrower shall, within 30 days of notice from the Agent of such occurrence, (a)
prepay, or make arrangements acceptable to the Lenders for the prepayment of,
the amount of such excess for application on the Loan Balance, (b) provide
additional collateral, of character and value satisfactory to the Lenders in
their sole discretion, to secure the Obligations by the execution and delivery
to the Lenders of security instruments in form and substance satisfactory to the
Lenders, or (c) effect any combination of the alternatives described in clauses
(a) and (b) of this Section and acceptable to the Lenders in their sole
discretion. In the event that a mandatory prepayment is required under this
Section and the Loan Balance is less than the amount required to be prepaid, the
Borrower shall repay the entire Loan Balance and, in accordance with the
provisions of the relevant Letter of Credit Applications executed by the
Borrower or otherwise to the satisfaction of the Lenders, deposit with the
Agent, as additional collateral securing the Obligations, an amount of cash, in
immediately available funds, equal to the
21
L/C Exposure minus the Borrowing Base. The cash deposited with the Agent in
satisfaction of the requirement provided in this Section may be invested, at the
sole discretion of the Lenders and then only at the express direction of the
Borrower as to investment vehicle and maturity (which shall be no later than the
latest expiry date of any then outstanding Letter of Credit), for the account of
the Borrower in cash or cash equivalent investments offered by or through the
Lenders.
2.11 Voluntary Prepayments and Conversions of Loans. Subject to
applicable provisions of this Agreement, the Borrower shall have the right at
any time or from time to time to prepay Loans and to convert Loans of one type
or with one Interest Period into Loans of another type or with a different
Interest Period; provided, however, that (a) the Borrower shall give the Lender
notice of each such prepayment or conversion of all or any portion of a LIBO
Rate Loan no less than two Business Days prior to prepayment or conversion, (b)
any LIBO Rate Loan may be prepaid or converted only on the last day of an
Interest Period for such Loan, (c) the Borrower shall pay all accrued and unpaid
interest on the amounts prepaid or converted, and (d) no such prepayment or
conversion shall serve to postpone the repayment when due of any Obligation.
2.12 Commitment Fee. In addition to interest on the Notes as provided
herein and all other fees payable hereunder and to compensate the Lenders for
maintaining funds available, the Borrower shall pay to the Lenders, in
immediately available funds, on the first day of October, 2000, and on the first
day of each third calendar month thereafter during the Commitment Period, a fee
in the amount of three-eighths percent (3/8%) per annum, calculated on the basis
of a year of 365 or 366 days, as the case may be, and actual days elapsed
(including the first day but excluding the last day), on the average daily
amount of the Available Commitment during the preceding quarterly period.
2.13 Engineering Fee. In addition to interest on the Notes as
provided herein and all other fees payable hereunder and to compensate the Agent
for the costs of evaluating the Mortgaged Properties and reviewing the Reserve
Reports, the Borrower shall pay to the Agent, in immediately available funds, on
the date of each semi-annual or Borrower's requested redetermination of the
Borrowing Base, an engineering fee in the amount of $7,500.
2.14 Facility Fee. In addition to interest on the Notes as provided
herein and all other fees payable hereunder and to compensate the Lenders for
the costs of the extension of credit hereunder, the Borrower shall pay to the
Lenders on the Closing Date, in immediately available funds, a facility fee in
the amount of $165,000, $25,000 of which has been paid and one-half percent on
all incremental increases in the Borrowing Base above the original Borrowing
Base amount, payable at the time of such increases.
2.15 Letter of Credit Fee. In addition to interest on the Notes as
provided herein and all other fees paid hereunder, the Borrower agrees to pay to
the Agent or Issuing Bank, on the date of issuance of each Letter of Credit, a
fee equal to the greater of $500.00 or one percent (1%) per annum, calculated on
the basis of a year of 365 or 366 days, as the case may be, and actual days
elapsed (including the first day but excluding the last day), on the face amount
of such Letter of Credit during the period for which such Letter of Credit is
issued; provided, however, in the event such Letter of Credit is canceled prior
to its original expiry date or a payment is made by the Lender with respect to
such Letter of Credit, the Lender shall, within 30 days after such cancellation
or the
22
making of such payment, rebate to the Borrower the unearned portion of such fee.
The Borrower also agrees to pay to the Agent or Issuing Bank on demand its
customary letter of credit transactional fees, including, without limitation,
amendment fees, payable with respect to each Letter of Credit.
2.16 Loans to Satisfy Obligations of Borrower. The Lenders may, but
shall not be obligated to, make Loans for the benefit of the Borrower and apply
proceeds thereof to the satisfaction of any condition, warranty, representation,
or covenant of the Borrower contained in this Agreement or any other Loan
Document. Any such Loan shall be evidenced by the Notes and shall be made as a
Floating Rate Loan.
2.17 Security Interest in Accounts; Right of Offset. As security for
the payment and performance of the Obligations, the Borrower hereby transfers,
assigns, and pledges to the Agent for the benefit of the Lenders and grants to
the Agent for the benefit of the Lenders a security interest in all of the
Borrower's funds now or hereafter or from time to time on deposit with the Agent
and such Lenders, with such interest of the Lender to be retransferred,
reassigned, and/or released by the Agent and each Lender, as the case may be, at
the expense of the Borrower upon payment in full and complete performance by the
Borrower of all Obligations. All remedies as secured party or assignee of such
funds shall be exercisable by the Lenders during the existence of the occurrence
of any Event of Default, regardless of whether the exercise of any such remedy
would result in any penalty or loss of interest or profit with respect to any
withdrawal of funds deposited in a time deposit account prior to the maturity
thereof. Furthermore, the Borrower hereby grants to the Agent and each Lender
the right, exercisable during the existence of an Event of Default, of offset or
banker's lien against all of the Borrower's funds now or hereafter or from time
to time on deposit with the Agent and each Lender, regardless of whether the
exercise of any such remedy would result in any penalty or loss of interest or
profit with respect to any withdrawal of funds deposited in a time deposit
account prior to the maturity thereof, provided that such Obligation shall have
matured, whether by acceleration of maturity or otherwise.
2.18 General Provisions Relating to Interest. (a) It is the intention
of the parties hereto to comply strictly with the usury laws of the State of
Texas and the United States of America. In this connection, there shall never be
collected, charged, or received on the sums advanced hereunder interest in
excess of that which would accrue at the Highest Lawful Rate. For purposes of
Chapter 303 of the Texas Finance Code (Vernon's 1999) the Borrower agrees that
the Highest Lawful Rate shall be the "weekly ceiling" as defined in such
Section, provided that the Lenders may also rely, to the extent permitted by
applicable laws of the State of Texas or the United States of America, on
alternative maximum rates of interest under other laws of the State of Texas or
the United States of America applicable to the Lenders, if greater.
(b) Notwithstanding anything herein or in the Notes to the contrary,
during any Limitation Period, the interest rate to be charged on amounts
evidenced by the Notes shall be the Highest Lawful Rate, and the obligation, if
any, of the Borrower for the payment of fees or other charges deemed to be
interest under applicable law shall be suspended. During any period or periods
of time following a Limitation Period, to the extent permitted by applicable
laws of the State of Texas or the United States of America, the interest rate to
be charged hereunder shall remain at the Highest Lawful Rate until such time as
there has been paid to the Lenders (i) the amount of interest in excess of that
accruing at the Highest Lawful Rate that the Lenders would have received during
23
the Limitation Period had the interest rate remained at the otherwise applicable
rate, and (ii) all interest and fees otherwise payable to the Lenders but for
the effect of such Limitation Period.
(c) If, under any circumstances, the aggregate amounts paid on the
Notes or under this Agreement or any other Loan Document include amounts which
by law are deemed interest and which would exceed the amount permitted if the
Highest Lawful Rate were in effect, the Borrower stipulates that such payment
and collection will have been and will be deemed to have been, to the extent
permitted by applicable laws of the State of Texas or the United States of
America, the result of mathematical error on the part of the Borrower and the
Lenders; and the Lenders shall promptly refund the amount of such excess (to the
extent only of such interest payments in excess of that which would have accrued
and been payable on the basis of the Highest Lawful Rate) upon discovery of such
error by the Lenders or notice thereof from the Borrower. In the event that the
maturity of any Obligation is accelerated, by reason of an election by the
Lenders or otherwise, or in the event of any required or permitted prepayment,
then the consideration constituting interest under applicable laws may never
exceed the Highest Lawful Rate; and excess amounts paid which by law are deemed
interest, if any, shall be credited by the Lenders on the principal amount of
the Obligations, or if the principal amount of the Obligations shall have been
paid in full, refunded to the Borrower.
(d) All sums paid, or agreed to be paid, to the Lenders for the use,
forbearance and detention of the proceeds of any advance hereunder shall, to the
extent permitted by applicable law, be amortized, prorated, allocated, and
spread throughout the full term hereof until paid in full so that the actual
rate of interest is uniform but does not exceed the Highest Lawful Rate
throughout the full term hereof.
2.19 Yield Protection. (a) Without limiting the effect of the other
provisions of this Section (but without duplication), the Borrower shall pay to
the Lenders from time to time such amounts as the Lenders may determine are
necessary to compensate it for any Additional Costs incurred by the Lenders.
(b) Without limiting the effect of the other provisions of this
Section (but without duplication), the Borrower shall pay to the Lenders from
time to time on request such amounts as the Lenders may determine are necessary
to compensate the Lenders for any costs attributable to Borrower's LIBO Rate
Loans hereunder and the maintenance thereof by the Lenders (or any Applicable
Lending Office), pursuant to any Regulatory Change, of capital in respect of the
Commitment, such compensation to include, without limitation, an amount equal to
any reduction of the rate of return on assets or equity of the Lenders (or any
Applicable Lending Office) to a level below that which the Lenders (or any
Applicable Lending Office) could have achieved but for such Regulatory Change.
(c) Without limiting the effect of the other provisions of this
Section (but without duplication), the Borrower shall pay to the Lenders such
amounts as shall be sufficient in the reasonable opinion of the Lenders to
compensate them for any actual loss, cost, or expense incurred by and as a
result of, which amount will be verified by the Lender in writing:
24
(i) any payment, prepayment, or conversion by the Borrower of a LIBO Rate
Loan on a date other than the last day of an Interest Period for such
Loan; or
(ii) any failure by the Borrower to borrow a LIBO Rate Loan from the
Lender on the date for such borrowing specified in the relevant Borrowing
Request ;
such compensation to include, without limitation, with respect to any LIBO Rate
Loan, an amount equal to the excess, if any, of (A) the amount of interest which
would have accrued on the principal amount so paid, prepaid, converted, or not
borrowed for the period from the date of such payment, prepayment, conversion,
or failure to borrow to the last day of the then current Interest Period for
such Loan (or, in the case of a failure to borrow, the Interest Period for such
Loan which would have commenced on the date of such failure to borrow) at the
applicable rate of interest for such Loan provided for herein over (B) the
interest component (as reasonably determined by the Lenders) of the amount (as
reasonably determined by the Lenders) the Lenders would have bid in the London
interbank market for Dollar deposits of amounts comparable to such principal
amount and maturities comparable to such period.
(d) Determinations by the Lenders for purposes of this Section of the
effect of any Regulatory Change on capital maintained, its costs or rate of
return, maintaining Loans, its obligation to make Loans, or on amounts
receivable by it in respect of Loans, or such obligations, and the additional
amounts required to compensate the Lenders under this Section shall be
conclusive, absent manifest error, provided that such determinations are made on
a reasonable basis. The Lenders shall furnish the Borrower with a certificate
setting forth in reasonable detail the basis and amount of increased costs
incurred or reduced amounts receivable as a result of any such event, and the
statements set forth therein shall be conclusive, absent manifest error. The
Lenders shall (i) notify the Borrower, as promptly as practicable after the
Lenders obtain knowledge of any Additional Costs or other sums payable pursuant
to this Section and determines to request compensation therefor, of any event
occurring after the Closing Date which will entitle the Lenders to compensation
pursuant to this Section; provided that the Borrower shall not be obligated for
the payment of any Additional Costs or other sums payable pursuant to this
Section to the extent such Additional Costs or other sums accrued more than 90
days prior to the date upon which the Borrower was given such notice; and (ii)
designate a different Applicable Lending Office for the Loans of the Lenders
affected by such event if such designation will avoid the need for or reduce the
amount of such compensation and will not, in the sole opinion of the Lenders, be
disadvantageous to the Lenders. If the Lenders request compensation from the
Borrower under this Section, the Borrower may, by notice to the Lenders, require
that the Loans by the Lenders of the type with respect to which such
compensation is requested be converted into Floating Rate Loans in accordance
with Section 211. Any compensation requested by the Lenders pursuant to this
Section shall be due and payable to the Lenders within five days of delivery of
any such notice by the Lenders to the Borrower.
(e) The Lenders agree that they shall not request, and the Borrower
shall not be obligated to pay, any Additional Costs or other sums payable
pursuant to this Section unless similar additional costs and other sums payable
are also generally assessed by the Lenders against other
25
customers of the Lenders similarly situated where such customers are subject to
documents providing for such assessment.
2.20 Limitation on Types of Loans. Anything herein to the contrary
notwithstanding, no more than five separate Loans shall be outstanding at any
one time, with, for purposes of this Section, all Floating Rate Loans
constituting one Loan and all LIBO Rate Loans for the same Interest Period
constituting one Loan. Anything herein to the contrary notwithstanding, if, on
or prior to the determination of any interest rate for any LIBO Rate Loan for
any Interest Period therefor:
(a) the Lenders determine (which determination shall be conclusive)
that quotations of interest rates for the deposits referred to in the
definition of "LIBO Rate" in Section 12 are not being provided in the
relevant amounts or for the relevant maturities for purposes of determining
the rate of interest for such Loan as provided in this Agreement; or
(b) the Lenders determine (which determination shall be conclusive)
that the rates of interest referred to in the definition of "LIBO Rate" in
Section 12 upon the basis of which the rate of interest for such Loan for
such Interest Period is to be determined do not accurately reflect the cost
to the Lenders of making or maintaining such Loan for such Interest Period,
then the Lenders shall give the Borrower prompt notice thereof; and so long as
such condition remains in effect, the Lenders shall be under no obligation to
make LIBO Rate Loans or to convert Loans of any other type into LIBO Rate Loans,
and the Borrower shall, on the last day of the then current Interest Period for
each outstanding LIBO Rate Loan, either prepay such LIBO Rate Loan or convert
such Loan into another type of Loan in accordance with Section 2.11. Before
giving such notice pursuant to this Section, the Lenders will designate a
different available Applicable Lending Office for LIBO Rate Loans or take such
other action as the Borrower may request if such designation or action will
avoid the need to suspend the obligation of the Lenders to make LIBO Rate Loans
hereunder and will not, in the opinion of the Lenders, be disadvantageous to the
Lenders.
2.21 Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any of the Lenders or their
Applicable Lending Office to (a) honor its obligation to make any type of LIBO
Rate Loans hereunder, or (b) maintain any type of LIBO Rate Loans hereunder,
then such Lender shall promptly notify the Borrower thereof; and the obligation
of such Lender hereunder to make such type of LIBO Rate Loans and to convert
other types of Loans into LIBO Rate Loans of such type shall be suspended until
such time as such Lender may again make and maintain LIBO Rate Loans of such
type, and the outstanding LIBO Rate Loans of such type shall be converted into
Floating Rate Loans in accordance with Section 2.11. Before giving such notice
pursuant to this Section, such Lender will designate a different available
Applicable Lending Office for LIBO Rate Loans or take such other action as the
Borrower may request if such designation or action will avoid the need to
suspend the obligation of such Lender to make LIBO Rate Loans and will not, in
the opinion of such Lender, be disadvantageous to such Lender.
26
2.22 Regulatory Change. In the event that by reason of any Regulatory
Change, any Lender (a) incurs Additional Costs based on or measured by the
excess above a specified level of the amount of a category of deposits or other
liabilities of such Lender which includes deposits by reference to which the
interest rate on any LIBO Rate Loan is determined as provided in this Agreement
or a category of extensions of credit or other assets of such Lender which
includes any LIBO Rate Loan, or (b) becomes subject to restrictions on the
amount of such a category of liabilities or assets which it may hold, then, at
the election of such Lender with notice to the Borrower, the obligation of such
Lender to make such LIBO Rate Loans and to convert Floating Rate Loans into such
LIBO Rate Loans shall be suspended until such time as such Regulatory Change
ceases to be in effect, and all such outstanding LIBO Rate Loans shall be
converted into Floating Rate Loans in accordance with Section 2.11.
2.23 Limitations on Interest Periods. Each Interest Period selected
by the Borrower (a) which commences on the last Business Day of a calendar month
(or, with respect to any LIBO Rate Loan, any day for which there is no
numerically corresponding day in the appropriate subsequent calendar month)
shall end on the last Business Day of the appropriate subsequent calendar month,
(b) which would otherwise end on a day which is not a Business Day shall end on
the next succeeding Business Day (or, if such next succeeding Business Day falls
in the next succeeding calendar month, on the next preceding Business Day), (c)
which would otherwise commence before and end after Final Maturity shall end on
Final Maturity, and (d) shall have a duration of not less than one month, as to
any LIBO Rate Loan, and, if any Interest Period would otherwise be a shorter
period, the relevant Loan shall be a Floating Rate Loan during such period.
2.24 Letters in Lieu of Transfer Orders. The Agent agrees that none
of the letters in lieu of transfer or division orders provided by the Borrower
pursuant to Section 3.1(g)(iii) or Section 5.7 will be sent to the addressees
thereof prior to the occurrence and continuation of an Event of Default, at
which time the Lender may, at its option and in addition to the exercise of any
of its other rights and remedies, send any or all of such letters.
2.25 Power of Attorney. The Borrower hereby designates the Lender as
its agent and attorney-in-fact, to act in its name, place, and stead for the
purpose of completing and, upon the occurrence of an Event of Default,
delivering any and all of the letters in lieu of transfer orders delivered by
the Borrower to the Agent pursuant to Section 3.1(g)(iii) or Section 5.7,
including, without limitation, completing any blanks contained in such letters
and attaching exhibits thereto describing the relevant Collateral. The Borrower
hereby ratifies and confirms all that the Agent shall lawfully do or cause to be
done by virtue of this power of attorney and the rights granted with respect to
such power of attorney. This power of attorney is coupled with the interests of
the Agent in the Collateral, shall commence and be in full force and effect as
of the Closing Date and shall remain in full force and effect and shall be
irrevocable so long as any Obligation remains outstanding or unpaid or any
Commitment exists. The powers conferred on the Agent by this appointment are
solely to protect the interests of the Agent under the Loan Documents and shall
not impose any duty upon the Agent to exercise any such powers. The Agent shall
be accountable only for amounts that it actually receives as a result of the
exercise of such powers and shall not be responsible to the Borrower or any
other Person for any act or failure to act with respect to such powers, except
for gross negligence or willful misconduct.
27
ARTICLE III
CONDITIONS
The obligations of the Lender to enter into this Agreement and to make
Loans and issue Letters of Credit are subject to the satisfaction of the
following conditions precedent:
3.1 Receipt of Loan Documents and Other Items. The Lenders shall
have no obligation under this Agreement unless and until all matters incident to
the consummation of the transactions contemplated herein, including, without
limitation, the review by the Agent or its counsel of the title of the Borrower
to its Oil and Gas Properties, shall be satisfactory to the Agent, and the Agent
shall have received, reviewed, and approved the following documents and other
items, appropriately executed when necessary and, where applicable, acknowledged
by one or more authorized officers of the Borrower, all in form and substance
satisfactory to the Agent and dated, where applicable, of even date herewith or
a date prior thereto and acceptable to the Agent:
(a) multiple counterparts of this Agreement, the Assignment and the
Guaranty, as requested by the Agent;
(b) the Existing Note, endorsed payable to the Agent for the ratable
benefit of the Lenders under this Agreement;
(c) the Notes;
(d) copies of the Articles of Incorporation or Certificate of
Incorporation and all amendments thereto and the bylaws and all amendments
thereto of the Borrower and the Guarantor, accompanied by a certificate
issued by the secretary or an assistant secretary of the Borrower or the
Guarantor, as the case may be, to the effect that each such copy is correct
and complete;
(e) certificates of incumbency and signatures of all officers of the
Borrower and the Guarantor who are authorized to execute Loan Documents on
behalf of such entities, each such certificate being executed by the
secretary or an assistant secretary of the Borrower or the Guarantor, as
the case may be;
(f) copies of corporate resolutions approving the Loan Documents and
authorizing the transactions contemplated herein and therein, duly adopted
by the boards of directors of the Borrower and the Guarantor, accompanied
by certificates of the secretary or an assistant secretary of the Borrower
or the Guarantor, as the case may be, to the effect that such copies are
true and correct copies of resolutions duly adopted at a meeting or by
unanimous consent of the board of directors of the Borrower or the
Guarantor, as the case may be, and that such resolutions constitute all the
resolutions adopted with respect to such transactions, have not been
amended, modified, or revoked in any respect, and are in full force and
effect as of the date of such certificate;
28
(g) multiple counterparts, as requested by the Agent, of the following
Security Instruments creating, evidencing, perfecting, and documents
amending, ratifying, and/or restating the Existing Security Instruments and
otherwise establishing Liens in favor of the Agent in and to the
Collateral:
(i) Mortgage, Deed of Trust, Indenture, Security Agreement,
Assignment of Production, and Financing Statement from the Borrower
covering certain designated Oil and Gas Properties of the Borrower and
all improvements, personal property, and fixtures related thereto;
(ii) Financing Statements from the Borrower, as debtor,
constituent to the instrument described in clause (i) above;
(ii) undated letters, in form and substance satisfactory to the
Lender, from the Borrower to each purchaser of production and disburser
of the proceeds of production from or attributable to the Mortgaged
Properties, together with additional letters with the addressees left
blank, authorizing and directing the addressees to make future payments
attributable to production from the Mortgaged Properties directly to the
Lender;
(h) audited consolidated Financial Statements of the Guarantor as of
December 31, 1999 and unaudited Financial Statements of the Guarantor as of
March 31, 2000;
(i) certificates dated as of a recent date from the Secretary of State
or other appropriate Governmental Authority evidencing the existence or
qualification and good standing of the Borrower and the Guarantor in their
respective jurisdictions of incorporation and in any other jurisdictions
where either of them does business other than where the failure to so
qualify would not have a Material Adverse Effect.
(j) results of searches of the UCC Records of the Secretary of State
of the State of Texas from a source acceptable to the Agent and reflecting
no Liens against any of the Collateral as to which perfection of a Lien is
accomplished by the filing of a financing statement other than in favor of
the Lender;
(k) confirmation, acceptable to the Agent, of the title of the
Borrower to the Mortgaged Properties, free and clear of Liens other than
Permitted Liens;
(l) engineering reports covering the Mortgaged Properties;
(m) the opinion of in-house counsel to the Borrower and the Guarantor,
in the form attached hereto as Exhibit , with such changes thereto as may
be approved by the Agent;
29
(n) certificates evidencing the insurance coverage required pursuant
to Section 518; and
(o) such other agreements, documents, instruments, opinions,
certificates, waivers, consents, and evidence as the Agent may reasonably
request.
3.2 Each Loan and Letter of Credit. In addition to the conditions
precedent stated elsewhere herein, the Lenders shall not be obligated to make
any Loan or issue any Letter of Credit unless:
(a) the Borrower shall have delivered to the Agent a Borrowing Request
at least the requisite time prior to the requested date for the relevant
Loan; or a Letter of Credit Application at least two Business Days prior to
the requested issuance date for the relevant Letter of Credit, and each
statement or certification made in such Borrowing Request or Letter of
Credit Application, as the case may be, shall be true and correct in all
material respects on the requested date for such Loan or the issuance of
such Letter of Credit;
(b) no Event of Default or Default shall exist or will occur as a
result of the making of the requested Loan or the issuance of the requested
Letter of Credit;
(c) if requested by the Agent, the Borrower shall have delivered
evidence satisfactory to the Agent, substantiating any of the matters
contained in this Agreement which are necessary to enable the Borrower to
qualify for such Loan or the issuance of such Letter of Credit;
(d) the Agent shall have received, reviewed, and approved such
additional documents and items as described in Section 31 as may be
requested by the Agent with respect to such Loan or Letter of Credit;
(e) no event shall have occurred which, in the reasonable opinion of
the Agent, could have a Material Adverse Effect;
(f) each of the representations and warranties contained in this
Agreement shall be true and correct and shall be deemed to be repeated by
the Borrower as if made on the requested date for such Loan or the issuance
of such Letter of Credit;
(g) the Guaranty and all of the Security Instruments shall be in full
force and effect and provide to the Agent the security interests intended
thereby;
(h) neither the consummation of the transactions contemplated hereby
nor the making of such Loan or the issuance of such Letter of Credit shall
contravene, violate, or conflict with any Requirement of Law;
(i) the Borrower shall hold defensible title to the Collateral and be
the sole beneficial owner thereof;
30
(j) the Agent and the Lenders shall have received the payment of all
Engineering Fees, Facility Fees, Letter of Credit Fees, and other fees
payable to the Agent and the Lenders hereunder and reimbursement from the
Borrower, or special legal counsel for the Agent shall have received
payment from the Borrower, for (i) all reasonable fees and expenses of
counsel to the Agent for which the Borrower is responsible pursuant to
applicable provisions of this Agreement and for which invoices have been
presented as of or prior to the date of the relevant Loan or Letter of
Credit Application, and (ii) estimated fees charged by filing officers and
other public officials incurred or to be incurred in connection with the
filing and recordation of any Security Instruments, for which invoices have
been presented as of or prior to the date of the requested Loan or Letter
of Credit Application; and
(k) all matters incident to the consummation of the transactions
hereby contemplated shall be satisfactory to the Agent.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
To induce the Agent and the Lenders to enter into this Agreement and
to make the Loans and issue Letters of Credit, the Borrower represents and
warrants to the Agent and the Lenders (which representations and warranties
shall survive the delivery of the Notes) that:
4.1 Due Authorization. The execution and delivery by the Borrower of
this Agreement and the borrowings hereunder, the execution and delivery by the
Borrower of the Notes, the repayment of the Notes and interest and fees provided
for in the Notes and this Agreement, the execution and delivery of the Security
Instruments by the Borrower and the performance of all obligations of the
Borrower under the Loan Documents are within the power of the Borrower, have
been duly authorized by all necessary corporate action by the Borrower, and do
not and will not (a) require the consent of any Governmental Authority, (b)
contravene or conflict with any Requirement of Law, (c) contravene or conflict
with any indenture, instrument, or other agreement to which the Borrower is a
party or by which any Property of the Borrower may be presently bound or
encumbered, or (d) result in or require the creation or imposition of any Lien
in, upon or of any Property of the Borrower under any such indenture,
instrument, or other agreement, other than the Loan Documents.
4.2 Corporate Existence. The Borrower is a corporation duly
organized, legally existing, and in good standing under the laws of its state of
incorporation and is duly qualified as a foreign corporation and is in good
standing in all jurisdictions wherein the ownership of Property or the operation
of its business necessitates same, other than those jurisdictions wherein the
failure to so qualify will not have a Material Adverse Effect.
4.3 Valid and Binding Obligations. All Loan Documents to which the
Borrower is a party, when duly executed and delivered by the Borrower, will be
the legal, valid, and binding
31
obligations of the Borrower, enforceable against the Borrower in accordance with
their respective terms.
4.4 Security Instruments. The provisions of each Security Instrument
executed by the Borrower are effective to create in favor of the Agent, a legal,
valid, and enforceable Lien in all right, title, and interest of the Borrower in
the Collateral described therein, which Liens, assuming the accomplishment of
recording and filing in accordance with applicable laws prior to the
intervention of rights of other Persons, shall constitute fully perfected first-
priority Liens on all right, title, and interest of the Borrower in the
Collateral described therein subject only to the Permitted Liens.
4.5 Title to Assets. The Borrower has good and defensible title to
all of its Properties, free and clear of all Liens except Permitted Liens.
4.6 Scope and Accuracy of Financial Statements. The Financial
Statements of the Guarantor as of March 31, 2000, present fairly the financial
position and results of operations and cash flows of the Guarantor in accordance
with GAAP as at the relevant point in time or for the period indicated, as
applicable. No event or circumstance has occurred since March 31, 2000, which
could reasonably be expected to have a Material Adverse Effect.
4.7 No Material Misstatements. No information, exhibit, statement,
or report furnished to the Agent and/or the Lenders by or at the direction of
the Borrower in connection with this Agreement contains any material
misstatement of fact or omits to state a material fact or any fact necessary to
make the statements contained therein not misleading as of the date made or
deemed made.
4.8 Liabilities, Litigation, and Restrictions. Other than as listed
under the heading "Liabilities" on Exhibit attached hereto, the Borrower has no
liabilities, direct, or contingent, which may materially and adversely affect
its business or operations or its ownership of the Collateral. Except as set
forth under the heading "Litigation" on Exhibit hereto, no litigation or other
action of any nature affecting the Borrower is pending before any Governmental
Authority or, to the knowledge of the Borrower, threatened against or affecting
the Borrower which might reasonably be expected to result in any impairment of
its ownership of any Collateral or have a Material Adverse Effect. To the
knowledge of the Borrower, after due inquiry, no unusual or unduly burdensome
restriction, restraint or hazard exists by contract, Requirement of Law, or
otherwise relative to the business or operations of the Borrower or the
ownership and operation of the Collateral other than such as relate generally to
Persons engaged in business activities similar to those conducted by the
Borrower.
4.9 Authorizations; Consents. Except as expressly contemplated by
this Agreement, no authorization, consent, approval, exemption, franchise,
permit, or license of, or filing with, any Governmental Authority or any other
Person is required to authorize or is otherwise required in connection with the
valid execution and delivery by the Borrower of the Loan Documents or any
instrument contemplated hereby, the repayment by the Borrower of the Note and
interest and fees provided in the Notes and this Agreement, or the performance
by the Borrower of the Obligations.
32
4.10 Compliance with Laws. The Borrower and its Property, including,
without limitation, the Mortgaged Property, are in compliance with all
applicable Requirements of Law, including, without limitation, Environmental
Laws, the Natural Gas Policy Act of 1978, as amended, and ERISA, except to the
extent non-compliance with any such Requirements of Law could not reasonably be
expected to have a Material Adverse Effect.
4.11 ERISA. No Reportable Event has occurred with respect to any
Single Employer Plan, and each Single Employer Plan has complied with and been
administered in all material respects in accordance with applicable provisions
of ERISA and the Code. To the best knowledge of the Borrower, (a) no Reportable
Event has occurred with respect to any Multiemployer Plan, and (b) each
Multiemployer Plan has complied with and been administered in all material
respects with applicable provisions of ERISA and the Code. The present value of
all benefits vested under each Single Employer Plan maintained by the Borrower
or any Commonly Controlled Entity (based on the assumptions used to fund such
Plan) did not, as of the last annual valuation date applicable thereto, exceed
the value of the assets of such Plan allocable to such vested benefits. Neither
the Borrower nor any Commonly Controlled Entity has had a complete or partial
withdrawal from any Multiemployer Plan for which there is any withdrawal
liability. As of the most recent valuation date applicable to any Multiemployer
Plan, neither the Borrower nor any Commonly Controlled Entity would become
subject to any liability under ERISA if the Borrower or such Commonly Controlled
Entity were to withdraw completely from such Multiemployer Plan. Neither the
Borrower nor any Commonly Controlled Entity has received notice that any
Multiemployer Plan is Insolvent or in Reorganization. To the knowledge of the
Borrower, no such Insolvency or Reorganization is reasonably likely to occur.
Based upon GAAP existing as of the date of this Agreement and current factual
circumstances, the Borrower has no reason to believe that the annual cost during
the term of this Agreement to the Borrower and all Commonly Controlled Entities
for post-retirement benefits to be provided to the current and former employees
of the Borrower and all Commonly Controlled Entities under Plans which are
welfare benefit plans (as defined in Section 3(1) of ERISA) will, in the
aggregate, have a Material Adverse Effect.
4.12 Environmental Laws. To the knowledge of the Borrower, except as
would not have a Material Adverse Effect, or as described on Exhibit under the
heading "Environmental Matters:"
(a) no Property of the Borrower is currently on any federal or state
list of Superfund Sites;
(b) no Hazardous Substances have been generated, transported, and/or
disposed of by the Borrower at a site which was, at the time of such
generation, transportation, and/or disposal, or has since become, a
Superfund Site;
(c) except in accordance with applicable Requirements of Law or the
terms of a valid permit, license, certificate, or approval of the relevant
Governmental Authority, no Release of Hazardous Substances by the Borrower
or from, affecting, or related to any Property of the Borrower or adjacent
to any Property of the Borrower has occurred; and
33
(d) no Environmental Complaint has been received by the Borrower which
would require Borrower to immediate action to respond, remediate or cleanup
Borrower property.
4.13 Compliance with Federal Reserve Regulations. No transaction
contemplated by the Loan Documents is in violation of any regulations
promulgated by the Board of Governors of the Federal Reserve System, including,
without limitation, Regulations G, T, U, or X.
4.14 Investment Company Act Compliance. The Borrower is not, nor is
the Borrower directly or indirectly controlled by or acting on behalf of any
Person which is, an "investment company" or an "affiliated person" of an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
4.15 Public Utility Holding Company Act Compliance. The Borrower is
not 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.
4.16 Proper Filing of Tax Returns; Payment of Taxes Due. The Borrower
has duly and properly filed or properly extended its United States income tax
return and all other tax returns which are required to be filed and has paid all
taxes due except such as are being contested in good faith and as to which
adequate provisions and disclosures have been made. The respective charges and
reserves on the books of the Borrower with respect to taxes and other
governmental charges are adequate.
4.17 Refunds. Except as described on Exhibit under the heading
"Refunds," no orders of, proceedings pending before, or other requirements of,
the Federal Energy Regulatory Commission, the Texas Railroad Commission, or any
Governmental Authority exist which could result in the Borrower being required
to refund any material portion of the proceeds received or to be received from
the sale of hydrocarbons constituting part of the Mortgaged Property.
4.18 Gas Contracts. Except as described on Exhibit under the heading
"Gas Contracts," the Borrower (a) is not obligated in any material respect by
virtue of any prepayment made under any contract containing a "take-or-pay" or
"prepayment" provision or under any similar agreement to deliver hydrocarbons
produced from or allocated to any of the Mortgaged Property at some future date
without receiving full payment therefor within 90 days of delivery, and (b) has
not produced gas, in any material amount, subject to, and neither the Borrower
nor any of the Mortgaged Properties is subject to, balancing rights of third
parties or subject to balancing duties under governmental requirements, except
as to such matters for which the Borrower has established monetary reserves
adequate in amount to satisfy such obligations and has segregated such reserves
from other accounts.
4.19 Intellectual Property. The Borrower owns or is licensed to use
all Intellectual Property necessary to conduct all business material to its
condition (financial or otherwise), business, or operations as such business is
currently conducted. No claim has been asserted or is pending by any Person
with the respect to the use of any such Intellectual Property or challenging or
questioning
34
the validity or effectiveness of any such Intellectual Property; and the
Borrower knows of no valid basis for any such claim. The use of such
Intellectual Property by the Borrower does not infringe on the rights of any
Person, except for such claims and infringements as do not, in the aggregate,
give rise to any material liability on the part of the Borrower.
4.20 Casualties or Taking of Property. Except as disclosed on Exhibit
under the heading "Casualties," since March 31, 2000, neither the business nor
any Property of the Borrower has been materially adversely affected as a result
of any fire, explosion, earthquake, flood, drought, windstorm, accident, strike
or other labor disturbance, embargo, requisition or taking of Property, or
cancellation of contracts, permits, or concessions by any Governmental
Authority, riot, activities of armed forces, or acts of God.
4.21 Locations of Borrower. The principal place of business and chief
executive office of the Borrower is located at the address of the Borrower set
forth in Section 93 or at such other location as the Borrower may have, by
proper written notice hereunder, advised the Agent, provided that such other
location is within a state in which appropriate financing statements from the
Borrower in favor of the Agent have been filed.
4.22 Subsidiaries. The Borrower has no Subsidiaries except those
described on Exhibit under the heading "Subsidiaries".
4.23 Existing Indebtedness; No Defenses. As of the date hereof, (a)
the Borrower is indebted to the Existing Lender under the Existing Note in the
aggregate principal amount of $10,500,000, and (b) the Borrower has no defenses
to, rights of setoff against, claims or counterclaims with respect to, and no
default exists under or with respect to, any of the Existing Loan Documents or
any Indebtedness or obligation of the Borrower to the Existing Lender.
ARTICLE V
AFFIRMATIVE COVENANTS
So long as any Obligation remains outstanding or unpaid or any
Commitment exists, the Borrower and where applicable, the Guarantor shall:
5.1 Maintenance and Access to Records. Keep adequate records, in
accordance with GAAP, of all its transactions so that at any time, and from time
to time, its true and complete financial condition may be readily determined,
and promptly following the reasonable request of the Agent and/or the Lenders,
make such records available for inspection by the Agent and/or the Lenders and,
at the expense of the Borrower, allow the Agent and/or the Lenders to make and
take away copies thereof.
5.2 Quarterly Financial Statements; Compliance Certificates. Deliver
to the Agent, (a) on or before the 45th day after the close of each of the first
three quarterly periods of each fiscal year of the Borrower, a copy of the
unaudited consolidated and consolidating by segments Financial Statements of the
Guarantor as at the close of such quarterly period and from the beginning
35
of such fiscal year to the end of such period, such Financial Statements to be
certified by Responsible Officers of the Guarantor as having been prepared in
accordance with GAAP consistently applied and as a fair presentation of the
condition of the Borrower and the Guarantor, subject to changes resulting from
normal year-end audit adjustments, and (b) on or before the 45th day after the
close of each fiscal quarter, with the exception of the last fiscal quarter, a
Compliance Certificate.
5.3 Annual Financial Statements. Deliver to the Agent and each
Lender, on or before the 90th day after the close of each fiscal year of the
Borrower, a copy of the annual audited consolidated and consolidating by
segments Financial Statements of the Guarantor and a Compliance Certificate.
5.4 Oil and Gas Reserve Reports. (a) Deliver to the Agent and each
Lender no later than April 1 of each year during the term of this Agreement,
engineering reports in form and substance satisfactory to the Agent and each
Lender, certified by any nationally- or regionally-recognized independent
consulting petroleum engineers acceptable to the Agent and each Lender as fairly
and accurately setting forth (i) the proven and producing, shut-in, behind-pipe,
and undeveloped oil and gas reserves (separately classified as such)
attributable to the Mortgaged Properties as of January 1 of the year for which
such reserve reports are furnished, (ii) the aggregate present value of the
future net income with respect to such Mortgaged Properties, discounted at a
stated per annum discount rate of proven and producing reserves, (iii)
projections of the annual rate of production, gross income, and net income with
respect to such proven and producing reserves, and (iv) information with respect
to the "take-or-pay," "prepayment," and gas-balancing liabilities of the
Borrower.
(b) Deliver to the Agent and each Lender no later than October 1 of
each year during the term of this Agreement, engineering reports in form and
substance satisfactory to the Agent and each Lender prepared by or under the
supervision of the chief petroleum engineer of the Borrower evaluating the
Mortgaged Properties as of July 1 of the year for which such reserve reports are
furnished and updating the information provided in the reports pursuant to
Section 5.4(a).
(c) Each of the reports provided pursuant to this Section shall be
submitted to the Lender together with additional data concerning pricing,
quantities of production from the Mortgaged Properties, volumes of production
sold, purchasers of production, gross revenues, expenses, and such other
information and engineering and geological data with respect thereto as the
Lender may reasonably request.
5.5 Title Opinions; Title Defects. Promptly upon the request of the
Agent, furnish to the Agent title opinions, in form and substance and by counsel
satisfactory to the Agent, or other confirmation of title acceptable to the
Agent, covering Oil and Gas Properties constituting not less than 80% of the
value, determined by the Agent in its sole discretion, of the Mortgaged
Properties; and promptly, but in any event within 60 days after notice by the
Agent of any defect, material in the opinion of the Agent in value, in the title
of the Borrower to any of its Oil and Gas Properties, clear such title defects,
and, in the event any such title defects are not cured in a timely manner, pay
all related costs and fees incurred by the Agent to do so or provide Agent with
substitute Collateral. Failure to cure or substitute Collateral may result in a
Borrowing Base Redetermination.
36
5.6 Notices of Certain Events. Deliver to the Agent and each Lender,
immediately upon having knowledge of the occurrence of any of the following
events or circumstances, a written statement with respect thereto, signed by a
Responsible Officer of the Borrower and setting forth the relevant event or
circumstance and the steps being taken by the Borrower or the Guarantor with
respect to such event or circumstance:
(a) any Default or Event of Default;
(b) any default or event of default under any contractual obligation
of the Borrower or the Guarantor, or any litigation, investigation, or
proceeding between the Borrower or the Guarantor and any Governmental
Authority which, in either case, if not cured or if adversely determined,
as the case may be, could reasonably be expected to have a Material Adverse
Effect;
(c) any litigation or proceeding involving the Borrower or the
Guarantor as a defendant or in which any Property of the Borrower or the
Guarantor is subject to a claim and in which the amount involved is
$500,000 or more and which is not covered by insurance or in which
injunctive or similar relief is sought;
(d) the receipt by the Borrower of any Environmental Complaint having
a potential Material Adverse Effect;
(e) any actual, proposed, or threatened testing or other investigation
set forth in writing by any Governmental Authority or other Person
concerning the environmental condition of, or relating to, any Property of
the Borrower following any allegation of a violation of any Requirement of
Law;
(f) any Release of Hazardous Substances by the Borrower or from,
affecting, or related to any Property of the Borrower or adjacent to any
Property of the Borrower except in accordance with applicable Requirements
of Law or the terms of a valid permit, license, certificate, or approval of
the relevant Governmental Authority, or the violation of any Environmental
Law, or the revocation, suspension, or forfeiture of or failure to renew,
any permit, license, registration, approval, or authorization which could
reasonably be expected to have a Material Adverse Effect;
(g) the change in identity or address of any Person remitting to the
Borrower proceeds from the sale of hydrocarbon production from or
attributable to any Mortgaged Property;
(h) any change in the executive management of the Guarantor; and
(i) any Reportable Event or imminently expected Reportable Event with
respect to any Plan; any withdrawal from, or the termination,
Reorganization or Insolvency of, any Multiemployer Plan; the institution of
proceedings or the taking of any other action by the PBGC, the Borrower,
the Guarantor or any Commonly Controlled Entity or Multiemployer Plan with
respect to the withdrawal from, or the
37
termination, Reorganization or Insolvency of, any Single Employer Plan or
Multiemployer Plan; or any Prohibited Transaction in connection with any
Plan or any trust created thereunder and the action being taken by the
Internal Revenue Service with respect thereto; and
(j) any other event or condition which could reasonably be expected to
have a Material Adverse Effect.
5.7 Letters in Lieu of Transfer Orders; Division Orders. Promptly
upon request by the Agent at any time and from time to time, execute such
letters in lieu of transfer orders, in addition to the letters signed by the
Borrower and delivered to the Agent in satisfaction of the condition set forth
in Section 3.1(g)(iii) and/or division and/or transfer orders as are necessary
or appropriate to transfer and deliver to the Agent proceeds from or
attributable to any Mortgaged Property subject to the restrictions under Section
2.21.
5.8 Additional Information. Furnish to the Agent and each Lender,
promptly upon the request of the Agent, such additional financial or other
information concerning the assets, liabilities, operations, and transactions of
the Borrower as the Agent may from time to time request; and notify the Agent
not less than ten Business Days prior to the occurrence of any condition or
event that may change the proper location for the filing of any financing
statement or other public notice or recording for the purpose of perfecting a
Lien in any Collateral, including, without limitation, any change in its name or
the location of its principal place of business or chief executive office; and
upon the request of the Agent, execute such additional Security Instruments as
may be necessary or appropriate in connection therewith.
5.9 Compliance with Laws. Except to the extent the failure to comply
or cause compliance would not have a Material Adverse Effect, comply with all
applicable Requirements of Law, including, without limitation, (a) the Natural
Gas Policy Act of 1978, as amended, (b) ERISA, (c) Environmental Laws, and (d)
all permits, licenses, registrations, approvals, and authorizations (i) related
to any natural or environmental resource or media located on, above, within, in
the vicinity of, related to or affected by any Property of the Borrower, (ii)
required for the performance of the operations of the Borrower, or (iii)
applicable to the use, generation, handling, storage, treatment, transport, or
disposal of any Hazardous Substances; and cause all employees, agents,
contractors, subcontractors, while such Persons are acting within the scope of
their relationship with the Borrower, to comply with all such Requirements of
Law as may be necessary or appropriate to enable the Borrower to so comply.
5.10 Payment of Assessments and Charges. Pay all taxes, assessments,
governmental charges, rent, and other Indebtedness which, if unpaid, might
become a Lien against the Property of the Borrower, except any of the foregoing
being contested in good faith and as to which adequate reserve in accordance
with GAAP has been established or unless failure to pay would not have a
Material Adverse Effect.
5.11 Maintenance of Corporate Existence and Good Standing. Maintain
its corporate existence or qualification and good standing in its jurisdictions
of incorporation and in all
38
jurisdictions wherein the Property now owned or hereafter acquired or business
now or hereafter conducted necessitates same, unless the failure to do so would
not have a Material Adverse Effect.
5.12 Payment of Notes; Performance of Obligations. Pay the Note or
Notes according to the reading, tenor, and effect thereof, as modified hereby,
and do and perform every act and discharge all of its other Obligations.
5.13 Further Assurances. Promptly cure any defects in the execution
and delivery of any of the Loan Documents and all agreements contemplated
thereby, and execute, acknowledge, and deliver such other assurances and
instruments as shall, in the opinion of the Agent or the Lenders, be necessary
to fulfill the terms of the Loan Documents.
5.14 Initial Fees and Expenses of Counsel to Agent. Upon request by
the Agent, promptly reimburse the Agent for all reasonable fees and expenses of
Xxxxxxx Xxxxxx L.L.P., special counsel to the Agent, in connection with the
preparation of this Agreement and all documentation contemplated hereby, the
satisfaction of the conditions precedent set forth herein, the filing and
recordation of Security Instruments, and the consummation of the transactions
contemplated in this Agreement.
5.15 Subsequent Fees and Expenses of Agent and/or Lenders. Upon
request by the Agent, promptly reimburse the Agent (to the fullest extent
permitted by law) for all amounts reasonably expended, advanced, or incurred by
or on behalf of the Agent and/or Lenders to satisfy any obligation of the
Borrower under any of the Loan Documents; to ratify, amend, restate, or prepare
additional Loan Documents, as the case may be; for the filing and recordation of
Security Instruments and to promptly reimburse Agent and/or Lenders (to the
fullest extent permitted by law) for all amounts expended to collect the
Obligations; to enforce the rights of the Agent and/or Lenders under any of the
Loan Documents; and to protect the Properties or business of the Borrower,
including, without limitation, the Collateral, which amounts shall be deemed
compensatory in nature and liquidated as to amount upon notice to the Borrower
by the Agent and/or Lenders and which amounts shall include, but not be limited
to (a) all court costs, (b) reasonable attorneys' fees, (c) reasonable fees and
expenses of auditors and accountants incurred to protect the interests of the
Agent and each Lender, (d) fees and expenses incurred in connection with the
participation by the Agent as a member of the creditors' committee in a case
commenced under any Insolvency Proceeding, (e) fees and expenses incurred in
connection with lifting the automatic stay prescribed in (S)362 Title 11 of the
United States Code, and (f) fees and expenses incurred in connection with any
action pursuant to (S)1129 Title 11 of the United States Code all reasonably
incurred by the Lender in connection with the collection of any sums due under
the Loan Documents, together with interest at the per annum interest rate equal
to the Floating Rate, calculated on a basis of a calendar year of 365 or 366
days, as the case may be, counting the actual number of days elapsed, on each
such amount from the date of notification that the same was expended, advanced,
or incurred by the Agent and/or Lenders until the date it is repaid to the Agent
and/or Lenders, with the obligations under this Section surviving the non-
assumption of this Agreement in a case commenced under any Insolvency Proceeding
and being binding upon the Borrower and/or a trustee, receiver, custodian, or
liquidator of the Borrower appointed in any such case.
39
5.16 Operation of Oil and Gas Properties. Develop, maintain, and
operate its Oil and Gas Properties in a prudent and workmanlike manner in
accordance with industry standards.
5.17 Maintenance and Inspection of Properties. Maintain all of its
tangible Properties in good repair and condition, ordinary wear and tear
excepted; make all necessary replacements thereof and operate such Properties in
a good and workmanlike manner; and permit any authorized representative of the
Lenders to visit and inspect, at the expense of the Borrower, any tangible
Property of the Borrower.
5.18 Maintenance of Insurance. Maintain insurance with respect to its
Properties and businesses against such liabilities, casualties, risks, and
contingencies as is customary in the relevant industry and sufficient to prevent
a Material Adverse Effect, all such insurance to be in amounts and from insurers
acceptable to the Agent and, within 30 days of the Closing Date for property
damage insurance covering Collateral and business interruption insurance, if
any, maintained by Borrower, naming the Agent as loss payee for the benefit of
the Lenders, and, upon any renewal of any such insurance and at other times upon
request by the Lenders, furnish to the Lenders evidence, satisfactory to the
Lenders, of the maintenance of such insurance. The Agent shall have the right to
collect, and the Borrower hereby assigns to the Agent any and all monies that
may become payable under any policies of insurance relating to business
interruption or by reason of damage, loss, or destruction of any of the
Collateral. In the event of any damage, loss, or destruction for which insurance
proceeds relating to business interruption or Collateral exceed $1,000,000, the
Lenders may, at their option, apply all such sums or any part thereof received
by it toward the payment of the Obligations, whether matured or unmatured,
application to be made first to interest and then to principal, and shall
deliver to the Borrower the balance, if any, after such application has been
made. In the event of any such damage, loss, or destruction for which insurance
proceeds are $1,000,000 or less, provided that no Default or Event of Default
has occurred and is continuing, the Agent shall deliver any such proceeds
received by it to the Borrower. In the event the Agent receives insurance
proceeds not attributable to Collateral or business interruption, the Agent
shall deliver any such proceeds to the Borrower.
5.19 INDEMNIFICATION. INDEMNIFY AND HOLD THE AGENT AND EACH LENDER
AND ITS SHAREHOLDERS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT,
AND AFFILIATES AND EACH TRUSTEE FOR THE BENEFIT OF THE AGENT AND EACH LENDER
UNDER ANY SECURITY INSTRUMENT HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS,
LOSSES, DAMAGES, LIABILITIES, FINES, PENALTIES, CHARGES, ADMINISTRATIVE AND
JUDICIAL PROCEEDINGS AND ORDERS, JUDGMENTS, REMEDIAL ACTIONS, REQUIREMENTS AND
ENFORCEMENT ACTIONS OF ANY KIND, AND ALL COSTS AND EXPENSES INCURRED IN
CONNECTION THEREWITH (INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEYS' FEES
AND EXPENSES), ARISING DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, FROM (A) THE
PRESENCE OF ANY HAZARDOUS SUBSTANCES ON, UNDER, OR FROM ANY PROPERTY OF THE
BORROWER, WHETHER PRIOR TO OR DURING THE TERM HEREOF, (B) ANY ACTIVITY CARRIED
ON OR UNDERTAKEN ON OR OFF ANY PROPERTY OF THE BORROWER, WHETHER PRIOR TO OR
DURING THE TERM HEREOF, AND WHETHER BY THE BORROWER OR ANY PREDECESSOR IN TITLE,
EMPLOYEE, AGENT, CONTRACTOR, OR SUBCONTRACTOR
40
OF THE BORROWER OR ANY OTHER PERSON AT ANY TIME OCCUPYING OR PRESENT ON SUCH
PROPERTY, IN CONNECTION WITH THE HANDLING, TREATMENT, REMOVAL, STORAGE,
DECONTAMINATION, CLEANUP, TRANSPORTATION, OR DISPOSAL OF ANY HAZARDOUS
SUBSTANCES AT ANY TIME LOCATED OR PRESENT ON OR UNDER SUCH PROPERTY, (C) ANY
RESIDUAL CONTAMINATION ON OR UNDER ANY PROPERTY OF THE BORROWER, (D) ANY
CONTAMINATION OF ANY PROPERTY OR NATURAL RESOURCES ARISING IN CONNECTION WITH
THE GENERATION, USE, HANDLING, STORAGE, TRANSPORTATION OR DISPOSAL OF ANY
HAZARDOUS SUBSTANCES BY THE BORROWER OR ANY EMPLOYEE, AGENT, CONTRACTOR, OR
SUBCONTRACTOR OF THE BORROWER WHILE SUCH PERSONS ARE ACTING WITHIN THE SCOPE OF
THEIR RELATIONSHIP WITH THE BORROWER, IRRESPECTIVE OF WHETHER ANY OF SUCH
ACTIVITIES WERE OR WILL BE UNDERTAKEN IN ACCORDANCE WITH APPLICABLE REQUIREMENTS
OF LAW, OR (E) THE PERFORMANCE AND ENFORCEMENT OF ANY LOAN DOCUMENT, ANY
ALLEGATION BY ANY BENEFICIARY OF A LETTER OF CREDIT OF A WRONGFUL DISHONOR BY
THE LENDER OF A CLAIM OR DRAFT PRESENTED THEREUNDER, OR ANY OTHER ACT OR
OMISSION IN CONNECTION WITH OR RELATED TO ANY LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED THEREBY, INCLUDING, WITHOUT LIMITATION, ANY OF THE FOREGOING IN
THIS SECTION ARISING FROM NEGLIGENCE, WHETHER SOLE OR CONCURRENT, BUT EXCLUDING
UNLAWFUL OR GROSS NEGLIGENT CONDUCT ON THE PART OF THE LENDER OR ANY OF ITS
SHAREHOLDERS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT, OR
AFFILIATES OR ANY TRUSTEE FOR THE BENEFIT OF THE LENDER UNDER ANY SECURITY
INSTRUMENT; WITH THE FOREGOING INDEMNITY SURVIVING SATISFACTION OF ALL
OBLIGATIONS AND THE TERMINATION OF THIS AGREEMENT, UNLESS ALL SUCH OBLIGATIONS
HAVE BEEN SATISFIED WHOLLY IN CASH FROM THE BORROWER AND NOT BY WAY OF
REALIZATION AGAINST ANY COLLATERAL OR THE CONVEYANCE OF ANY PROPERTY IN LIEU
THEREOF, PROVIDED THAT SUCH INDEMNITY SHALL NOT EXTEND TO ANY ACT OR OMISSION BY
THE AGENT OR ANY LENDER WITH RESPECT TO ANY PROPERTY SUBSEQUENT TO THE AGENT OR
ANY LENDER BECOMING THE OWNER OF SUCH PROPERTY AND WITH RESPECT TO WHICH
PROPERTY SUCH CLAIM, LOSS, DAMAGE, LIABILITY, FINE, PENALTY, CHARGE, PROCEEDING,
ORDER, JUDGMENT, ACTION, OR REQUIREMENT ARISES SUBSEQUENT TO THE ACQUISITION OF
TITLE THERETO BY THE AGENT OR ANY LENDER.
ARTICLE VI
NEGATIVE COVENANTS
So long as any Obligation remains outstanding or unpaid or any
Commitment exists, the Borrower will not without the written consent of the
Agent:
6.1 Indebtedness. Create, incur, assume, or suffer to exist any
Indebtedness, whether by way of loan or otherwise in excess of $500,000 in the
aggregate outstanding at any time; provided, however, the foregoing restriction
shall not apply to (a) the Obligations, (b) unsecured
41
accounts payable incurred in the ordinary course of business, which are not
unpaid in excess of 90 days beyond invoice date or are being contested in good
faith and as to which such reserve as is required by GAAP has been made, (c)
crude oil, natural gas, or other hydrocarbon floor, collar, cap, price
protection, or swap agreements ("Commodity Hedge Agreements"), in form and
substance and with a Person acceptable to the Agent and each Lender, provided
that (i) each commitment issued under such agreement must also be approved by
the Agent and each Lender, (ii) such agreements shall not be entered into with
respect to Mortgaged Properties constituting more than 75% of monthly production
of proven producing reserves as forecast in Agent and each Lender's most recent
engineering evaluation, (iii) that the strike prices in such agreements
excluding those with the Existing Lender are not less than the prices used by
the Agent and each Lender in its most recent Borrowing Base determination, and
(iv) the Agent and each Lender shall receive a security interest in the
Commodity Hedge Agreements, or (d) Rate Management Transactions, in form and
substance and with a Person acceptable to the Agent and each Lender.
6.2 Contingent Obligations. Create, incur, assume, or suffer to
exist any Contingent Obligation in excess of $1,000,000 in the aggregate
outstanding at any one time; provided, however, the foregoing restriction shall
not apply to (a) performance guarantees and performance surety or other bonds
provided in the ordinary course of business, or (b) trade credit incurred or
operating leases entered into in the ordinary course of business.
6.3 Liens. Create, incur, assume, or suffer to exist any Lien in
excess of $500,000 in the aggregate outstanding at any one time on any of its
Oil and Gas Properties or any other Property, whether now owned or hereafter
acquired; provided, however, the foregoing restrictions shall not apply to
Permitted Liens.
6.4 Sales of Assets. Without the prior written consent of the Agent
and each Lender, sell, transfer, or otherwise dispose of, in one or any series
of transactions, assets, whether now owned or hereafter acquired in excess of
$500,000 per year.
6.5 Leasebacks. Enter into any agreement to sell or transfer any
Property and thereafter rent or lease as lessee such Property or other Property
intended for the same use or purpose as the Property sold or transferred.
6.6 Loans or Advances. Make or agree to make or allow to remain
outstanding any loans or advances to any Person in excess of $250,000; provided,
however, the foregoing restrictions shall not apply to (a) advances or
extensions of credit in the form of accounts receivable incurred in the ordinary
course of business and upon terms common in the industry for such accounts
receivable, (b) advances to employees of the Borrower for the payment of
expenses in the ordinary course of business, or (c) intercompany payments to the
Guarantor which are made in the normal course of business of Borrower.
6.7 Investments. Acquire Investments in, or purchase or otherwise
acquire all or substantially all of the assets of, any Person; provided,
however, the foregoing restriction shall not apply to the purchase or
acquisition of (a) Oil and Gas Properties, (b) Investments in the form of (i)
debt securities issued or directly and fully guaranteed or insured by the United
States Government or any agency or instrumentality thereof, with maturities of
no more than one year, (ii) commercial
42
paper of a domestic issuer rated at the date of acquisition at least P-2 by
Xxxxx'x Investor Service, Inc. or A-2 by Standard & Poor's Corporation and with
maturities of no more than one year from the date of acquisition, or (iii)
repurchase agreements covering debt securities or commercial paper of the type
permitted in this Section, certificates of deposit, demand deposits, eurodollar
time deposits, overnight bank deposits and bankers' acceptances, with maturities
of no more than one year from the date of acquisition, issued by or acquired
from or through any of the Lenders or any bank or trust company organized under
the laws of the United States or any state thereof and having capital surplus
and undivided profits aggregating at least $100,000,000, (c) other short-term
Investments similar in nature and degree of risk to those described in clause
(b) of this Section, or (d) money-market funds.
6.8 Dividends and Distributions. Declare, pay, or make, whether in
cash or Property of the Borrower, any dividend or distribution on, or purchase,
redeem, or otherwise acquire for value, any share of any class of its capital
stock; provided, however, the foregoing restriction shall not apply to dividends
paid in capital stock of the Borrower.
6.9 Issuance of Stock; Changes in Corporate Structure. Issue or
agree to issue additional shares of capital stock, in one or any series of
transactions; enter into any transaction of consolidation, merger, or
amalgamation; liquidate, wind up, or dissolve (or suffer any liquidation or
dissolution).
6.10 Transactions with Affiliates. Directly or indirectly, enter into
any transaction (including the sale, lease, or exchange of Property or the
rendering of service) with any of its Affiliates, other than upon fair and
reasonable terms no less favorable than could be obtained in an arm's length
transaction with a Person which was not an Affiliate.
6.11 Lines of Business. Expand, on its own or through any Subsidiary,
into any line of business other than those in which the Borrower is engaged as
of the date hereof.
6.12 ERISA Compliance. Permit any Plan maintained by it or any
Commonly Controlled Entity to (a) engage in any Prohibited Transaction, (b)
incur any "accumulated funding deficiency," as such term is defined in Section
302 of ERISA, or (c) terminate in a manner which could result in the imposition
of a Lien on any Property of the Borrower pursuant to Section 4068 of ERISA; or
assume an obligation to contribute to any Multiemployer Plan; or acquire any
Person or the assets of any Person which has now or has had at any time an
obligation to contribute to any Multiemployer Plan.
6.13 Current Ratio. Permit the ratio of Guarantor of Current Assets
to Current Liabilities to be less than 1.00 to 1.00 at any time.
6.14 Tangible Net Worth. Permit Tangible Net Worth of Guarantor as
of the close of any fiscal quarter to be less than $155,000,000 plus 75% of
positive Net Income plus 100% of net proceeds of any new equity.
6.15 Total Liabilities to Tangible Net Worth Ratio. Permit the ratio
of Debt to Tangible Net Worth to be greater than 1.00 to 1.00.
43
6.16 Debt Service Coverage Ratio. Permit, as of the close of any
fiscal quarter, the ratio of (a) EBITDA for any fiscal quarter to (b) Debt
Service for such quarter to be less than 1.50 to 1.0.
6.17 Guarantor's Compliance. Guarantor will not be out of compliance
with Article 10, Section 10.10 of the May 1998 Trust covering the European Notes
for any period beyond the grace periods (if any) set forth therein.
ARTICLE VII
EVENTS OF DEFAULT
7.1 Enumeration of Events of Default. Any of the following events
shall constitute an Event of Default:
(a) default shall be made in the payment when due of any installment
of principal or interest under this Agreement or the Note or in the payment
when due of any fee or other sum payable under any Loan Document and such
default as to interest or fees only shall have continued for three business
days and such default as to Fees or other amounts payable shall have
continued for ten business days;
(b) default shall be made by the Borrower or the Guarantor in the due
observance or performance of any of their respective obligations under the
Loan Documents, and such default shall continue for 30 days after the
earlier of notice thereof to the Borrower by the Agent or knowledge thereof
by the Borrower;
(c) any representation or warranty made by the Borrower or the
Guarantor in any of the Loan Documents proves to have been untrue in any
material respect or any representation, statement (including Financial
Statements), certificate, or data furnished or made to the Lender in
connection herewith proves to have been untrue in any material respect as
of the date the facts therein set forth were stated or certified;
(d) default shall be made by the Borrower or the Guarantor (as
principal or guarantor or other surety) in the payment or performance of
any bond, debenture, note, or other Indebtedness or under any credit
agreement, loan agreement, indenture, promissory note, or similar agreement
or instrument executed in connection with any of the foregoing, in excess
of $250,000 and such default shall remain unremedied for in excess of the
period of grace, if any, with respect thereto;
(e) the Borrower shall be unable to satisfy any condition or cure any
circumstance specified in Article , the satisfaction or curing of which is
precedent to the right of the Borrower to obtain a Loan or the issuance of
a Letter of Credit and such inability shall continue for a period in excess
of 30 days;
44
(f) either the Borrower or the Guarantor shall (i) apply for or
consent to the appointment of a receiver, trustee, or liquidator of it or
all or a substantial part of its assets, (ii) file a voluntary petition
commencing an Insolvency Proceeding, (iii) make a general assignment for
the benefit of creditors, (iv) be unable, or admit in writing its
inability, to pay its debts generally as they become due, or (v) file an
answer admitting the material allegations of a petition filed against it in
any Insolvency Proceeding;
(g) an order, judgment, or decree shall be entered against either the
Borrower or the Guarantor by any court of competent jurisdiction or by any
other duly authorized authority, on the petition of a creditor or
otherwise, granting relief in any Insolvency Proceeding or approving a
petition seeking reorganization or an arrangement of its debts or
appointing a receiver, trustee, conservator, custodian, or liquidator of it
or all or any substantial part of its assets, and such order, judgment, or
decree shall not be dismissed or stayed within 60 days;
(h) the levy against any significant portion of the Property of the
Borrower or the Guarantor, or any execution, garnishment, attachment,
sequestration, or other writ or similar proceeding which is not permanently
dismissed or discharged within 60 days after the levy;
(i) a final and non-appealable order, judgment, or decree shall be
entered against the Borrower or the Guarantor for money damages and/or
Indebtedness due in an amount in excess of $500,000, and such order,
judgment, or decree shall not be dismissed or stayed within 60 days;
(j) any charges are filed or any other action or proceeding is
instituted by any Governmental Authority against either the Borrower or the
Guarantor under the Racketeering Influence and Corrupt Organizations
Statute (18 U.S.C. (S)1961 et seq.), the result of which could be the
forfeiture or transfer of any material Property of the Borrower or the
Guarantor subject to a Lien in favor of the Agent, without (i) satisfaction
or provision for satisfaction of such Lien, or (ii) such forfeiture or
transfer of such Property being expressly made subject to such Lien;
(k) either the Borrower or the Guarantor shall have (i) concealed,
removed, or diverted, or permitted to be concealed, removed, or diverted,
any part of its Property, with intent to hinder, delay, or defraud its
creditors or any of them, (ii) made or suffered a transfer of any of its
Property which may be fraudulent under any bankruptcy, fraudulent
conveyance, or similar law, (iii) made any transfer of its Property to or
for the benefit of a creditor at a time when other creditors similarly
situated have not been paid, or (iv) shall have suffered or permitted,
while insolvent, any creditor to obtain a Lien upon any of its Property
through legal proceedings or distraint which is not vacated within 30 days
from the date such Lien is imposed;
45
(l) any Security Instrument shall for any reason not, or cease to,
create valid and perfected first-priority Liens (subject to the Permitted
Liens) against the Collateral purportedly covered thereby;
(m) any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any
Plan; any "accumulated funding deficiency" (as defined in Section 302 of
ERISA), whether or not waived, shall exist with respect to any Plan for
which an excise tax is due or would be due in the absence of a waiver; a
Reportable Event shall occur with respect to, or proceedings shall commence
to have a trustee appointed, or a trustee shall be appointed, to administer
or to terminate, any Single Employer Plan, which Reportable Event or
commencement of proceedings or appointment of a trustee is, in the
reasonable opinion of the Lender, likely to result in the termination of
such Plan for purposes of Title IV of ERISA; any Single Employer Plan shall
terminate for purposes of Title IV of ERISA; the Borrower, the Guarantor or
any Commonly Controlled Entity shall incur, or in the reasonable opinion of
the Lender, be likely to incur any liability in connection with a
withdrawal from, or the Insolvency or Reorganization of, a Multiemployer
Plan; or any other event or condition shall occur or exist with respect to
a Plan and the result of such events or conditions referred to in this
Section 71 could subject the Borrower, the Guarantor or any Commonly
Controlled Entity to any tax (other than an excise tax under Section 4980
of the Code), penalty or other liabilities which taken in the aggregate
would have a Material Adverse Effect and any such circumstance shall exist
for in excess of 30 days.
(n) the occurrence of a Material Adverse Effect and the same shall
remain unremedied for in excess of 30 days after notice given by the Agent.
7.2 Remedies. (a) Upon the occurrence of an Event of Default
specified in Sections 7.1(f) or 7.1(g), immediately and without notice, (i) all
Obligations shall automatically become immediately due and payable, without
presentment, demand, protest, notice of protest, default, or dishonor, notice of
intent to accelerate maturity, notice of acceleration of maturity, or other
notice of any kind, except as may be provided to the contrary elsewhere herein,
all of which are hereby expressly waived by the Borrower; (ii) the Commitment
shall immediately cease and terminate unless and until reinstated by the Lenders
in writing; and (iii) the Lenders are hereby authorized at any time and from
time to time, without notice to the Borrower (any such notice being expressly
waived by the Borrower), to set-off and apply any and all deposits (general or
special, time or demand, provisional or final) held by the Lenders and any and
all other indebtedness at any time owing by the Lenders to or for the credit or
account of the Borrower against any and all of the Obligations although such
Obligations may be unmatured.
(b) Upon the occurrence of any Event of Default other than those
specified in Sections 7.1(f) or 7.1(g), (i) the Lenders may, by notice to the
Borrower, declare all Obligations immediately due and payable, without
presentment, demand, protest, notice of protest, default, or dishonor, notice of
intent to accelerate maturity, notice of acceleration of maturity, or other
notice of any kind, except as may be provided to the contrary elsewhere herein,
all of which are hereby expressly waived by the Borrower; (ii) the Commitment
shall immediately cease and terminate unless and until reinstated
46
by the Lenders in writing; and (iii) the Lenders are hereby authorized at any
time and from time to time, without notice to the Borrower (any such notice
being expressly waived by the Borrower), to set-off and apply any and all
deposits (general or special, time or demand, provisional or final) held by the
Lenders and any and all other indebtedness at any time owing by the Lenders to
or for the credit or account of the Borrower against any and all of the
Obligations although such Obligations may be unmatured.
(c) Upon the occurrence of any Event of Default, the Lenders may, in
addition to the foregoing in this Section, exercise any or all of their rights
and remedies provided by law or pursuant to the Loan Documents.
ARTICLE VII
THE AGENT
8.1 Appointment. Each Lender hereby designates and appoints the
Agent as the agent of such Lender under this Agreement and the other Loan
Documents. Each Lender authorizes the Agent, as the agent for such Lender, to
take such action on behalf of such Lender under the provisions of this Agreement
and the other Loan Documents and to exercise such powers and perform such duties
as are expressly delegated to the Agent by the terms of this Agreement and the
other Loan Documents, together with such other powers as are reasonably
incidental thereto. Notwithstanding any provision to the contrary elsewhere in
this Agreement or in any other Loan Document, the Agent shall not have any
duties or responsibilities except those expressly set forth herein or in any
other Loan Document or any fiduciary relationship with any Lender; and no
implied covenants, functions, responsibilities, duties, obligations, or
liabilities on the part of the Agent shall be read into this Agreement or any
other Loan Document or otherwise exist against the Agent.
8.2 Waivers, Amendments. 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 Required Lenders; provided, however, that no such amendment,
modification or waiver would: (a) modify any requirement hereunder that any
particular action be taken by all of the Lenders or by the Required Lenders
unless consented to by each Lender; (b) modify this Section 8.2, change the
definition of "Required Lenders", or change the Commitment Amount or Percentage
Share of any Lender, reduce the fees described in Article II, extend the
Commitment Termination Date or Final Maturity, release substantially all of the
collateral under the Security Instruments, or initiate any foreclosure,
enforcement or collection procedure without the consent of each Lender; (c)
extend the due date for, (or reduce the amount of any scheduled repayment or
prepayment of principal of or interest on any Loan) without the consent of the
holder of that Note evidencing such Loan; (d) affect, adversely the interests,
rights, or obligations of the Agent without the consent of the Agent; or (e) to
modify the Borrowing Base or modify the monthly amount by which the Borrowing
Base shall be reduced.
8.3 Delegation of Duties. The Agent may execute any of its duties
under this Agreement and the other Loan Documents by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not
47
be responsible to any Lender for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care.
8.4 Exculpatory Provisions. Neither the Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or affiliates shall be
(a) required to initiate or conduct any litigation or collection proceedings
hereunder, except with the concurrence of the Required Lenders and contribution
by each Lender of its Percentage Share of costs reasonably expected by the Agent
to be incurred in connection therewith, (b) liable for any action lawfully taken
or omitted to be taken by it or such Person under or in connection with this
Agreement or any other Loan Document (except for gross negligence or willful
misconduct of the Agent or such Person), or (c) responsible in any manner to any
Lender for any recitals, statements, representations or warranties made by the
Borrower or any officer thereof contained in this Agreement or any other Loan
Document or in any certificate, report, statement or other document referred to
or provided for in, or received by the Agent under or in connection with, this
Agreement or any other Loan Document, or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other Loan
Document or for any failure of the Borrower to perform its obligations hereunder
or thereunder. The Agent shall not be under any obligation to any Lender to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the properties, books or records of the Borrower.
8.5 Reliance by Agent. The Agent shall be entitled to rely, and
shall be fully protected in relying, upon any Note, writing, resolution, notice,
consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or
teletype message, statement, order or other document or conversation believed by
it to be genuine and correct and to have been signed, sent or made by the proper
Person or Persons and upon advice and statements of legal counsel (including
counsel to the Borrower), independent accountants and other experts selected by
the Agent. The Agent may deem and treat the payee of any Note as the owner
thereof for all purposes unless and until a written notice of assignment,
negotiation, or transfer thereof shall have been received by the Agent. The
Agent shall be fully justified in failing or refusing to take any action under
this Agreement or any other Loan Document unless it shall first receive such
advice or concurrence of the Required Lenders as it deems appropriate and
contribution by each Lender of its Percentage Share of costs reasonably expected
by the Agent to be incurred in connection therewith. The Agent shall in all
cases be fully protected in acting, or in refraining from acting, under this
Agreement and the other Loan Documents in accordance with a request of the
Required Lenders. Such request and any action taken or failure to act pursuant
thereto shall be binding upon the Lenders and all future holders of the Notes.
In no event shall the Agent be required to take any action that exposes the
Agent to personal liability or that is contrary to any Loan Document or
applicable Requirement of Law.
8.6 Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default unless
the Agent has received notice from a Lender or the Borrower referring to this
Agreement, describing such Default or Event of Default and stating that such
notice is a "notice of default." In the event that the Agent receives such a
notice, the Agent shall promptly give notice thereof to the Lenders. The Agent
shall take such action with respect to such Default or Event of Default as shall
be reasonably directed by the Required Lenders; provided that unless and until
the Agent shall have received such directions, subject to the provisions of
Section 7.2, the Agent may (but shall not be obligated to) take such
48
action, or refrain from taking such action, with respect to such Default or
Event of Default as it shall deem advisable in the best interests of the
Lenders. In the event that the officer of the Agent primarily responsible for
the lending relationship with the Borrower or the officer of any Lender
primarily responsible for the lending relationship with the Borrower becomes
aware that a Default or Event of Default has occurred and is continuing, the
Agent or such Lender, as the case may be, shall use its good faith efforts to
inform the other Lenders and/or the Agent, as the case may be, promptly of such
occurrence. Notwithstanding the preceding sentence, failure to comply with the
preceding sentence shall not result in any liability to the Agent or any Lender.
8.7 Non-Reliance on Agent and Other Lenders. Each Lender expressly
acknowledges that neither the Agent nor any other Lender nor any of their
respective officers, directors, employees, agents, attorneys-in-fact or
affiliates has made any representation or warranty to such Lender and that no
act by the Agent or any other Lender hereafter taken, including any review of
the affairs of the Borrower, shall be deemed to constitute any representation or
warranty by the Agent or any Lender to any other Lender. Each Lender represents
to the Agent that it has, independently and without reliance upon the Agent or
any other Lender, and based on such docu ments and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
operations, property, condition (financial and otherwise) and creditworthiness
of the Borrower and the value of the Collateral and other Properties of the
Borrower and has made its own decision to enter into this Agreement. Each
Lender also represents that it will, independently and without reliance upon the
Agent or any other Lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement and
the other Loan Documents, and to make such investigation as it deems necessary
to inform itself as to the business, operations, property, condition (financial
and otherwise) and creditworthiness of the Borrower and the value of the
Collateral and other Properties of the Borrower. Except for notices, reports
and other documents expressly required to be furnished to the Lenders by the
Agent hereunder, the Agent shall not have any duty or responsibility to provide
any Lender with any credit or other information concerning the business,
operations, property, condition (financial and otherwise), or creditworthiness
of the Borrower or the value of the Collateral or other Properties of the
Borrower which may come into the possession of the Agent or any of its officers,
directors, employees, agents, attorneys-in-fact or affiliates.
8.8 Indemnification. EACH LENDER AGREES TO INDEMNIFY THE AGENT AND
ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT AND AFFILIATES (TO
THE EXTENT NOT REIMBURSED BY THE BORROWER AND WITHOUT LIMITING THE OBLIGATION OF
THE BORROWER TO DO SO), RATABLY ACCORDING TO THE PERCENTAGE SHARE OF SUCH
LENDER, FROM AND AGAINST ANY AND ALL LIABILITIES, CLAIMS, OBLIGATIONS, LOSSES,
DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES AND DISBURSEMENTS
OF ANY KIND WHATSOEVER WHICH MAY AT ANY TIME (INCLUDING ANY TIME FOLLOWING THE
PAYMENT AND PERFORMANCE OF ALL OBLIGATIONS AND THE TERMINATION OF THIS
AGREEMENT) BE IMPOSED ON, INCURRED BY OR ASSERTED AGAINST THE AGENT OR ANY OF
ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR AFFILIATES IN
ANY WAY RELATING TO OR ARISING OUT OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT,
OR ANY OTHER DOCUMENT CONTEMPLATED OR REFERRED TO HEREIN OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR ANY ACTION TAKEN OR OMITTED BY THE AGENT OR ANY OF ITS
OFFICERS, DIRECTORS,
49
EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR AFFILIATES UNDER OR IN CONNECTION WITH
ANY OF THE FOREGOING, INCLUDING ANY LIABILITIES, CLAIMS, OBLIGATIONS, LOSSES,
DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES AND DISBURSEMENTS
IMPOSED, INCURRED OR ASSERTED AS A RESULT OF THE NEGLIGENCE, WHETHER SOLE OR
CONCURRENT, OF THE AGENT OR ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
ATTORNEYS-IN-FACT OR AFFILIATES; PROVIDED THAT NO LENDER SHALL BE LIABLE FOR THE
PAYMENT OF ANY PORTION OF SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES,
PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS RESULTING
SOLELY FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE AGENT OR ANY OF
ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR AFFILIATES. THE
AGREEMENTS IN THIS SECTION SHALL SURVIVE THE PAYMENT AND PERFORMANCE OF ALL
OBLIGATIONS AND THE TERMINATION OF THIS AGREEMENT.
8.9 Restitution. Should the right of the Agent or any Lender to
realize funds with respect to the Obligations be challenged and any application
of such funds to the Obligations be reversed, whether by Governmental Authority
or otherwise, or should the Borrower otherwise be entitled to a refund or return
of funds distributed to the Lenders in connection with the Obligations, the
Agent or such Lender, as the case may be, shall promptly notify the Lenders of
such fact. Not later than Noon, Central Standard or Central Daylight Savings
Time, as the case may be, of the Business Day following such notice, each Lender
shall pay to the Agent an amount equal to the ratable share of such Lender of
the funds required to be returned to the Borrower. The ratable share of each
Lender shall be determined on the basis of the percentage of the payment all or
a portion of which is required to be refunded originally distributed to such
Lender, if such percentage can be determined, or, if such percentage cannot be
determined, on the basis of the Percentage Share of such Lender. The Agent
shall forward such funds to the Borrower or to the Lender required to return
such funds. If any such amount due to the Agent is made available by any Lender
after Noon, Central Standard or Central Daylight Savings Time, as the case may
be, of the Business Day following such notice, such Lender shall pay to the
Agent (or the Lender required to return funds to the Borrower, as the case may
be) for its own account interest on such amount at a rate equal to the Federal
Funds Rate for the period from and including the date on which restitution to
the Borrower is made by the Agent (or the Lender required to return funds to the
Borrower, as the case may be) to but not including the date on which such Lender
failing to timely forward its share of funds required to be returned to the
Borrower shall have made its ratable share of such funds available.
8.10 Agent in Its Individual Capacity. The Agent and its affiliates
may make loans to, accept deposits from and generally engage in any kind of
business with the Borrower as though the Agent were not the agent hereunder.
With respect to any Note issued to the Lender serving as the Agent, the Agent
shall have the same rights and powers under this Agreement as a Lender and may
exercise such rights and powers as though it were not the Agent. The terms
"Lender" and "Lenders" shall include the Agent in its individual capacity.
8.11 Successor Agent. The Agent may resign as Agent upon thirty days'
notice to the Lenders and the Borrower. If the Agent shall resign as Agent
under this Agreement and the other Loan Documents, Lenders for which the
Percentage Shares aggregate at least fifty-one percent (51%) shall appoint from
among the Lenders a successor agent for the Lenders, subject to the reasonable
consent of the Borrowers, whereupon such successor agent shall succeed to the
rights, powers and
50
duties of the Agent. The term "Agent" shall mean such successor agent effective
upon its appointment. The rights, powers, and duties of the former Agent as
Agent shall be terminated, with out any other or further act or deed on the part
of such former Agent or any of the parties to this Agreement or any holders of
the Notes. After the removal or resignation of any Agent hereunder as Agent, the
provisions of this Article VIII and those of any Section hereof relating to the
Agent, including Section 5.14, Section 5.15 and Section 5.19 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent
under this Agreement and the other Loan Documents.
8.12 Applicable Parties. The provisions of this Article are solely
for the benefit of the Agent and the Lenders, and except for the notice
provision under Section 8.11 above, the Borrower shall not have any rights as a
third party beneficiary or otherwise under any of the provisions of this
Article. In performing functions and duties hereunder and under the other Loan
Documents, the Agent shall act solely as the agent of the Lenders and does not
assume, nor shall it be deemed to have assumed, any obligation or relationship
of trust or agency with or for the Borrower or any legal representative,
successor, and assign of the Borrower.
ARTICLE IX
MISCELLANEOUS
9.1 Assignments; Participations. Each Lender may assign or sell
participations in its Loans and Commitments to one or more other Persons in
accordance with this Section 9.1.
(a) Assignments. Any Lender,
(i) with the written consent of the Borrower (in its sole discretion)
and the Agent (which consent shall not be unreasonably delayed or
withheld), may at any time, assign and delegate to one or more
commercial banks or other financial institutions, and
(ii) with notice to the Borrower and the Agent, but without the
consent of the Borrower or the Agent, may assign and delegate to any
of its Affiliates or to any other Lender
(each Person described in (i) or (ii) above as being the Person to
whom such assignment and delegation is to be made, being hereinafter referred to
as an "Assignee Lender"), all or any fraction of such Lender's total Loans and
Commitments (which assignment and delegation shall be of a constant, and not a
varying percentage, of all the assigning Lender's Loans and Commitments), in a
minimum aggregate amount of $1,000,000 of such Lender's Percentage Share of the
Maximum Commitment Amount, if less; provided, however, that such Assignee Lender
will comply with all the provisions of this Agreement, and further, provided,
however, that the Borrower and Agent shall be entitled to continue to deal
solely and directly with such assigning Lender in connection with the interests
so assigned and delegated to an Assignee Lender until:
51
(iii) 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 and the
Agent by such Lender and such Assignee Lender,
(iv) such Assignee Lender shall have executed and delivered to the
Borrower and the Agent a Lender Assignment Agreement, accepted by the
Borrower and the Agent and attached hereto as Exhibit VII, and
(v) the processing fees described below shall have been paid.
From and after the date that the Borrower and the Agent accept such
Lender Assignment Agreement, (a) 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 Agreement, shall have the rights and
obligations of a Lender hereunder and under the other Loan Documents, and (b)
the Assignor Lender, to the extent that rights and obligations hereunder have
been assigned and delegated by it in connection with such Lender Assignment
Agreement, shall be released from its obligations hereunder and under the other
Loan Documents. Within five Business Days after its receipt of notice that the
Agent has received an executed Lender Assignment Agreement, the Borrower shall
execute and deliver to the Agent (for delivery 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 (such Notes to be in exchange for, but not in payment
of, those Notes then held by such assignor Lender). Each such Note shall be
dated the date of the predecessor Notes. The assignor Lender shall xxxx the
predecessor Notes "exchanged" and deliver them to the Borrower. Accrued
interest on that part of the predecessor Notes evidenced by the new Notes, and
accrued fees, shall be paid as provided in the Lender Assignment Agreement.
Accrued interest on that part of the predecessor Notes 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 such assignee Lender must
also pay a processing fee to the Agent upon delivery of any Lender Assignment
Agreement in the amount of $3,000. Any attempted assignment and delegation not
made in accordance with this Section 9.1 shall be null and void.
(b) Participations. Any Lender, with the prior written consent of the
Borrower in its sole discretion, may at any time sell to one or more commercial
banks (each of such commercial banks being herein called a "Participant")
participating interests in any of the Loans, Commitments, or other interests of
such Lender hereunder; provided, however, that (a) no participation contemplated
in this Section 9.1 shall relieve such Lender from its Commitments or its other
obligations hereunder or under any other Loan Document, (b) such Lender shall
remain solely responsible for the performance of its Commitments and such other
obligations, (c) the Borrower and the Agent shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and each of the other Loan Documents, (d) no
52
Participant shall be entitled to require such Lender to take or refrain from
taking any action hereunder or under any other Loan Document.
9.2 Survival of Representations, Warranties, and Covenants. All
representations and warranties of the Borrower and all covenants and agreements
herein made shall survive the execution and delivery of the Note and the
Security Instruments and shall remain in force and effect so long as any
Obligation is outstanding or any Commitment exists.
9.3 Notices and Other Communications. Except as to oral notices
expressly authorized herein, which oral notices shall be confirmed in writing,
all notices, requests, and communications hereunder shall be in writing
(including by telecopy). Unless otherwise expressly provided herein, any such
notice, request, demand, or other communication shall be deemed to have been
duly given or made when delivered by hand, or, in the case of delivery by mail,
when deposited in the mail, certified mail, return receipt requested, postage
prepaid, or, in the case of telecopy notice, when receipt thereof is
acknowledged orally or by written confirmation report, addressed as follows:
(a) if to the Agent and Lenders, to:
Bank One, Texas, National Association
910 Xxxxxx, 0xx Xxxxx
Xxxxxxx, Xxxxx 00000-0000
Attention: Energy Group, 6th Floor
(or for notice by mail, to:
X.X. Xxx 0000
Xxxxxxx, Xxxxx 00000-0000
Attention: Energy Group, 6th Floor
Telecopy: (000) 000-0000
(b) if to the Borrower, to:
Harken Exploration Company,
XPLOR Energy, Inc.,
Harken Energy West Texas, Inc.,
Harken Southwest Corporation
South Coast Exploration Co.
XPLOR Energy SPV-1, Inc.
XxXxxxxxx Energy, Inc.
00000 Xxxx Xxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxx Xxxxxxxx and Xxxx Xxxxxxxx
Telecopy: 000-000-0000
(c) if to the Guarantor, to:
Harken Energy Corporation
00000 Xxxx Xxx Xxxxx, Xxxxx 000
53
Xxxxxxx, Xxxxx 00000
Attention: Xxxxx Xxxxxxxx and Xxxx Xxxxxxxx
Telecopy: 000-000-0000
Any party may, by proper written notice hereunder to the others,
change the individuals or addresses to which such notices to it shall thereafter
be sent.
9.4 Parties in Interest. Subject to the restrictions on changes in
corporate structure set forth in Section 6.9 and other applicable restrictions
contained herein, all covenants and agreements herein contained by or on behalf
of the Borrower, the Agent or the Lenders shall be binding upon and inure to the
benefit of the Borrower, the Agent or the Lenders, as the case may be, and their
respective legal representatives, successors, and assigns.
9.5 Rights of Third Parties. All provisions herein are imposed
solely and exclusively for the benefit of the Agent, Lenders and the Borrower.
No other Person shall have any right, benefit, priority, or interest hereunder
or as a result hereof or have standing to require satisfaction of provisions
hereof in accordance with their terms, and any or all of such provisions may be
freely waived in whole or in part by the Lender at any time if in its sole
discretion it deems it advisable to do so.
9.6 Renewals; Extensions. All provisions of this Agreement relating
to the Notes shall apply with equal force and effect to each promissory note
hereafter executed which in whole or in part represents a renewal or extension
of any part of the Indebtedness of the Borrower under this Agreement, the Notes,
or any other Loan Document.
9.7 No Waiver; Rights Cumulative. No course of dealing on the part
of the Agent or the Lenders, their officers or employees, nor any failure or
delay by the Agent or the Lenders with respect to exercising any of its rights
under any Loan Document shall operate as a waiver thereof. The rights of the
Agent or the Lenders under the Loan Documents shall be cumulative and the
exercise or partial exercise of any such right shall not preclude the exercise
of any other right. Neither the making of any Loan nor the issuance of a Letter
of Credit shall constitute a waiver of any of the covenants, warranties, or
conditions of the Borrower contained herein. In the event the Borrower is
unable to satisfy any such covenant, warranty, or condition, neither the making
of any Loan nor the issuance of a Letter of Credit shall have the effect of
precluding the Agent or the Lenders from thereafter declaring such inability to
be an Event of Default as hereinabove provided.
9.8 Survival Upon Unenforceability. In the event any one or more of
the provisions contained in any of the Loan Documents or in any other instrument
referred to herein or executed in connection with the Obligations shall, for any
reason, be held to be invalid, illegal, or unenforceable in any respect, such
invalidity, illegality, or unenforceability shall not affect any other provision
of any Loan Document or of any other instrument referred to herein or executed
in connection with such Obligations.
9.9 Amendments; Waivers. Neither this Agreement nor any provision
hereof may be amended, waived, discharged, or terminated orally, but only by an
instrument in writing signed
54
by the party against whom enforcement of the amendment, waiver, discharge, or
termination is sought.
9.10 Controlling Agreement. In the event of a conflict between the
provisions of this Agreement and those of any other Loan Document, the
provisions of this Agreement shall control.
9.11 Disposition of Collateral. Notwithstanding any term or
provision, express or implied, in any of the Security Instruments, the
realization, liquidation, foreclosure, or any other disposition on or of any or
all of the Collateral shall be in the order and manner and determined in the
sole discretion of the Agent or the Lenders; provided, however, that in no event
shall the Agent or the Lenders violate applicable law or exercise rights and
remedies other than those provided in such Security Instruments or otherwise
existing at law or in equity.
9.12 GOVERNING LAW. THIS AGREEMENT, AND THE NOTES AND THE GUARANTY
SHALL BE DEEMED TO BE CONTRACTS MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS WITHOUT GIVING EFFECT TO
PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW; PROVIDED, HOWEVER, THAT CHAPTER
345 OF THE TEXAS FINANCE CODE (WHICH REGULATES CERTAIN REVOLVING CREDIT LOAN
ACCOUNTS AND REVOLVING TRIPARTY ACCOUNTS) SHALL NOT APPLY.
9.13 JURISDICTION AND VENUE. ALL ACTIONS OR PROCEEDINGS WITH RESPECT
TO, ARISING DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT OF, RELATED TO, OR
FROM THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE LITIGATED, IN COURTS
HAVING SITUS IN HOUSTON, XXXXXX COUNTY, TEXAS. THE BORROWER, AGENT AND EACH
LENDER HEREBY SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE, OR FEDERAL COURT
LOCATED IN HOUSTON, XXXXXX COUNTY, TEXAS, AND HEREBY WAIVES ANY RIGHTS IT MAY
HAVE TO TRANSFER OR CHANGE THE JURISDICTION OR VENUE OF ANY LITIGATION BROUGHT
AGAINST IT IN ACCORDANCE WITH THIS SECTION.
9.14 WAIVER OF RIGHTS TO JURY TRIAL. THE BORROWER, AGENT AND EACH
LENDER HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY, IRREVOCABLY, AND
UNCONDITIONALLY WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT,
PROCEEDING, COUNTERCLAIM, OR OTHER LITIGATION THAT RELATES TO OR ARISES OUT OF
ANY OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE ACTS OR OMISSIONS OF THE
AGENT AND LENDERS IN THE ENFORCEMENT OF ANY OF THE TERMS OR PROVISIONS OF THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT OR OTHERWISE WITH RESPECT THERETO. THE
PROVISIONS OF THIS SECTION ARE A MATERIAL INDUCEMENT FOR THE AGENT AND THE
LENDERS ENTERING INTO THIS AGREEMENT.
55
9.15 ENTIRE AGREEMENT. THIS AGREEMENT AMENDS, RESTATES, AND REPLACES
THE EXISTING CREDIT AGREEMENT AND CONSTITUTES THE ENTIRE AGREEMENT BETWEEN THE
PARTIES HERETO WITH RESPECT TO THE SUBJECT HEREOF AND SHALL SUPERSEDE ANY PRIOR
AGREEMENT BETWEEN THE PARTIES HERETO, WHETHER WRITTEN OR ORAL, RELATING TO THE
SUBJECT HEREOF, INCLUDING, WITHOUT LIMITATION, THE EXISTING CREDIT AGREEMENT AND
THE CORRESPONDENCE DATED JUNE 7, 2000, FROM THE LENDER TO THE BORROWER [AND THE
TERM SHEET ENCLOSED THEREWITH]. FURTHERMORE, IN THIS REGARD, THIS AGREEMENT AND
THE OTHER WRITTEN LOAN DOCUMENTS REPRESENT, COLLECTIVELY, THE FINAL AGREEMENT
AMONG THE PARTIES THERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF SUCH PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS AMONG SUCH PARTIES.
9.16 Release by Borrower. Notwithstanding the assignment made and
evidenced by the Assignment and the assumption by the Agent on behalf of the
Lenders of certain obligations and liabilities of the Existing Lender pursuant
thereto, the Borrower hereby releases and discharges the Agent and the Lenders
from all obligations, claims, losses, causes of action, and liabilities, of
whatsoever kind or nature, whether heretofore or hereafter accruing, whether now
known or unknown, arising under or in connection with any Existing Loan Document
or Existing Letter of Credit or any act or omission by the Existing Lender under
or in connection with any Existing Loan Document or Existing Letter of Credit;
provided, however, nothing set forth in this Section shall relieve the Agent and
the Lenders from its obligations and liabilities under the Loan Documents (other
than the Assignment) to which it is a party.
9.17 Counterparts. For the convenience of the parties, this Agreement
may be executed in multiple counterparts, each of which for all purposes shall
be deemed to be an original, and all such counterparts shall together constitute
but one and the same Agreement.
IN WITNESS WHEREOF, this Agreement is deemed executed effective as of
the date first above written.
BORROWER:
HARKEN EXPLORATION COMPANY
XPLOR ENERGY, INC.
HARKEN ENERGY WEST TEXAS, INC.
HARKEN SOUTHWEST CORPORATION
SOUTH COAST EXPLORATION CO.
XPLOR ENERGY SPV-1, INC.
56
XXXXXXXXX ENERGY, INC.
/s/ XXXX XXXXXXXX
By: __________________________________________
Xxxx Xxxxxxxx
Senior Vice President and Chief Financial
Officer
GUARANTOR:
----------
HARKEN ENERGY CORPORATION
/s/ XXXX XXXXXXXX
By: __________________________________________
Xxxx Xxxxxxxx
Senior Vice President and Chief Financial
Officer
AGENT AND LENDER:
-----------------
BANK ONE, TEXAS, NATIONAL
ASSOCIATION
/s/ XXXXXXXX XXXXXXX
By: __________________________________________
Xxxxxxxx Xxxxxxx
Vice President
57
FIRST AMENDMENT TO
CREDIT AGREEMENT
BETWEEN
HARKEN EXPLORATION COMPANY, XPLOR ENERGY, INC.,
HARKEN ENERGY WEST TEXAS, INC., SOUTH COAST EXPLORATION CO.,
XPLOR ENERGY SPV-1, INC., XXXXXXXXX ENERGY, INC.
AND
BANK ONE, TEXAS, NATIONAL ASSOCIATION
AS AGENT AND LENDER
AND
THE LENDERS SIGNATORY HERETO
Effective as of
December 21, 2000
TABLE OF CONTENTS
-----------------
PAGE
----
ARTICLE I. DEFINITIONS...................................... 1
1.01 Terms Defined Above........................ 1
1.02 Terms Defined in Agreement................. 1
1.03 References................................. 2
1.04 Articles and Sections...................... 2
1.05 Number and Gender.......................... 2
ARTICLE II. AMENDMENTS....................................... 2
2.01 Release of Harken Southwest Corporation.... 2
2.02 Amendment of Section 6.13.................. 2
2.03 Amendment of Exhibit I..................... 2
ARTICLE III. CONDITIONS....................................... 3
3.01 Receipt of Documents....................... 3
3.02 Accuracy of Representations and Warranties. 3
3.03 Matters Satisfactory to Lender............. 3
ARTICLE IV. REPRESENTATIONS AND WARRANTIES................... 3
ARTICLE V. RATIFICATION..................................... 3
ARTICLE VI. MISCELLANEOUS.................................... 4
6.01 Scope of Amendment......................... 4
6.02 Agreement as Amended....................... 4
6.03 Parties in Interest........................ 4
6.04 Rights of Third Parties.................... 4
6.05 ENTIRE AGREEMENT........................... 4
6.06 GOVERNING LAW.............................. 4
6.07 JURISDICTION AND VENUE..................... 5
i
FIRST AMENDMENT TO CREDIT AGREEMENT
This FIRST AMENDMENT TO CREDIT AGREEMENT (this "First Amendment") is
made and entered into effective as of December 21, 2000, between HARKEN
EXPLORATION COMPANY, a Delaware corporation, XPLOR ENERGY, INC., a Texas
corporation, HARKEN ENERGY WEST TEXAS, INC., a Delaware corporation, XPLOR
ENERGY SPV-1, INC., an Oklahoma corporation, and XXXXXXXXX ENERGY, INC., a Texas
corporation, (collectively the "Borrower"), each lender that is signatory
hereto or becomes a signatory hereto as provided in Section 9.1, (individually,
together with its successors and assigns, a "Lender", and collectively together
with their respective successors and assigns, the "Lenders"), and BANK ONE,
TEXAS, NATIONAL ASSOCIATION, a national banking association, as agent for the
Lenders (in such capacity, together with its successors in such capacity
pursuant to the terms hereof, the "Agent").
W I T N E S S E T H:
WHEREAS, the above named parties did execute and exchange counterparts
of that certain Credit Agreement dated August 11, 2000 (the "Agreement"), to
which reference is here made for all purposes;
WHEREAS, the parties subject to and bound by the Agreement are
desirous of amending the Agreement in the particulars hereinafter set forth;
WHEREAS, Harken Southwest Corporation is removed from the Agreement as
a Borrower;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements of the parties to the Agreement, as set forth therein, and the mutual
covenants and agreements of the parties hereto, as set forth in this First
Amendment, the parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
1.01 Terms Defined Above. As used herein, each of the terms
"Agreement," "Borrower," "First Amendment," and "Lender" shall have the meaning
assigned to such term hereinabove.
1.02 Terms Defined in Agreement. As used herein, each term defined
in the Agreement shall have the meaning assigned thereto in the Agreement,
unless expressly provided herein to the contrary.
1.03 References. References in this First Amendment to Article or
Section numbers shall be to Articles and Sections of this First Amendment,
unless expressly stated herein to the contrary. References in this First
Amendment to "hereby," "herein," "hereinafter," "hereinabove," "hereinbelow,"
"hereof," and "hereunder" shall be to this First Amendment in its entirety and
not only to the particular Article or Section in which such reference appears.
1.04 Articles and Sections. This First Amendment, for convenience
only, has been divided into Articles and Sections and it is understood that the
rights, powers, privileges, duties, and other legal relations of the parties
hereto shall be determined from this First Amendment as an entirety and without
regard to such division into Articles and Sections and without regard to
headings prefixed to such Articles and Sections.
1.05 Number and Gender. Whenever the context requires, reference
herein made to the single number shall be understood to include the plural and
likewise the plural shall be understood to include the singular. Words denoting
sex shall be construed to include the masculine, feminine, and neuter, when such
construction is appropriate, and specific enumeration shall not exclude the
general, but shall be construed as cumulative. Definitions of terms defined in
the singular and plural shall be equally applicable to the plural or singular,
as the case may be.
ARTICLE II.
AMENDMENTS
----------
The Borrower and the Lender hereby amend the Agreement in the
following particulars:
2.01 Release of Harken Southwest Corporation. Harken Southwest
Corporation is hereby released from all Obligations under the Agreement.
2.02 Amendment of Section 6.13. Section 6.13 of the Credit
Agreement is hereby amended to read as follows:
"6.13 Current Ratio. Permit the ratio of Guarantor of Current Assets
to Current Liabilities to be less than 1.5 to 1.0 at any time."
2.03 Amendment of Exhibit I. Exhibit I, i.e., the Form of
Promissory Note, is as set forth on Exhibit I to this First Amendment.
2
ARTICLE III.
CONDITIONS
The obligation of the Lender to amend the Agreement as provided herein
is subject to the fulfillment of the following conditions precedent:
3.01 Receipt of Documents. The Lender shall have received,
reviewed, and approved the following documents and other items, appropriately
executed when necessary and in form and substance satisfactory to the Lender:
(a) multiple counterparts of this First Amendment and the Note, as
requested by the Lender; and
(b) such other agreements, documents, items, instruments, opinions,
certificates, waivers, consents, and evidence as the Lender may
reasonably request.
3.02 Accuracy of Representations and Warranties. The representations
and warranties contained in Article IV of the Agreement and this First Amendment
shall be true and correct.
3.03 Matters Satisfactory to Lender. All matters incident to the
consummation of the transactions contemplated hereby shall be satisfactory to
the Lender.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
The Borrower hereby expressly re-makes, in favor of the Lender, all of
the representations and warranties set forth in Article IV of the Agreement, and
represents and warrants that all such representations and warranties remain true
and unbreached.
ARTICLE V.
RATIFICATION
Each of the parties hereto does hereby adopt, ratify, and confirm the
Agreement and the other Loan Documents, in all things in accordance with the
terms and provisions thereof, as amended by this First Amendment.
3
ARTICLE VI.
MISCELLANEOUS
6.01 Scope of Amendment. The scope of this First Amendment is
expressly limited to the matters addressed herein and this First Amendment shall
not operate as a waiver of any past, present, or future breach, Default, or
Event of Default under the Agreement, except to the extent, if any, that any
such breach, Default, or Event of Default is remedied by the effect of this
First Amendment.
6.02 Agreement as Amended. All references to the Agreement in
any document heretofore or hereafter executed in connection with the
transactions contemplated in the Agreement shall be deemed to refer to the
Agreement as amended by this First Amendment.
6.03 Parties in Interest. All provisions of this First Amendment
shall be binding upon and shall inure to the benefit of the Borrower, the Lender
and their respective successors and assigns.
6.04 Rights of Third Parties. All provisions herein are imposed
solely and exclusively for the benefit of the Lender and the Borrower, and no
other Person shall have standing to require satisfaction of such provisions in
accordance with their terms and any or all of such provisions may be freely
waived in whole or in part by the Lender at any time if in its sole discretion
it deems it advisable to do so.
6.05 ENTIRE AGREEMENT. THIS FIRST AMENDMENT CONSTITUTES THE
ENTIRE AGREEMENT BETWEEN THE PARTIES HERETO WITH RESPECT TO THE SUBJECT HEREOF
AND SUPERSEDES ANY PRIOR AGREEMENT, WHETHER WRITTEN OR ORAL, BETWEEN SUCH
PARTIES REGARDING THE SUBJECT HEREOF. FURTHERMORE IN THIS REGARD, THIS FIRST
AMENDMENT, THE AGREEMENT, THE NOTE, THE SECURITY INSTRUMENTS, AND THE OTHER
WRITTEN DOCUMENTS REFERRED TO IN THE AGREEMENT OR EXECUTED IN CONNECTION WITH OR
AS SECURITY FOR THE NOTE REPRESENT, COLLECTIVELY, THE FINAL AGREEMENT AMONG THE
PARTIES THERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.
6.06 GOVERNING LAW. THIS FIRST AMENDMENT, THE AGREEMENT AND THE
NOTE SHALL BE DEEMED TO BE CONTRACTS MADE UNDER AND SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS. THE PARTIES
ACKNOWLEDGE AND AGREE THAT THIS AGREEMENT AND THE NOTE AND THE TRANSACTIONS
CONTEMPLATED HEREBY BEAR A NORMAL, REASONABLE, AND SUBSTANTIAL RELATIONSHIP TO
THE STATE OF TEXAS.
4
6.07 JURISDICTION AND VENUE. ALL ACTIONS OR PROCEEDINGS WITH
RESPECT TO, ARISING DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT OF, RELATED
TO, OR FROM THIS FIRST AMENDMENT, THE AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY
BE LITIGATED IN COURTS HAVING SITUS IN XXXXXX COUNTY, TEXAS. EACH OF THE
BORROWER AND THE LENDER HEREBY SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE,
OR FEDERAL COURT LOCATED IN XXXXXX COUNTY, TEXAS, AND HEREBY WAIVES ANY RIGHTS
IT MAY HAVE TO TRANSFER OR CHANGE THE JURISDICTION OR VENUE OF ANY LITIGATION
BROUGHT AGAINST IT BY THE BORROWER OR THE LENDER IN ACCORDANCE WITH THIS
SECTION.
5
IN WITNESS WHEREOF, this First Amendment to Credit Agreement is
executed effective the date first hereinabove written.
BORROWER:
--------
HARKEN EXPLORATION COMPANY
XPLOR ENERGY, INC.
HARKEN ENERGY WEST TEXAS, INC.
SOUTH COAST EXPLORATION CO.
XPLOR ENERGY SPV-1, INC.
XXXXXXXXX ENERGY, INC.
By: /s/ XXXX XXXXXXXX
----------------------------------------
Xxxx Xxxxxxxx
Senior Vice President and Chief Financial
Officer
GUARANTOR:
----------
HARKEN ENERGY CORPORATION
By: /s/ XXXX XXXXXXXX
----------------------------------------
Xxxx Xxxxxxxx
Senior Vice President and Chief Financial
Officer
6
AGENT AND LENDER:
BANK ONE, TEXAS, NATIONAL ASSOCIATION
By: /s/ XXXXXXXX XXXXXXX
----------------------------------------
Xxxxxxxx Xxxxxxx
Vice President
7
SECOND AMENDMENT TO CREDIT AGREEMENT
BETWEEN
HARKEN EXPLORATION COMPANY, XPLOR ENERGY, INC.
HARKEN ENERGY WEST TEXAS, INC., SOUTH COAST EXPLORATION CO.,
XPLOR ENERGY SPV-1, INC., XXXXXXXXX ENERGY, INC.
AND
BANK ONE, NA,
AS AGENT AND LENDER
AND THE LENDERS SIGNATORY HERETO
Effective as of December 31, 2000
TABLE OF CONTENTS
PAGE
----
ARTICLE I
DEFINITIONS
1.01 Terms Defined Above.......................... 1
1.02 Terms Defined in Agreement................... 1
1.03 References................................... 1
1.04 Articles and Sections........................ 2
1.05 Number and Gender............................ 2
ARTICLE II
AMENDMENTS
2.01 Amendment of Section 6.14.................... 2
2.02 Amendment of Section 6.15.................... 2
ARTICLE III
CONDITIONS
3.01 Receipt of Documents......................... 2
3.02 Accuracy of Representations and Warranties... 3
3.03 Matters Satisfactory to Agent................ 3
ARTICLE IV
REPRESENTATIONS AND WARRANTIES...................... 3
ARTICLE V
RATIFICATION........................................ 3
ARTICLE VI
MISCELLANEOUS
6.01 Scope of Amendment........................... 3
6.02 Agreement as Amended......................... 3
6.03 Parties in Interest.......................... 3
6.04 Rights of Third Parties...................... 3
6.05 ENTIRE AGREEMENT............................. 3
6.06 GOVERNING LAW................................ 4
6.07 JURISDICTION AND VENUE....................... 4
i
SECOND AMENDMENT TO CREDIT AGREEMENT
This SECOND AMENDMENT TO CREDIT AGREEMENT (this "Second Amendment") is made
and entered into effective as of December 31, 2000, between HARKEN EXPLORATION
COMPANY, a Delaware corporation, XPLOR ENERGY, INC., a Texas corporation, HARKEN
ENERGY WEST TEXAS, INC., a Delaware corporation, XPLOR ENERGY SPV-1, INC., an
Oklahoma corporation, and XXXXXXXXX ENERGY, INC., a Texas corporation,
(collectively the "Borrower"), each lender that is signatory hereto or becomes a
signatory hereto as provided in Section 9.1, (individually, together with its
successors and assigns, a "Lender", and collectively together with their
respective successors and assigns, the "Lenders"), and BANK ONE, NA, a national
banking association, as agent for the Lenders (in such capacity, together with
its successors in such capacity pursuant to the terms hereof, the "Agent") (as
successor by merger to Bank One, Texas, National Association).
W I T N E S S E T H
-------------------
WHEREAS, the above named parties did execute and exchange counterparts of
that certain Credit Agreement dated August 11, 2000, as amended by First
Amendment to Credit Agreement dated December 21, 2000 (the "Agreement"), to
which reference is here made for all purposes;
WHEREAS, the parties subject to and bound by the Agreement are desirous of
amending the Agreement in the particulars hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements of
the parties to the Agreement, as set forth therein, and the mutual covenants and
agreements of the parties hereto, as set forth in this Second Amendment, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.01 Terms Defined Above. As used herein, each of the terms "Agent",
"Agreement", "Borrower", "Lender" and "Second Amendment" shall have the meaning
assigned to such term hereinabove.
1.02 Terms Defined in Agreement. As used herein, each term defined in the
Agreement shall have the meaning assigned thereto in the Agreement, unless
expressly provided herein to the contrary.
1.03 References. References in this Second Amendment to Article or Section
numbers shall be to Articles and Sections of this Second Amendment, unless
expressly stated herein to the contrary. References in this Second Amendment to
"hereby,""herein," hereinafter," hereinabove," "hereinbelow," "hereof," and
"hereunder" shall be to this Second Amendment in its entirety and not only to
the particular Article or Section in which such reference appears.
1
1.04 Articles and Sections. This Second Amendment, for convenience only,
has been divided into Articles and Sections and it is understood that the
rights, powers, privileges, duties, and other legal relations of the parties
hereto shall be determined from this Second Amendment as an entirety and without
regard to such division into Articles and Sections and without regard to
headings prefixed to such Articles and Sections.
1.05 Number and Gender. Whenever the context requires, reference herein
made to the single number shall be understood to include the plural and likewise
the plural shall be understood to include the singular. Words denoting sex shall
be construed to include the masculine, feminine, and neuter, when such
construction is appropriate, and specific enumeration shall not exclude the
general, but shall be construed as cumulative. Definitions of terms defined in
the singular and plural shall be equally applicable to the plural or singular,
as the case may be.
ARTICLE II
AMENDMENTS
The Borrower and the Lender hereby amend the Agreement in the following
particulars:
2.01 Amendment of Section 6.14. Section 6.14 of the Agreement is hereby
amended to read as follows:
"6.14 Tangible Net Worth. Permit Tangible Net Worth of Guarantor, as of
the close of any quarter, to be less than $40,000,000 at December 31, 2000,
plus 75% of positive Net Income plus 100% of net proceeds of any new
equity, beginning March 31, 2001."
2.02 Amendment of Section 6.15. Section 6.15 of the Agreement is hereby
amended to read as follows:
"6.15 Total Liabilities to Tangible Net Worth. Permit the ratio of Debt to
Tangible Net Worth to be greater than 2.30 to 1.00."
ARTICLE III
CONDITIONS
The obligation of the Agent and Lender to amend the Agreement as provided
herein is subject to the fulfillment of the following conditions precedent:
3.01 Receipt of Documents. The Lender shall have received, reviewed, and
approved the following documents and other items, appropriately executed when
necessary and in form and substance satisfactory to the Agent:
(a) multiple counterparts of this Second Amendment as requested by the
Agent; and
(b) such other agreements, documents, items, instruments, opinions,
certificates, waivers, consents, and evidence as the Agent may reasonably
request.
2
3.02 Accuracy of Representations and Warranties. The representations and
warranties contained in Article IV of the Agreement and this Second Amendment
shall be true and correct.
3.03 Matters Satisfactory to Agent. All matters incident to the
consummation of the transactions contemplated hereby shall be satisfactory to
the Agent.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower hereby expressly re-makes, in favor of the Agent and Lender,
all of the representations and warranties set forth in Article IV of the
Agreement, and represents and warrants that all such representations and
warranties remain true and unbreached.
ARTICLE V
RATIFICATION
Each of the parties hereto does hereby adopt, ratify, and confirm the
Agreement and the other Loan Documents, in all things in accordance with the
terms and provisions thereof, as amended by this Second Amendment.
ARTICLE VI
MISCELLANEOUS
6.01 Scope of Amendment. The scope of this Second Amendment is expressly
limited to the matters addressed herein and this Second Amendment shall not
operate as a waiver of any past, present, or future breach, Default, or Event of
Default under the Agreement. except to the extent, if any, that any such breach,
Default, or Event of Default is remedied by the effect of this Second Amendment.
6.02 Agreement as Amended. All references to the Agreement in any document
heretofore or hereafter executed in connection with the transactions
contemplated in the Agreement shall be deemed to refer to the Agreement as
amended by this Second Amendment.
6.03 Parties in Interest. All provisions of this Second Amendment shall be
binding upon and shall inure to the benefit of the Borrower, the Agent and the
Lender and their respective successors and assigns.
6.04 Rights of Third Parties. All provisions herein are imposed solely and
exclusively for the benefit of the Agent, Lender and the Borrower, and no other
Person shall have standing to require satisfaction of such provisions in
accordance with their terms and any or all of such provisions may be freely
waived in whole or in part by the Agent and/or the Lender at any time if in its
sole discretion it deems it advisable to do so.
6.05 ENTIRE AGREEMENT. THIS SECOND AMENDMENT CONSTITUTES THE ENTIRE
AGREEMENT BETWEEN THE PARTIES HERETO WITH RESPECT TO THE SUBJECT HEREOF AND
SUPERSEDES ANY PRIOR AGREEMENT, WHETHER WRITTEN OR ORAL, BETWEEN SUCH PARTIES
REGARDING THE
3
SUBJECT HEREOF. FURTHERMORE IN THIS REGARD, THIS SECOND AMENDMENT, THE
AGREEMENT, THE NOTE, THE SECURITY INSTRUMENTS, AND THE OTHER WRITTEN DOCUMENTS
REFERRED TO IN THE AGREEMENT OR EXECUTED IN CONNECTION WITH OR AS SECURITY FOR
THE NOTE REPRESENT, COLLECTIVELY, THE FINAL AGREEMENT AMONG THE PARTIES THERETO
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE
PARTIES.
6.06 GOVERNING LAW. THIS SECOND AMENDMENT, THE AGREEMENT AND THE NOTE SHALL
BE DEEMED TO BE CONTRACTS MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS. THE PARTIES ACKNOWLEDGE AND
AGREE THAT THIS AGREEMENT AND THE NOTE AND THE TRANSACTIONS CONTEMPLATED HEREBY
BEAR A NORMAL, REASONABLE, AND SUBSTANTIAL RELATIONSHIP TO THE STATE OF TEXAS.
6.07 JURISDICTION AND VENUE. ALL ACTIONS OR PROCEEDINGS WITH RESPECT TO,
ARISING DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT OF, RELATED TO, OR FROM
THIS SECOND AMENDMENT, THE AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE LITIGATED
IN COURTS HAVING SITUS IN XXXXXX COUNTY, TEXAS. EACH OF THE BORROWER AND THE
LENDER HEREBY SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE, OR FEDERAL COURT
LOCATED IN XXXXXX COUNTY, TEXAS, AND HEREBY WAIVES ANY RIGHTS IT MAY HAVE TO
TRANSFER OR CHANGE THE JURISDICTION OR VENUE OF ANY LITIGATION BROUGHT AGAINST
IT BY THE BORROWER OR THE LENDER IN ACCORDANCE WITH THIS SECTION.
[Remainder of Page Intentionally Left Blank]
4
IN WITNESS WHEREOF, this Second Amendment to Credit Agreement is executed
effective the date first hereinabove written.
BORROWER
----------
HARKEN EXPLORATION COMPANY
XPLOR ENERGY, INC.
HARKEN ENERGY WEST TEXAS, INC.
SOUTH COAST EXPLORATION CO.
XPLOR ENERGY SPV-1, INC.
XXXXXXXXX ENERGY, INC.
By: /s/ XXXX XXXXXXXX
----------------------------
Xxxx Xxxxxxxx
Senior Vice President and Chief
Financial Officer
GUARANTOR
---------
HARKEN ENERGY CORPORATION
By: /s/ XXXX XXXXXXXX
---------------------------
Xxxx Xxxxxxxx
Senior Vice President and Chief
Financial Officer
AGENT AND LENDER
----------------
BANK ONE, NA
By:
---------------------------
Xxxxxxxx Xxxxxxx
Vice President
5
