ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
1.1. NOTE PURCHASE AGREEMENT DATED DECEMBER 20, 1996
BETWEEN UNEXCO, INC. AND RIMCO.
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UNEXCO, INC.
$4,000,000
12% Senior Secured General Obligation Notes
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NOTE PURCHASE AGREEMENT
__________
Dated as of December 20, 1996
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NOTE PURCHASE AGREEMENT
NOTE PURCHASE AGREEMENT dated as of December 20, 1996 among UNEXCO,
INC., a Delaware corporation (the "COMPANY"), and RIMCO PARTNERS, L.P., a
Delaware limited partnership, RIMCO PARTNERS, X.X. XX, a Delaware limited
partnership, RIMCO PARTNERS, L.P. III, a Delaware limited partnership, and RIMCO
PARTNERS, X.X. XX, a Delaware limited partnership (collectively, the
"NOTEHOLDERS")
In consideration of the mutual covenants herein contained, the Company
and the Noteholders agree as follows:
ARTICLE I
DEFINITIONS, ETC.
SECTION 1.01. CERTAIN DEFINED TERMS. Capitalized terms used in this
Agreement and not otherwise defined herein shall have the respective meanings
set forth in ANNEX A attached hereto (such meanings to be equally applicable to
both singular and plural forms of the terms defined).
SECTION 1.02. COVENANT CONSTRUCTION. Each covenant contained herein
shall be construed (absent express provision to the contrary) as being
independent of each other covenant contained herein, so that compliance with any
one covenant shall not (absent such an express contrary provision) be deemed to
excuse compliance with any other covenant. Where any provision herein refers to
action to be taken by any Person, or which such Person is prohibited from
taking, such provision shall be applicable whether such action is taken directly
or indirectly by such Person.
SECTION 1.03. OTHER RULES OF CONSTRUCTION. The words "hereof,"
"herein" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement. All references herein to articles, sections, annexes, exhibits
and schedules shall, unless the context requires a different construction, be
deemed to be references to the articles and sections of this Agreement and the
annexes, exhibits and schedules attached hereto and made a part hereof. In this
Agreement, unless a clear contrary intention appears, the word "including" (and
with correlative meaning "include") means including, without limiting the
generality of any description preceding such term. The headings of the various
articles and sections of this Agreement are for convenience only and shall not
affect the meaning of the terms and conditions of this Agreement. No provision
of this Agreement shall be interpreted or construed against any party solely
because that party or its legal representative drafted such provision.
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ARTICLE II
COMMITMENTS AND NOTES
SECTION 2.01. NOTES. (a) Subject to the terms and conditions of this
Agreement, each Noteholder severally agrees to make advances to the Company
(each and "ADVANCE") during the period from the date hereof through June 30,
1998 (the "COMMITMENT PERIOD") in an aggregate amount not exceeding the
principal amount specified opposite such Noteholder's name in SCHEDULE A (such
amount, as it may be reduced or terminated pursuant to this Agreement, is herein
referred to as such Noteholder's "COMMITMENT"). Each funding of Advances shall
be made on the same date ratably by the Noteholders. The Advances made by each
Noteholder shall be evidenced by the Note issued to such Noteholder. Within the
limits set forth herein and subject to the terms and conditions of this
Agreement, the Company may borrow, repay pursuant to SECTION 7.03, prepay
pursuant to SECTION 7.04 and reborrow under this ARTICLE II.
(b) The Company will authorize the issue and sale of $3,000,000
aggregate principal amount of its 12% Senior Secured General Obligation Notes
(the "NOTES"). Subject to the terms and conditions of this Agreement, at the
Closing provided for in ARTICLE III, the Company will issue to each Noteholder a
Note in the principal amount of such Noteholder's Commitment. The Notes shall be
substantially in the form set out in EXHIBIT 2.01, with such changes therefrom,
if any, as may be approved by the Noteholders and the Company. Each Noteholder
will note on its internal records, to the extent applicable, the date and amount
of each Advance made by such Noteholder to the Company hereunder, and the amount
of each payment in respect thereof and will prior to any transfer of its Note
endorse on the reverse side thereof the outstanding principal amount of Advances
evidenced thereby. Failure to make any such notation shall not affect the
Company's obligations in respect of such Advance. Absent manifest error, any
Noteholder's records or notations on its Note as to the outstanding principal
amount of its Advances shall be conclusive.
(c) Notwithstanding any other term hereof, no Advance shall be made
if after giving effect to the making of such Advance the aggregate of amount of
Advances outstanding would exceed the Total Commitment.
(d) If a Change of Control shall occur, the Commitment of each
Noteholder shall automatically terminate.
SECTION 2.02. GUARANTY AGREEMENT. Universal Seismic Associates, Inc.,
a Delaware corporation ("USA"), at the Closing provided for in ARTICLE III will
execute a Guaranty Agreement (the "GUARANTY AGREEMENT") pursuant to which USA
will guarantee payment of the Notes. The Guaranty Agreement shall be
substantially in the form set out in EXHIBIT 2.02, with such changes therefrom,
if any, as may be approved by the Noteholders and USA.
SECTION 2.03. PROCEDURES FOR ADVANCES UNDER THE NOTES. (a) Subject to
the terms and conditions of this Agreement, on the day of Closing, the
Noteholders shall make Advances in the aggregate amount of $900,000.
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(b) Whenever the Company desires to obtain a funding of additional
Advances, it shall, no less than 20 Business Days prior to the proposed funding
date for such Advances, provide the Noteholders with the following:
(i) a description of the Oil and Gas Properties to be acquired by
the Company in connection with such proposed Advance or the oil and gas
operations to be conducted with the proceeds of such proposed Advance, a
summary describing the material terms of such acquisition or operations,
copies of all documents relating to such acquisition or operations, title
opinions or other title information covering such Oil and Gas Properties in
form and substance reasonably satisfactory to the Noteholders, and such
other information pertaining to the Oil and Gas Properties to be acquired,
or oil and gas operation to be conducted, by the Company in connection with
such proposed Advances as the Noteholders may reasonably request,
(ii) a copy of all geological, geophysical, engineering and other
technical data in the possession of the Company, or to which the Company
has access, pertaining to the Oil and Gas Properties to be acquired or
developed in connection with such proposed Advances and such other
technical information as may be reasonably requested by the Noteholders,
and
(iii) a schedule describing the proposed use of the proceeds of such
Advances, which uses shall be permitted under SECTION 5.13.
(c) Within 10 Business Days after receipt of such information and
such other information as the Noteholders shall reasonably request, the
Noteholders shall provide the Company with a written notice (an "AVAILABILITY
NOTICE") stating the amount, if any, of Advances that the Noteholders are
willing to fund (as determined by the Noteholders in their sole absolute
discretion), subject to the other terms and conditions hereof, including the
conditions specified in ARTICLE IV, as well as any other conditions precedent to
the funding of such Advances that the Noteholders may specify.
(d) Subject to the other terms and conditions set forth herein, each
funding of Advances shall be made upon the written, telecopied or facsimile
transmitted request of the Company, given to the Noteholders not later than
12:00 Noon (Houston time) on the fifth Business Day prior to the proposed date
of such Advances. Each request for Advances (an "ADVANCE REQUEST") shall conform
to the requirements of the related Availability Notice and shall specify
therein: (a) the proposed date for such Advances; (b) the aggregate amount of
such Advances; and (c) the wire transfer instructions for such Advances.
(e) Upon satisfaction of all conditions to any Advance, the
Noteholders will make their respective Advances available to the Company by
delivery to the Company or its order of immediately available funds in the
amount, stated in the Advance Request by wire transfer of immediately available
funds for the account of the Company to the bank stated in the Advance Request.
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ARTICLE III
CLOSING
The sale and purchase of the Notes to be purchased by the Noteholders
shall occur at the offices of Xxxxxxx & Xxxxx, L.L.P., 000 Xxxxxx, Xxxxxxx,
Xxxxx 00000, at 10:00 a.m., Houston time, at a closing (the "CLOSING") on
December 20, 1996 or on such other Business Day thereafter on or prior to
January 6, 1997 as may be agreed upon by the Company and the Noteholders. At the
Closing, the Company will deliver to each Noteholder the Note to be purchased by
such Noteholder, registered in such Noteholder's name. If at the Closing the
Company shall fail to tender such Notes to the Noteholders as provided above in
this ARTICLE III, or any of the conditions specified below shall not have been
fulfilled to the Noteholders' reasonable satisfaction, the Noteholders shall, at
the Noteholders' election, be relieved of all further obligations under this
Agreement, without thereby waiving any rights the Noteholders may have by reason
of such failure or such nonfulfillment.
The effectiveness of this Agreement is subject to the fulfillment to
the Noteholders' reasonable satisfaction, prior to or at the Closing, of the
following conditions:
SECTION 3.01. EXECUTION OF DOCUMENTS. The Noteholders shall have
received the following agreements (together with this Agreement and any
agreements delivered pursuant to SECTION 4.01 OR SECTION 9.07, collectively, the
"TRANSACTION DOCUMENTS"), in such number of counterparts as the Noteholders may
reasonably request, each dated the date of the Closing and duly executed by the
Persons indicated below:
(a) the Notes duly executed by the Company;
(b) the Guaranty Agreement duly executed by USA;
(c) the Pledge Agreement duly executed by USA together with
certificates representing all of the issued and outstanding common stock of
the Company and related stock powers duly executed in blank by Parent; and
(d) amendments to the USA Note Agreements duly executed by USA, in
form and substance satisfactory to the Noteholders.
SECTION 3.02. CERTIFICATES. The Company and USA shall have delivered
to the Noteholders:
(a) an Officer's Certificate from the Company, dated the date of the
Closing, certifying that the conditions specified in SECTION 3.04 AND
SECTION 3.05 have been fulfilled;
(b) an Officer's Certificate from USA, dated the date of the Closing,
certifying that the conditions specified in SECTION 3.04 AND SECTION 3.05
have been fulfilled;
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(c) a certificate certifying as to the resolutions attached thereto
and other corporate proceedings relating to the authorization, execution
and delivery of this Agreement and the other Transaction Documents; and
(d) certificates of appropriate public officials as to the corporate
existence and good standing of, and the payment of all franchise taxes
owing by, the Company in the States of Delaware, Texas and Louisiana and
USA in the States of Delaware and Texas.
SECTION 3.03. OPINION OF COUNSEL, The Noteholders shall have received
opinions in form and substance satisfactory to the Noteholders, dated the date
of the Closing from Xxxxx, Xxxxx & Xxxxxx, Incorporated, counsel for the
Company, covering such matters incident to the transactions contemplates hereby
as the Noteholders or the Noteholders' counsel may reasonably request (and the
Company hereby instructs its counsel to deliver such opinion to the
Noteholders).
SECTION 3.04. REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company and USA in this Agreement and the other Transaction
Documents shall be true and correct when made and at the time of the Closing.
SECTION 3.05. PERFORMANCE; NO DEFAULT. The Company and USA shall have
performed and complied with all agreements and conditions contained in this
Agreement or the other Transaction Documents required to be performed or
complied with by them prior to or at the Closing and after giving effect to the
issue and sale of the Notes no Default or Event of Default shall have occurred
and be continuing.
SECTION 3.06. PAYMENT OF SPECIAL COUNSEL FEES. Without limiting the
provisions of SECTION 13.01, the Company or USA shall have paid on or before the
Closing the reasonable fees, charges and disbursement of the Noteholders'
special counsel to the extent reflected in a statement of such counsel rendered
to the Company at least one Business Day prior to the Closing.
SECTION 3.07. PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings in connection with the transactions contemplated by this Agreement
and all documents and instruments incident to such transactions shall be
satisfactory to the Noteholders and the Noteholders' special counsel, and the
Noteholders and the Noteholders' special counsel shall have received all such
counterpart originals or certified or other copies of such documents as the
Noteholders or they may reasonably request.
ARTICLE IV
CONDITIONS TO ADVANCES
Unless otherwise waived by the Noteholders, the Noteholders'
obligation to fund any Advance is subject to the fulfillment to the Noteholders'
reasonable satisfaction, prior to or on the date of such Advance, of the
following conditions:
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SECTION 4.01. EXECUTION OF DOCUMENTS. The Noteholders shall have
received the following agreements, in such number of counterparts as the
Noteholders may reasonably request, each duly executed by the Persons indicated
below:
(a) the Security Documents dated the date of such Advance and duly
executed by the Company granting a first priority Lien in favor of the
Noteholders on the Oil and Gas Properties and other related assets to be
acquired or developed by the Company in connection with such Advance; and
(b) to the extent such Advance is to be used to acquire Oil and Gas
Properties, assignments of such Oil and Gas Properties acquired by the
Company and duly executed by the Person from whom the Company is acquiring
such Oil and Gas Properties in form and substance satisfactory to the
Noteholders.
SECTION 4.02. PERFECTION OF LIENS. The Noteholders shall have received
evidence, in form and substance satisfactory to the Noteholders, that the Liens
contemplated by the Security Documents have been duly perfected in accordance
with applicable law and, upon funding of the Advance and consummation of the
acquisition of the Oil and Gas Properties, will constitute a first priority Lien
on the Oil and Gas Properties and other related assets to be acquired or
developed by the Company in connection with such Advance, including filing of
mortgages, deeds of trust and financing statements in all appropriate filing
jurisdictions.
SECTION 4.03. CERTIFICATES. The Company shall have delivered to the
Noteholders:
(a) an Officer's Certificate from the Company, dated the date of
such Advance, certifying that the conditions specified in SECTION 4.05 and
SECTION 4.06 have been fulfilled; and
(b) an Officer's Certificate from USA, dated the date of such
Advance, certifying that the conditions specified in SECTION 4.05 and
SECTION 4.06 have been fulfilled.
SECTION 4.04. INSURANCE. The Noteholders shall have received evidence
in form and substance satisfactory to the Noteholders, that the Company has the
insurance required under SECTION 9.02 covering the Oil and Gas Properties and
other related assets to be acquired in connection with such Advance.
SECTION 4.05. REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company and USA in this Agreement and the other Transaction
Documents shall be correct when made and at the time of such Advance.
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SECTION 4.06 PERFORMANCE; NO DEFAULT. After giving to such Advance
(and the application of the proceeds thereof as contemplated by SECTION 5.13) no
Default or Event of Default shall have occurred and be continuing.
SECTION 4.07 PAYMENT OF SPECIAL COUNSEL FEES. Without limiting the
provisions of SECTION 13.01, the Company shall have paid on or before the date
of such Advance the reasonable fees, charges and disbursements of the
Noteholders' special counsel to the extent reflected in a statement of such
counsel rendered to the Company at least one Business Day prior to the date of
such Advance.
SECTION 4.08 PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings in connection with the transactions related to such Advance and all
documents and instruments incident to such transactions shall be reasonably
satisfactory to the Noteholders and the Noteholders' special counsel, and the
Noteholders and the Noteholders' special counsel shall have received all such
counterpart originals or certified or other copies of such documents as the
Noteholders or they may reasonably request.
SECTION 4.09 NO MATERIAL ADVERSE CHANGE. No event shall have occurred
which, in the opinion of the Noteholders shall have a Material Adverse Effect on
the Company, USA or the Oil and Gas Properties to be acquired or developed by
the Company in connection with such Advance.
ARTICLE V
REPRESENTATIVES AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Noteholders that:
SECTION 5.01. ORGANIZATION; POWER AND AUTHORITY. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, and is duly qualified as a foreign corporation and is
in good standing in each jurisdiction in which such qualification is required by
law, other than those jurisdictions as to which the failure to be so qualified
or in good standing could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. The Company has the corporate power
and authority to own or hold under lease the properties it purports to own or
hold under lease, to transact the business it transacts and proposes to
transact, to execute and deliver this Agreement and the other Transaction
Documents and to perform the provisions hereof and thereof.
SECTION 5.02. AUTHORIZATION, ETC. This Agreement and the other
Transaction Documents to which it is a party have been duly authorized by all
necessary corporate action on the part of the Company, and this Agreement
constitutes, and upon execution and delivery thereof each other Transaction
Document to which it is a party will constitute, a legal, valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, except as such enforceability may be limited by (a) applicable
bankruptcy, insolvency, reorganization,
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moratorium or other similar laws affecting the enforcement of creditors' rights
generally and (b) general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
SECTION 5.03. COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC. The execution,
delivery and performance by the Company of this Agreement and the other
Transaction Documents to which it is a party will not (a) contravene, result in
any breach of, or constitute a default under, or result in the creation of any
Lien in respect of any property of the Company under, any indenture, mortgage,
deed of trust, loan, purchase or credit agreement, lease, corporate charter or
by-laws, or any other agreement or instrument to which the Company is bound or
by which the Company or any or its properties may be bound or affected, (b)
conflict with or result in a breach of any of the terms, conditions or
provisions of any order, judgment, decree, or ruling of any court, arbitrator
or Governmental Authority applicable to the company or (c) violate any provision
of any statute or other rule or regulation of any Governmental Authority
applicable to the Company.
SECTION 5.04. GOVERNMENTAL AUTHORIZATIONS, ETC. No consent, approval or
authorization of, or registration, filing or declaration with, any Governmental
Authority is required in connection with the execution, delivery or performance
by the Company of this Agreement of the other Transaction Documents.
SECTION 5.05. SUBSIDIARIES. The Company has no Subsidiaries.
SECTION 5.06. DISCLOSURE. This Agreement, the documents, certificates or
other writings delivered to the Noteholders by or on behalf of the Company in
connection with the transactions contemplated hereby, taken as a whole, do not
contain any untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein not misleading. There is no fact
known to the Company that could be expected to have a Material Adverse Effect
that has not been set forth herein or in the other documents, certificates and
other writings delivered to the Noteholders by or on behalf of the Company
specifically for use in connection with the transactions contemplated hereby.
SECTION 5.07. LITIGATION. Except as disclosed in SCHEDULE 5.07, there are
no actions, suits or proceedings pending or, to the knowledge of the Company,
threatened against or affecting the Company of any property of the Company in
any court or before any arbitrator of any kind or before or by any Governmental
Authority that, individually or in the aggregate, could reasonably be expected
to have a Material Adverse Effect.
SECTION 5.08. OBSERVANCE OF AGREEMENTS, STATUTES AND ORDERS. The Company
is not in default under any term of any agreement or instrument to which it is a
party or by which it is bound, or any order, judgment, decree or ruling of any
court, arbitrator or Governmental Authority and is not in violation of any
applicable law, ordinance, rule or regulation (including without limitation
Environmental Laws) of any Governmental Authority, which default or violation,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
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SECTION 5.09. TAXES. The Company has filed all tax returns that are
required to have been filed in any jurisdiction, and has paid all taxes shown to
be due and payable on such returns and all other taxes and assessments levied
upon them or their properties, assets, income or franchises, to the extent such
taxes and assessments have become due and payable and before they have become
delinquent, except for any taxes and assessments (i) the amount of which is not
individually or in the aggregate Material or (ii) the amount, applicability or
validity of which is currently being contested in good faith by appropriate
proceedings and with respect to which the Company has established adequate
reserves in accordance with GAAP. The Company knows of no basis for any other
tax or assessment that, if imposed, could reasonably be expected to have a
Material Adverse Effect. The charges, accruals and reserves on the books of the
Company in respect of Federal, state or other taxes for all fiscal periods are
adequate in all material respects.
SECTION 5.10. TITLE TO PROPERTY. The Company has good and sufficient
title to its Oil and Gas Properties, if any, and its other Material properties,
if any, in each case free and clear of Liens other than those permitted by
this Agreement. All leases that individually or in the aggregate are Material
are valid and subsisting and are in full force and effect in all material
respects.
SECTION 5.11. LICENSES, PERMITS, ETC. The Company owns or possesses
all licenses, permits, franchises, authorizations, patents, copyrights, service
marks, trademarks and trade names, or rights thereto, that individually or in
the aggregate are Material, without known conflict with the rights of others. To
the best knowledge of the Company, (a) no product of the Company infringes in
any material respect any license, permit, franchise, authorization, patent,
copyright, service xxxx, trademark, trade name or other right owned by any
other Person; and (b) there is no Material violation by any Person of any right
of the Company with respect to any patent, copyright, service xxxx, trademark,
trade name or other right owned by or used by the Company.
SECTION 5.12. COMPLIANCE WITH ERISA.
(a) The Company and each ERISA Affiliate have operated and
administered each Plan, if any, in compliance with all applicable laws except
for such instances of noncompliance as have not resulted in and could not
reasonably be expected to result in a Material Adverse Effect. Neither the
Company nor any ERISA Affiliate has incurred any liability pursuant to Title I
or IV or ERISA or the penalty or excise tax provisions of the Code relating to
employee benefit plans (as defined in Section 3 of ERISA), and no event,
transaction or condition has occurred or exists that could reasonably be
expected to result in the incurrence of any such liability by the Company or any
ERISA Affiliate, or in the imposition of any Lien on any of the rights,
properties or assets of the Company or any ERISA Affiliate, in either case
pursuant to Title I of IV of ERISA or to such penalty or excise tax provisions
or to Section 401(a)(29) or 412 of the Code, other than such liabilities or
Liens as would not be individually or in the aggregate Material.
(b) The present value of the aggregate benefit liabilities under each
of the Plans (other than Multiemployer Plans), determined as of the end of such
Plan's most recently ended plan year on the basis of the actuarial assumptions
specified for funding purposes in such Plan's most
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recent actuarial valuation report, did not exceed the aggregate current value of
the assets of such Plan allocable to such benefit liabilities. The term "BENEFIT
LIABILITIES" has the meaning specified in section 4001 of ERISA and the terms
"CURRENT VALUE" and "PRESENT VALUE" have the meaning specified in section 3 of
ERISA.
(c) The Company and its ERISA Affiliates have not incurred withdrawal
liabilities (and are not subject to contingent withdrawal liabilities) under
section 4201 or 4204 of ERISA in respect of Multiemployer Plans that
individually or in the aggregate are Material.
(d) The expected post-retirement benefit obligation (determined as of
the last day of the Company's most recently ended fiscal year in accordance with
Financial Accounting Standards Board Statement No. 106, without regard to
liabilities attributable to continuation coverage mandated by section 4980B of
the Code) of the Company is not Material.
SECTION 5.13. USE OF PROCEEDS; MARGIN REGULATIONS. The Company shall
use the Advances made under SECTION 2.03(A) to repay Indebtedness owing to USA.
The Company will apply the proceeds of all other Advances to pay for the
acquisition, exploration and development of Oil and Gas Properties acquired or
developed by the Company in connection with such Advances and for other working
capital purposes, in each case, as described in the applicable schedule provided
to the Noteholders under SECTION 2.03(B)(III). No part of the proceeds of any
Advance will be used, directly or indirectly, for the purpose of buying or
carrying any margin stock within the meaning of Regulation G of the Board of
Governors of the Federal Reserve System (12 C.F.R. 207), or for the purpose of
buying or carrying or trading in any securities under such circumstances as to
involve the Company in violation of Regulation X of said Board (12 C.F.R. 224)
or to involve any broker or dealer in a violation of Regulation T of said Board
(12 C.F.R. 220).
SECTION 5.14. STATUS UNDER CERTAIN STATUTES. The Company is not
subject to regulation under the Investment Company Act of 1940, as amended, the
Public Utility Holding Company Act of 1935, as amended, the Interstate Commerce
Act, as amended, or the Federal Power Act, as amended.
SECTION 5.15. SECURITIES MATTERS. Other than offers to Accredited
Investors, neither the Company nor anyone acting on its behalf has directly or
indirectly offered the Notes or any part thereof or any similar securities for
sale to, or solicited any offer to buy any of the same from, or otherwise
approached or negotiated in respect thereof with, anyone other than the
Noteholders named in SCHEDULE A. Neither the Company nor anyone acting on its
behalf has taken or will take any action which would subject the issuance and
sale of the Notes to the registration and prospectus delivery provisions of the
Securities Act.
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SECTION 5.16. ENVIRONMENTAL MATTERS. The Company has no knowledge of
any claim and has not received any notice of any claim, and no proceeding has
been instituted raising any claim against the Company or any of its real
properties now or formerly owned, leased or operated by the company or other
assets, alleging any damage to the environment or violation of any Environmental
Laws, except, in each case, such as could not reasonably be expected to result
in a Material Adverse Effect. Except as otherwise disclosed to the Noteholders
in writing, (a) the Company has no knowledge of any facts which would give rise
to any claim, public or private, of violation of Environmental Laws or damage to
the environment emanating from, occurring on or in any way related to real
properties now or formerly owned, leased or operated by the Company or to other
assets or their use, except, in each case, such as could not reasonably be
expected to result in a Material Adverse Effect; (b) Company has not stored any
Hazardous Materials on real properties now or formerly owned, leased or
operated by the Company and has not disposed of any Hazardous Materials in
manner contrary to any Environmental Laws in each case in any manner that could
reasonably be expected to result in a Material Adverse Effect; and (c) all
buildings on all real properties now owned, leased or operated by the Company
are in compliance with applicable Environmental Laws, except where failure to
comply could not reasonably be expected to result in a Material Adverse Effect.
ARTICLE VI
REPRESENTATIONS OF THE PURCHASER
SECTION 6.01. PURCHASE FOR INVESTMENT. Each Noteholder represents
that it is acquiring its Notes for its own account or for one of its separate
accounts (or for the account of trusts for which it is trustee) for investment
with no intention of presently distributing or reselling the same, subject,
nevertheless, to its right to dispose of, in compliance with all applicable
securities laws, its respective Notes, or any part of any thereof held by it, if
at some future time in its sole discretion it deems it advisable so to do. Each
Noteholder hereby agrees that it will not sell, transfer or otherwise dispose of
its Notes in violation of the Securities Act.
SECTION 6.02. STATUS; NO REGISTRATION. Each Noteholder represents
that it is an Accredited Investor. Each Noteholder acknowledges that the Notes
have not been registered under the Securities Act, and that such Notes must be
held indefinitely unless they are subsequently registered under the Securities
Act or an exemption from such registration is available.
ARTICLE VII
PAYMENT OF THE NOTES
SECTION 7.01. PLACE OF PAYMENT. The Company will pay all sums
becoming due to any Noteholder under any Transaction Document by the method and
at the address specified for such purpose below such Noteholder's name in
SCHEDULE A, or by such other method or at such other address as such Noteholder
shall have from time to time specified to the Company in writing for such
purpose, without the presentation or surrender of such Note or the making of
any notation thereon, except that upon written request of the Company made
concurrently with or reasonably
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promptly after payment or prepayment in full of any Note, the Noteholders shall
surrender such Note for cancellation, reasonably promptly after any such
request, to the Company at its principal executive office.
SECTION 7.02. PAYMENTS DUE ON NON-BUSINESS DAYS. Anything in this
Agreement or the Notes to the contrary notwithstanding, any payment of principal
of or interest on any Note that is due on a date other than a Business Day shall
be made on the next succeeding Business Day without including the additional
days elapsed in the computation of the interest payable on such next succeeding
Business Day.
SECTION 7.03. MANDATORY REPAYMENT OF NOTES. The Notes shall be due
and payable as follows:
(a) from time to time payments in such amounts as shall be necessary
so that the aggregate amount of Advances outstanding shall not be in excess
of the Total Commitment. Any repayment required by this SECTION 7.03(A)
shall include a payment of accrued but unpaid interest to the date of
payment on the principal amount paid and shall be due and payable on the
date such payment accrues pursuant to the preceding sentence;
(b) on each Monthly Payment Date, a payment equal to the greater of
(i) all accrued, but unpaid interest on the Notes or (ii) 100% of the Net
Revenues for the immediately preceding month (or, if less, the entire
unpaid principal of, and accrued interest on, the Notes) shall be due and
payable;
(c) on December 1, 1999, the entire unpaid principal of the Notes,
together with all accrued, but unpaid interest on the Notes, shall be fully
and finally due and payable; and
(d) if a Change of Control shall occur, the entire unpaid principal
of the Notes, together with all accrued, but unpaid interest on the Notes,
shall be fully and finally due and payable on the date one day after such
Change of Control occurs.
All payments on the Notes shall be applied pro rata, in accordance with the
principal amounts outstanding on the Notes, first to accrued but unpaid interest
on the Notes and the remainder, if any, to the principal amount outstanding on
the Notes.
SECTION 7.04. OPTIONAL PREPAYMENT OF NOTES. The Company may, at its
option, without notice, penalty, premium or fee, prepay at any time all, or from
time to time any part of, the Notes at 100% of the principal amount so prepaid,
plus accrued and unpaid interest on such principal amount. In the case of each
partial prepayment of the Notes, the principal amount of the Notes to be prepaid
shall be allocated among all of the Notes at the time outstanding in proportion
to the respective unpaid principal amounts thereof.
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SECTION 7.05. PURCHASE OF NOTES. The Company will not, and will not
permit any Affiliate to, purchase, redeem, prepay or otherwise acquire, directly
or indirectly, any of the outstanding Notes except upon the payment of the Notes
in accordance with the terms of this Agreement and the Notes. The Company will
promptly cancel all Notes acquired by it or any Affiliate pursuant to any
payment or purchase of Notes pursuant to any provision of this Agreement and no
Notes may be issued in substitution or exchange for any such Notes.
ARTICLE VIII
INFORMATION AS TO COMPANY
SECTION 8.01. FINANCIAL AND BUSINESS INFORMATION. The Company shall
deliver to each of the Noteholders:
(a) Within 45 days after the end of each quarterly fiscal period in
each fiscal year of the Company, copies of (i) a consolidated balance sheet of
the Company as at the end of such quarter, and (ii) consolidated statements of
income, changes in shareholders' equity and cash flows of the Company, for such
quarter and for the portion of the fiscal year ending with such quarter, setting
forth in each case in comparative form the figures for the corresponding periods
in the previous fiscal year, all in reasonable detail, prepared in accordance
with GAAP applicable to quarterly financial statements generally, and certified
by a Senior Financial Officer of the Company as fairly presenting, in all
material respects, the financial position of the companies being reported on and
their results of operations and cash flows, subject to changes resulting from
year-end adjustments.
(b) Within 90 days after the end of each fiscal year of the Company,
copies of (i) a consolidated balance sheet of the Company, as at the end of such
year, and (ii) consolidated statements of income, changes in shareholders'
equity and cash flows of the Company, for such year, setting forth in each case
in comparative form the figures for the previous fiscal year, all in reasonable
detail, prepared in accordance with GAAP, and accompanied (A) by an opinion
thereon of independent certified public accountants of recognized national
standing, which opinion shall state that such financial statements present
fairly, in all material respects, the financial position of the companies being
reported upon and their results of operations and cash flows and have been
prepared in conformity with GAAP, and that the examination of such accountants
in connection with such financial statements has been made in accordance with
generally accepted auditing standards, and that such audit provides a reasonable
basis for such opinion in the circumstances, and (B) a certificate of such
accountants stating that they have reviewed this Agreement and stating further
whether, in making their audit, they have become aware of any condition or event
that then constitutes a Default or an Event of Default, and, if they are aware
that any such condition or event then exists, specifying the nature and period
of the existence thereof.
(c) Within 25 days after the end of each calendar month, copies of
(i) a consolidated balance sheet of the Company as at the end of such month, and
(ii) consolidated statements of income, changes in shareholders' equity and cash
flows of the Company, for such
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month and for the portion of the fiscal year ending with such month, setting
forth in each case in comparative form the figures for the corresponding periods
in the previous fiscal year, all in reasonable detail, prepared in accordance
with GAAP applicable to monthly financial statements generally, and certified
by a Senior Financial Officer of the Company as fairly presenting, in all
material respects, the financial position of the companies being reported on and
their results of operations and cash flows, subject to changes resulting from
year-end adjustments.
(d) By March 1 and September 1 of each calendar year, beginning March
1, 1997, a reserve report (each a "RESERVE REPORT") in form and substance
satisfactory to the Noteholders, prepared by an independent petroleum
engineering firm satisfactory to the Noteholders setting forth as of the
immediately preceding December 31 or June 30, as applicable, the Future Net
Revenue for the Company's Oil and Gas Properties. With the delivery of each
Reserve Report, the Company shall deliver to the Noteholder a certificate from a
Responsible Officer of the Company certifying that the information in the
Reserve Report is true and correct in all Material respects.
(e) On or before the 20th day of each month, a production report
prepared by the Company setting forth in reasonable detail, the production from,
and Gross Production Proceeds and Deductible Costs attributable to, the
Company's Oil and Gas Properties for the immediately preceding month and such
other information as the Noteholders may reasonably request (each a "MONTHLY
PRODUCTION REPORT").
(f) Promptly, and in any event within five days after a Responsible
Officer of the Company becoming aware of the existence of any Default or Event
of Default or that any Person has given any notice or taken any action with
respect to a claimed default hereunder or that any Person has given any notice
or taken any action with respect to a claimed default of the type referred to in
SECTION 11.01, a written notice specifying the nature and period of existence
thereof and what action the Company is taking or proposes to take with respect
thereto.
(g) Promptly, and in any event within five days after a Responsible
Officer of the Company becoming aware of any of the following, a written notice
setting forth the nature thereof and the action, if any, that the Company or an
ERISA Affiliate proposes to take with respect thereto: (i) with respect to any
Plan, any reportable event, as defined in section 4043(b) of ERISA and the
regulations thereunder, for which notice thereof has not been waived pursuant to
such regulations as in effect on the date hereof; or (ii) the taking by the PBGC
of steps to institute, or the threatening by the PBGC of the institution of,
proceedings under section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan, or the receipt by the Company
or any ERISA Affiliate of a notice from a Multiemployer Plan that such action
has been taken by the PBGC with respect to such Multiemployer Plan; or (iii) any
event, transaction or condition that could result in the incurrence of any
liability by the Company or any ERISA Affiliate pursuant to Title I or IV of
ERISA or the penalty or excise tax provisions of the Code relating to employee
benefit plans, or in the imposition of any Lien on any of the rights, properties
or assets of the Company or any ERISA Affiliate pursuant to Title I or IV of
ERISA or such penalty or excise tax provisions, if such liability
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or Lien, taken together with any other such liabilities or Liens then existing,
could reasonably be expected to be Material.
(h) Promptly, and in any event within 30 days of receipt thereof,
copies of any notice to the Company from any Federal or state Governmental
Authority relating to any order, ruling, statute or other law or regulation that
could reasonably be expected to have a Material Adverse Effect.
(i) Within 10 days after the Company acquires, or enters into an
agreement to acquire, any Oil and Gas Properties that are not acquired by way
of an Advance under the Notes, written notice of such acquisition, including the
terms of the acquisition, a description of the Oil and Gas Properties acquired
or to be acquired and such other information related thereto as the Noteholders
may reasonably request.
(j) With reasonable promptness, such other data and information
relating to the business, operations, affairs, financial condition, assets or
properties of the Company or relating to the ability of the Company to perform
its obligations hereunder and under the Notes as from time to time may be
reasonably requested by any of Noteholder.
SECTION 8.02. OFFICER'S CERTIFICATE. Each set of financial
statements delivered to a holder of Notes pursuant to SECTION 8.01(A), SECTION
8.01(B) or SECTION 8.01(C) shall be accompanied by a certificate of a Senior
Financial Officer of the Company stating that such officer has reviewed the
relevant terms hereof and has made, or caused to be made, under his or her
supervision, a review of the transactions and conditions of the Company from the
beginning of the monthly, quarterly or annual period covered by the statements
then being furnished to the date of the certificate and that such review shall
not have disclosed the existence during such period of any condition or event
that constitutes a Default or an Event of Default or, if any such condition or
event existed or exists (including, without limitation, any such event or
condition resulting from the failure of the Company to comply with any
Environmental Law), specifying the nature and period of existence thereof and
what action the Company shall have taken or proposes to take with respect
thereto.
SECTION 8.03. INSPECTION. The Company shall permit the
representatives of each Noteholder, at the expense of the Company and upon
reasonable prior notice to the Company, to visit and inspect any of the offices
or properties of the Company, to examine all their respective books of account,
records, reports and other papers, to make copies and extracts therefrom, and to
discuss their respective affairs, finances and accounts with their respective
officers and independent public accountants (and by this provision the Company
authorizes said accountants to discuss the affairs, finances and accounts of the
Company), all at such times and as often as may be requested.
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ARTICLE IX
AFFIRMATIVE COVENANTS
The Company covenants that so long as any of the Commitments remain in
effect or any of the Notes are outstanding:
SECTION 9.01. COMPLIANCE WITH LAW; CONTRACTS. The Company will
comply with all laws, ordinances or governmental rules or regulations to which
it is subject, including, without limitation, Environmental Laws, and will
obtain and maintain in effect all licenses, certificates, permits, franchises
and other governmental authorizations necessary to the ownership of its
properties or to the conduct of its businesses, in each case to the extent
necessary to ensure that noncompliance with such laws, ordinances or
governmental rules or regulations or failures to obtain or maintain in effect
such licenses, certificates, permits, franchises and other governmental
authorizations could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. The Company will comply with, and
perform its obligations under, each contract or agreement to which it is a
party, unless, in the good faith judgment of the Company, the failure to so
comply or perform could not reasonably be expected to have a Material Adverse
Effect.
SECTION 9.02. INSURANCE. The Company will maintain, with financially
sound and reputable insurers, insurance with respect to its properties and
businesses against such casualties and contingencies, of such types, on such
terms and in such amounts (including deductibles, co-insurance and
self-insurance, if adequate reserves are maintained with respect thereto) as is
customary in the case of entities of established reputations engaged in the same
or a similar business and similarly situated.
SECTION 9.03. MAINTENANCE OF PROPERTIES. The Company will maintain
and keep, or cause to be maintained and kept, its properties in good repair,
working order and condition (other than ordinary wear and tear), so that the
business carried on in connection therewith may be properly conducted at all
times, provided that this Section shall not prevent the Company from
discontinuing the operation and the maintenance of any of its properties if such
discontinuance is desirable in the conduct of its business and the Company has
concluded that such discontinuance could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
SECTION 9.04. PAYMENT OF TAXES AND CLAIMS. The Company will file all
tax returns required to be filed in any jurisdiction and to pay and discharge
all taxes shown to be due and payable on such returns and all other taxes,
assessments, governmental charges, or levies imposed on them or any of their
properties, assets, income or franchises, to the extent such taxes and
assessments have become due and payable and before they have become delinquent
and all claims for which sums have become due and payable that have or might
become a Lien on properties or assets of the Company, provided that the Company
need not pay any such tax or assessment or claims if (i) the amount,
applicability or validity thereof is contested by the Company on a timely basis
in good faith and in appropriate proceedings, and the Company has established
adequate reserves therefor in accordance with GAAP on the books of the Company
or (ii) the nonpayment of
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all such taxes and assessments in the aggregate could not reasonably be expected
to have a Material Adverse Effect.
SECTION 9.05. CORPORATE EXISTENCE, ETC. The Company will at all times
preserve and keep in full force and effect its corporate existence. The Company
will at all times preserve and keep in full force and effect all rights and
franchises of the Company unless, in the good faith judgment of the Company, the
termination of or failure to preserve and keep in full force and effect such
corporate existence, right or franchise could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
SECTION 9.06. CONDUCT OF OPERATIONS. Prior to the end of the
Commitment Period, the Company shall conduct, or cause to be conducted, and pay
for each of the exploration and development operations described in the
schedules delivered to the Noteholders under SECTION 2.03(B)(III) on the Oil and
Gas Properties acquired or developed in connection with Advances by the
Noteholders.
SECTION 9.07. LIEN ON OIL AND GAS PROPERTIES. In addition to Liens
granted in favor of the Noteholders under ARTICLE IV, upon the written request
of the Noteholders the Company shall immediately execute and deliver to the
Noteholders Security Documents granting a first priority Lien on all other Oil
and Gas Properties and related assets acquired or owned by the Company.
ARTICLE X
NEGATIVE COVENANTS
The Company covenants that so long as any of the Commitments remain in
effect or any of the Notes are outstanding:
SECTION 10.01. RESTRICTIONS ON INDEBTEDNESS. The Company will not
create, incur, assume, Guaranty or permit to exist any Indebtedness, except the
Notes.
SECTION 10.02. RESTRICTIONS ON LIENS. The Company will not create,
incur, assume, or permit to exist any Lien with respect to any asset now owned
or hereafter acquired, except:
(a) Liens in favor of the Noteholders;
(b) encumbrances consisting of easements of ingress or egress over
real property, where the same do not materially detract from the use or
enjoyment of such property by, or the value of such property to, the
Company;
(c) Liens for taxes or assessments or governmental charges or levies,
if payment shall not at the time be required to be made in accordance with
the provisions of SECTION 9.04;
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(d) any judgment lien, unless the judgment it secures shall not,
within 30 days after the entry thereof, have been discharged or execution
thereof stayed pending appeal, or shall not have been discharged within 30
days after the expiration of any such stay;
(e) statutory liens of landlords and liens of carriers, warehousemen,
mechanics, laborers and materialmen incurred in the ordinary course of
business for sums not yet due or being contested in good faith; and
(f) Liens (other than liens created by section 4068 of ERISA)
incurred on pledges or deposits made in the ordinary course of business in
connection with workmen's compensation, unemployment insurance, social
security laws or similar legislation.
SECTION 10.03. RESTRICTED PAYMENTS. The Company will not directly or
indirectly make or pay (a) any dividend or other distribution on any shares of
the Company's capital stock (including any dividends payable in shares of
capital stock), (b) any payment on account of the purchase, redemption,
retirement or acquisition of any shares of the Company's capital stock or any
option, warrant or other right to acquire such shares, or (c) any payments or
other distributions to Sierra Management, Inc.
SECTION 10.04. MERGER, CONSOLIDATION, ETC. The Company shall not
consolidate with or merge with any other Person or convey, transfer or lease all
or substantially all of its assets in a single transaction or series of
transactions to any Person.
SECTION 10.05. RESTRICTIONS ON ASSET SALES. Without the Noteholders'
prior written consent, the Company will not sell, transfer, assign, convey or
otherwise dispose of an interest in any asset now owned or hereafter acquired,
except for the sale of oil and gas production in the ordinary course of
business.
SECTION 10.06. TRANSACTIONS WITH AFFILIATES. The Company will not
enter into directly or indirectly and Material transaction or Material group of
related transactions (including without limitation the purchase, lease, sale or
exchange of properties of any kind or the rendering of any service) with any
Affiliate, except in the ordinary course and pursuant to the reasonable
requirements of the Company's business and upon fair and reasonable terms no
less favorable to the Company than would be obtainable in a comparable
arm's-length transaction with a Person not an Affiliate.
SECTION 10.07. CHANGE IN BUSINESS. The Company will not directly or
indirectly engage to a material extent in any business other than those in which
it is presently engaged or that are directly related thereto, or discontinue any
of its existing lines of business or substantially alter its method of doing
business.
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ARTICLE XI
DEFAULT AND REMEDIES
SECTION 11.01. EVENTS OF DEFAULT. An "EVENT OF DEFAULT" shall exist if
any of the following conditions or events shall occur and be continuing:
(a) the Company defaults in the payment of any principal or interest
on any Note when the same becomes due and payable, whether at maturity, by
declaration or otherwise; or
(b) the Company defaults in the performance of or compliance with any
term contained in ARTICLE X, or USA defaults in the performance or
compliance with any term of ARTICLE VII of the Guaranty Agreement; or
(c) the Company or USA defaults in the performance of or compliance
with any term contained in the Transaction Documents to which they are a
party (other than those referred to in paragraphs (a) and (b) of this
SECTION 11.01) and such default is not remedied within 30 days after the
earlier of (i) a Responsible Officer obtains actual knowledge of such
default or (ii) the Company receives written notice of such default from
any holder of a Note; or
(d) any representation or warranty made in writing by or on behalf of
the Company or USA or by any officer of the Company or USA in this
Agreement or the other Transaction Documents or in any writing furnished in
connection with the transactions contemplated hereby or thereby proves to
have been false or incorrect in any Material respect on the date as of
which made; or
(e) (i) USA, the Company or any other Subsidiary of USA is in default
(as principal or as guarantor or other surety) in the payment of any
principal of or premium or interest on any Indebtedness that is outstanding
in an aggregate principal amount of at least $100,000 beyond any period of
grace provided with respect thereto, or (ii) USA, the Company or any other
Subsidiary of USA is in default in the performance of or compliance with
any term of any evidence of any Indebtedness in an aggregate outstanding
principal amount of at least $100,000 or of any mortgage, indenture or
other agreement relating thereto or any other condition exists, and as a
consequence of such default or condition such Indebtedness has become, or
has been declared (or one or more Persons are entitled to declare such
Indebtedness to be), due and payable before its stated maturity or before
its regularly scheduled dates of payment, or (iii) as a consequence of the
occurrence or continuation of any event or condition (other than the
passage of time or the right of the holder of Indebtedness to convert such
Indebtedness into equity interests), (x) USA, the Company or any other
Subsidiary of USA has become obligated to purchase or repay Indebtedness
before its regular maturity or before its regularly scheduled dates of
payment, in an aggregate outstanding principal amount of at least $100,000
or (y) one or more Persons
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have the right to require USA, the Company or any other Subsidiary of USA
to purchase or repay such Indebtedness; or
(f) USA, the Company or any other Subsidiary of USA (i) is generally
not paying, or admits in writing its inability to pay, its debts as they
become due, (ii) files, or consents by answer or otherwise to the filing
against it of, a petition for relief or reorganization or arrangement or
any other petition in bankruptcy, for liquidation or to take advantage of
any bankruptcy, insolvency, reorganization, moratorium or other similar law
of any jurisdiction, (iii) makes an assignment for the benefit of its
creditors, (iv) consents to the appointment of a custodian, receiver,
trustee or other officer with similar powers with respect to it or with
respect to any substantial part of its property, (v) is adjudicated as
insolvent or to be liquidated, or (vi) takes corporate action for the
purpose of any of the foregoing; or
(g) a court or governmental authority of competent jurisdiction
enters an order appointing, without consent by USA, the Company or any
other Subsidiary of USA, a custodian, receiver, trustee or other officer
with similar powers with respect to it or with respect to any substantial
part of its property, or constituting an order for relief or approving a
petition for relief or reorganization or any other petition in bankruptcy
or for liquidation or to take advantage of any bankruptcy or insolvency law
of any jurisdiction, or ordering the dissolution, winding-up or liquidation
of USA, the Company or any other Subsidiary of USA, or any such petition
shall be filed against USA, the Company or any other Subsidiary of USA and
such petition shall not be dismissed within 60 days; or
(h) a final judgment or judgments for the payment of money
aggregating in excess of $250,000 are rendered against one or more of USA,
the Company and any other Subsidiary of USA and such judgments are not,
within 60 days after entry thereof, bonded, discharged or stayed pending
appeal, or are not discharged within 60 days after the expiration of such
stay; or
(i) an "Event of Default" exists under any of the USA Note
Agreements; or
(j) USA fails to own (both beneficially and of record) 100% of the
common stock and other equity securities of the Company; or
(k) if (i) any Plan shall fail to satisfy the minimum funding
standards of ERISA or Code for any plan year or part thereof or a waiver of
such standards or extension of any amortization period is sought or granted
under section 412 of Code, (ii) a notice of intent to terminate any Plan
shall have been or is reasonably expected to be filed with the PBGC or the
PBGC shall have instituted proceedings under ERISA section 4042 to
terminate or appoint a trustee to administer any Plan or the PBGC shall
have notified USA, the Company or any ERISA Affiliate that a Plan may
become a subject to any such proceedings (iii) the aggregate "amount of
unfunded benefit liabilities" (within the meaning of section
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4001(a)(18) of ERISA) under all Plans, determined in accordance with Title
IV of ERISA, shall exceed $25,000, (iv) USA, the Company or any ERISA
Affiliate shall have incurred or is reasonably expected to incur any
liability pursuant to Title I or IV of ERISA or the penalty or excise tax
provisions of the Code relating to employee benefit plans, (v) USA, the
Company or any ERISA Affiliate withdraws from any Multiemployer Plan, (vi)
USA, the Company or any ERISA Affiliate fails to make any contribution due,
or payment to, any employee benefit plan, or (vii) USA, the Company or any
other Subsidiary of USA establishes or amends any employee welfare benefit
plan that provides post-employment welfare benefits in a manner that would
increase the liability of USA, the Company or any Subsidiary thereunder,
and any such event or events described in clauses (i) through (vii) above,
either individually or together with any other such event or events, could
reasonably be expected to have a Material Adverse Effect. As used in
Section 11.01(j), the terms "EMPLOYEE BENEFIT PLAN" and EMPLOYEE WELFARE
BENEFIT PLAN" shall have the respective meanings assigned to such terms in
Section 3 of ERISA
SECTION 11.02. ACCELERATION
(a) If an Event of Default with respect to the Company described in
paragraph (f) or (g) of SECTION 11.01 (other than an Event of Default described
in clause (i) of paragraph (f) or described in clause (vi) of paragraph (f) by
virtue of the fact that such clause encompass clause (i) of paragraph (f) has
occurred, (i) all unfunded Commitments shall automatically terminate and (ii)
all amounts then outstanding under the Notes shall automatically become
immediately due and payable.
(b) If any other Event of Default has occurred and is continuing, the
Required Holders at any time at its or their option, by notice or notices to the
Company, (i) terminate all unfunded Commitments and (ii) declare all amount then
outstanding under the Notes to be immediately due and payable.
(c) If any Event Default described in paragraph (a) of SECTION 11.01
has occurred and is continuing, any holder or holders of Notes at the time
outstanding affected by such Event of Default may at any time, at its or their
option, by notice or notices to the Company, (i) terminate their respective
Commitments and (ii) declare all amounts then outstanding under the Notes held
by it or them to be immediately due and payable.
Upon any Notes becoming due and payable under this SECTION 11.02,
whether automatically or by declaration, such Notes will forthwith mature and
the entire unpaid principal amount of such Notes, plus all accrued and unpaid
interest thereon, shall all be immediately due and payable, in each and every
case without presentment, demand, notice of default, notice of intent to
accelerate, notice of acceleration, protest or further notice, all of which are
hereby waived.
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SECTION 11.03. OTHER REMEDIES. If any Default or Event of Default
has occurred and is continuing, and irrespective of whether any Notes have
become or have been declared immediately due and payable under SECTION 11.02,
the holder of any Note at the time outstanding may proceed to protect and
enforce the rights of such holder by an action at law, suit in equity or other
appropriate proceeding, whether for the specific performance of any agreement
contained herein or in any Note, or for an injunction against a violation of any
of the terms hereof or thereof, or in aid of the exercise of any power granted
hereby or thereby or by law or otherwise.
SECTION 11.04. NO WAIVERS OR ELECTION OF REMEDIES, EXPENSES, ETC. No
course of dealing and no delay on the part of any holder of any Note in
exercising any right, power or remedy shall operate as a waiver thereof or
otherwise prejudice such holder's rights, powers or remedies. No right, power or
remedy conferred by this Agreement or by any Note upon any holder thereof shall
be exclusive of any other right, power or remedy referred to herein or therein
or now or hereafter available at law, in equity, by statute or otherwise.
Without limiting the obligations of the Company under SECTION 13.01, the Company
will pay to the holder of each Note on demand such further amount as shall be
sufficient to cover all reasonable costs and expenses of such holder incurred in
any enforcement or collection under this ARTICLE XI, including, without
limitation, reasonable attorneys' fees, expenses and disbursements, together
with interest on such amounts at the Default Rate accruing from the date of
demand.
ARTICLE XII
REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES
SECTION 12.01. REGISTRATION OF NOTES. The Company shall keep at its
principal executive office a register for the registration and registration of
transfers of Notes. The name and address of each holder of one or more Notes,
each transfer thereof and the name and address of each transferee of one or more
Notes shall be registered in such register. Prior to due presentment for
registration of transfer, the Person in whose name any Note shall be registered
shall be deemed and treated as the owner and holder thereof for all purposes
hereof, and the Company shall not be affected by any notice or knowledge to the
contrary. The Company shall give to any holder of a Note promptly upon request
therefor, a complete and correct copy of the names and addresses of all
registered holders of Notes.
SECTION 12.02. TRANSFER AND EXCHANGE OF NOTES. Subject to compliance
with all applicable securities laws, upon surrender of any Note at the principal
executive office of the Company for registration of transfer or exchange (and in
the case of a surrender for registration of transfer, duly endorsed or
accompanied by a written instrument of transfer duly executed by the registered
holder of such Note or his attorney duly authorized in writing and accompanied
by the address for notices of each transferee of such Note or part thereof), the
Company shall execute and deliver, at the Company's expense, one or more new
Notes (as requested by the holder thereof) in exchange therefor, in an aggregate
principal amount equal to the unpaid principal amount of the surrendered Note.
Each such new Note shall be payable to such Person as such holder may request
and shall be substantially in the form specified herein. Each such new Note
shall be dated and bear
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interest from the date to which interest shall have been paid on the surrendered
Note or dated the date of the surrendered Note if no interest shall have been
paid thereon.
SECTION 12.03. REPLACEMENT OF NOTES. Upon receipt by the Company of
evidence reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of any Note, and (a) in the case of loss, theft or
destruction, of indemnity reasonably satisfactory to it (provided that if the
holder of such Note is, or is a nominee for, an original Noteholder, such
Person's own unsecured agreement of indemnity shall be deemed to be
satisfactory), or (b) in the case of mutilation, upon surrender and cancellation
thereof, the Company at its own expense shall execute and deliver, in lieu
thereof, a new Note, dated and bearing interest from the date to which interest
shall have been paid on such lost, stolen, destroyed or mutilated Note or dated
the date of such lost, stolen, destroyed or mutilated Note if no interest shall
have been paid thereon.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.01. TRANSACTION EXPENSES. Whether or not the transactions
contemplated hereby are consummated, the Company will pay all reasonable costs
and expenses (including reasonable attorneys' fees of a special counsel and any
local or other counsel) incurred by the Noteholders or holder of a Note in
connection with such transactions and in connection with any amendments, waivers
or consents under or in respect of this Agreement or the other Transaction
Documents (whether or not such amendment, waiver or consent becomes effective),
including, without limitation: (a) the reasonable costs and expenses incurred in
enforcing or defending (or determining whether or how to enforce or defend) any
rights under this Agreement or the other Transaction Documents or in responding
to any subpoena or other legal process or informal investigative demand issued
in connection with this Agreement or the other Transaction Documents, or by
reason of being a holder of any Note, (b) the reasonable costs and expenses of
negotiation, preparation and execution of this Agreement and the other
Transaction Documents, and (c) the reasonable costs and expenses, including
reasonable financial advisors' fees, incurred in connection with the insolvency
or bankruptcy of the Company or in connection with any work-out or restructuring
of the transactions contemplated hereby and by the Notes. The Company will pay,
and will save the Noteholders and each other holder of a Note harmless from, all
claims in respect of any fees, costs or expenses if any, of brokers and finders
(other than those retained by the Noteholders). The obligations of the Company
under this SECTION 13.01 will survive the payment or transfer of any Note, the
enforcement, amendment or waiver of any provision of this Agreement or the other
Transaction Documents, and the termination of this Agreement.
SECTION 13.02. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties contained herein shall survive the execution and
delivery of this Agreement and the Notes, the purchase or transfer by the
Noteholders of any Note or portion thereof or interest therein and the payment
of any Note, and may be relied upon by any subsequent holder of a Note,
regardless of any investigation made at any time by or on behalf of the
Noteholders or any other holder of a Note. All statements contained in any
certificate or other instrument delivered by or on behalf of
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U 05190
the Company pursuant to this Agreement shall be deemed representations and
warranties of the Company under this Agreement.
SECTION 13.03. AMENDMENT AND WAIVER. This Agreement and the Notes may
be amended, and the observance of any term hereof or of the Notes may be waived
(either retroactively or prospectively), with (and only with) the written
consent of the Company and the Required Holders, except that (a) no amendment or
waiver of any of the provisions of ARTICLES II, III, IV OR V, or any defined
term (as it is used therein), will be effective as to the Noteholders unless
consented to by all of the Noteholders in writing, and (b) no such amendment or
waiver may, without the written consent of the holder of each Note at the time
outstanding affected thereby, (i) subject to the provisions of ARTICLE XI
relating to acceleration or rescission, change the amount or time of any payment
of principal of, or reduce the rate or change the time of payment or method of
computation of interest on, the Notes, or (ii) change the percentage of the
principal amount of the Notes the holders of which are required to consent to
any such amendment or waiver. Any amendment or waiver consented to as provided
in this SECTION 13.03 applies equally to all holders of the Notes and is binding
upon them and upon each future holder of any Note and upon the Company without
regard to whether such Note has been marked to indicate such amendment or
waiver. No such amendment or waiver will extend to or affect any obligation,
covenant, agreement, Default or Event of Default not expressly amended or waived
or impair any right consequent thereon. No course of dealing between the Company
and the holder of any Note nor any delay in exercising any rights hereunder or
under any Note shall operate as a waiver of any rights of any holder of such
Note.
SECTION 13.04. NOTICES. All notices and communications provided for
hereunder shall be in writing and sent (a) by telecopy if the sender on the same
day sends a confirming copy of such notice by a recognized overnight deliver
service (charges prepaid), or (b) by registered or certified mail with return
receipt requested (postage prepaid), or (c) by a recognized overnight delivery
service (with charges prepaid). Any such notice must be sent: if to a
Noteholder, to its address specified for such communications in SCHEDULE A, or
at such other address as it shall have specified to the Company in writing, if
to the Company, to the Company at 00000 Xxxx Xxx Xxxxx, Xxxxx 000, Xxxxxxx,
Xxxxx 00000, Telecopy No. 000-000-0000, or at such other address as the Company
shall have specified to the holder of each Note in writing. Notices under this
SECTION 13.04 will be deemed given only when actually received.
SECTION 13.05. LIMITATION ON INTEREST. Each provision in this
Agreement and each other Transaction Document is expressly limited so that in no
event whatsoever shall the amount paid, or otherwise agreed to be paid, by the
Company for the use, forbearance or detention of the money to be loaned under
this Agreement or any other Transaction Document or otherwise (including any
sums paid as required by any covenant or obligation contained herein or in any
other Transaction Document which is for the use, forbearance or detention of
such money), exceed that amount of money which would cause the effective rate of
interest thereon to exceed the Highest Lawful Rate, and all amounts owed under
this Agreement and each other Transaction Document shall be held to be subject
to reduction to the effect that such amounts so paid or agreed to be paid which
are for the use, forbearance or detention of money under this Agreement or such
Transaction
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U 05191
Document shall in no event exceed that amount of money which would cause the
effective rate of interest thereon to exceed the Highest Lawful Rate.
Notwithstanding the provisions of Section 13.14, to the extent that the Highest
Lawful Rate applicable to a Noteholder is at any time determined by Texas law,
such rate shall be the "indicated rate ceiling" described in Section (a)(1) of
Article 1.04 of Chapter 1, Title 79, of the Revised Civil Statutes of Texas,
1925, as amended; provided, however, to the extent permitted by such Article,
the Noteholders from time to time by notice to Company may revise the aforesaid
election of such interest rate ceiling as such ceiling affects the then-current
or future balances of the loans outstanding under the Notes. Notwithstanding any
provision in this Agreement or any other Transaction Document to the contrary,
if the maturity of the Notes or the obligations in respect of the other
Transaction Documents are accelerated for any reason, or in the event of
prepayment of all or any portion of the Notes or the obligations in respect of
the other Transaction Documents by the Company or in any other event, earned
interest on the Notes and such other obligations of the Company may never exceed
the maximum amount permitted by applicable law, and any unearned interest
otherwise payable under the Notes or the obligations in respect of the other
Transaction Documents that is in excess of the maximum amount permitted by
applicable law shall be canceled automatically as of the date of such
acceleration or prepayment or other such event and, if theretofore paid, shall
be credited on the principal of the Notes or, if the principal of the Notes has
been paid in full, refunded to the Company. In determining whether or not the
interest paid or payable, under any specific contingency, exceeds the Highest
Lawful Rate, the Company and the Noteholders shall, to the maximum extent
permitted by applicable law, amortize, prorate, allocate and spread, in equal
parts during the period of the actual term of this Agreement, all interest at
any time contracted for, charged, received or reserved in connection with the
Transaction Documents.
SECTION 13.06. INDEMNIFICATION. The Company agrees to indemnify,
defend and hold each Noteholder, their partners and their respective officers,
employees, agents, directors, partners, affiliates and shareholders
(collectively, "INDEMNIFIED PERSONS") harmless from and against any and all
loss, liability, damage, judgment, claim, deficiency or reasonable expense
(including interest, penalties, reasonable attorneys' fees and amounts paid in
settlement) incurred by or asserted against any Indemnified Person arising out
of, in any way connected with, or as a result of (a) the execution and delivery
of this Agreement and the other documents contemplated hereby, the performance
by the parties hereto and thereto of their respective obligations hereunder and
thereunder and consummation of the transactions contemplated hereby and thereby,
(b) the actual or proposed use of the proceeds of the loans contemplated hereby,
(c) any violation by the Company or any of its Subsidiaries of any requirement
of law, including but not limited to Environmental Laws, (d) any Noteholder
being deemed an operator of any real or personal property of the Company in
circumstances in which no Noteholder is generally operating or generally
exercising control over such property, to the extent such losses, liabilities,
damages, judgments, claims, deficiencies or expenses arise out of or result from
any Hazardous Materials located in, on or under such property or (e) any claim,
litigation, investigation or proceeding relating to any of the foregoing,
whether or not any Indemnified Person is a party thereto; provided that such
indemnity shall not apply to any such losses, claims, damages, liabilities or
related expenses that are determined by a court of competent jurisdiction by
final and nonappealable judgment to have resulted from the
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CONFIDENTIAL
U 05192
gross negligence or willful misconduct of, or willful violation of the
Transaction Documents by, such Indemnified Person. WITHOUT ANY PROVISION OF THIS
AGREEMENT OR ANY OF THE OTHER TRANSACTION DOCUMENTS, IT IS THE EXPRESS INTENTION
OF THE PARTIES THAT EACH INDEMNIFIED PERSON SHALL BE INDEMNIFIED AND HELD
HARMLESS AGAINST ANY AND ALL LOSSES, LIABILITIES, CLAIMS, DEFICIENCIES,
JUDGMENTS AND REASONABLE EXPENSES ARISING OUT OF OR RESULTING FROM THE ORDINARY
NEGLIGENCE (WHETHER SOLE, CONCURRENT OR CONTRIBUTORY) OF SUCH INDEMNIFIED
PERSON. Each Indemnified Person will attempt to consult with the Company prior
to entering into any settlement of any lawsuit or proceeding that could give
rise to a claim for indemnity under this SECTION 13.06, although nothing herein
shall give the Company the right to direct, or control any such settlement
negotiations or any related lawsuit or proceeding on behalf of such Indemnified
Party. The obligation of the Company under this SECTION 13.06 shall survive the
termination of this Agreement and repayment of the Notes.
SECTION 13.07. SUCCESSORS AND ASSIGNS. All covenants and other
agreements contained in this Agreement by or on behalf of any of the parties
hereto bind and inure to the benefit of their respective successors and assigns
(including, without limitation, any subsequent holder of a Note) whether so
expressed or not.
SECTION 13.08. SEVERABILITY. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall (to the full extent permitted by law)
not invalidate or render unenforceable such provision in any other jurisdiction.
SECTION 13.09. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be an original but all of which
together shall constitute one instrument. Each counterpart may consist of a
number of copies hereof, each signed by less than all, but together signed by
all, of the parties hereto.
SECTION 13.10. CONFIDENTIALITY. In connection with the negotiation
and administration of this Agreement and the other Transaction Documents, the
Company has furnished and will from time to time furnish the Noteholders certain
written information (such information, other than any such information which (i)
was publicly available, or otherwise known to the Noteholders, at the time of
disclosure, (ii) subsequently becomes publicly available other than through any
act or omission by the Noteholders of (iii) otherwise subsequently becomes known
to the Noteholders, being hereinafter referred to as "CONFIDENTIAL
INFORMATION"). The Noteholders will maintain the confidentiality of any
Confidential Information in accordance with such procedures as the Noteholders
apply generally to information of that nature. Subject to the prohibitions and
restrictions imposed on the Noteholders with respect to the Confidential
Information under applicable securities laws, it is understood that the
foregoing will not restrict the Noteholders' ability to exchange such
Confidential Information with their current or prospective investors, assignees
of
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U 05193
the Notes and advisors. it is further understood that the foregoing will not
prohibit the disclosure of any or all Confidential Information if and to the
extent that such disclosure may be required or requested (w) by a Governmental
Authority, (x) pursuant to court order, subpoena or other legal process or in
connection with any pending or threatened litigation hereunder, (y) otherwise
as required by law, or (z) in order to protect its interests or its rights or
remedies hereunder or under the other Transaction Documents; in the event of
any required disclosure under clause (w),(x), or (y) above, the Noteholders
agree to use reasonable efforts to inform the Company as promptly as
practicable. With respect to Confidential Information provided to the
Noteholders under SECTION 2.03(A) that relates to Oil and Gas Properties on
which the Noteholders elect not to make the Advance requested by the Company,
the Noteholders (i) shall promptly return such Confidential Information to the
Company (including all copies thereof) upon written request from the Company,
(ii) shall not use, and shall not permit any other Person to use, such
Confidential Information for any purpose other that evaluating the proposed
Advance and (iii) acknowledge that such Confidential Information shall remain
the exclusive property of the Company (subject only to any rights the
Noteholders may have to such Confidential Information under the Security
Documents).
SECTION 13.11. FINAL AGREEMENT OF THE PARTIES. THIS AGREEMENT AND THE
OTHER TRANSACTION DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES.
SECTION 13.12. JURY WAIVER. THE COMPANY AND THE NOTEHOLDERS HEREBY
IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
SECTION 13.13. CHOICE OF FORUM. THE COMPANY AND THE NOTEHOLDERS AGREE
THAT ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY SHALL BE BROUGHT IN THE FEDERAL AND STATE
COURTS OF XXXXXX COUNTY, TEXAS, OTHER THAN LEGAL PROCEEDINGS INSTITUTED BY THE
NOTEHOLDERS WITH RESPECT TO THEIR RIGHTS AND REMEDIES UNDER THE SECURITY
DOCUMENTS, WHICH PROCEEDINGS MAY BE BROUGHT IN THE FEDERAL OR STATE COURTS OF
XXXXXX COUNTY, TEXAS OR THE COURTS OF ANY OTHER JURISDICTION DEEMED APPROPRIATE
BY THE NOTEHOLDERS TO ENFORCE THEIR RIGHTS AND REMEDIES UNDER THE SECURITY
DOCUMENTS.
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SECTION 13.14. GOVERNING LAW. This Agreement and the Notes shall be
construed and enforced in accordance with, and the rights of the parties shall
be governed by, the law of the State of New York excluding choice-of-law
principles of the law of such State that would require the application of the
laws of a jurisdiction other that such State.
IN WITNESS WHEREOF, the Company and the Noteholders have caused this
Agreement to be executed by their respective representatives thereunto duly
authorized effective as of the date first above written.
UNEXCO, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
---------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: President
RIMCO PARTNERS, L.P.,
RIMCO PARTNERS, X.X.XX,
RIMCO PARTNERS, L.P.III, AND
RIMCO PARTNERS, X.X.XX
By: RESOURCE INVESTORS MANAGEMENT COMPANY
LIMITED PARTNERSHIP, THEIR GENERAL PARTNER
By: RIMCO ASSOCIATES, INC.,
ITS GENERAL PARTNER
By: /s/ Xxxx Xxxxxxx
---------------------------------
Name: Xxxx Xxxxxxx
Title: Vice President
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SCHEDULE A
INFORMATION RELATING TO NOTEHOLDERS
Principal Amount of
Name and Address of Noteholder Notes to be Purchased
------------------------------ ---------------------
RIMCO PARTNERS, L.P. $1,040,000
RIMCO PARTNERS, X.X.XX 1,200,000
RIMCO PARTNERS, L.P.III 480,000
RIMCO PARTNERS, X.X.XX 1,280,000
$4,000,000
==========
(1) All payments by wire transfer
of immediately available
funds to:
Fleet Bank, N.Y.
ABA No. 000000000
Account Name: Universal Seismic Associates, Inc.
Automatic Clearing Account
Account No. 9390641743
with sufficient information to identify the source and application of such
funds.
(2) All notices of payments and
written confirmations of such
wire transfers:
Resource Investors Management Company
00 Xxxxxxxxxx Xxxx
Xxxx, Xxxxxxxxxxx 00000
Attn: Xxxx Xxxxxxx
Telecopy No.: 000-000-0000
Schedule A-1
CONFIDENTIAL
U 05196
(3) All other communications
Resource Investors Management Company
Suite 6875
000 Xxxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000
Attn: Xxxx Xxxxxxx
Telecopy No.: 000-000-0000
with a copy to:
Resource Investors Management Company
00 Xxxxxxxxxx Xxxx
Xxxx, Xxxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxx
Telecopy No.: 000-000-0000
Schedule A-2
CONFIDENTIAL
U 05197
ANNEX A
DEFINED TERMS
"Accredited Investor" means an "accredited investor" as such term is
defined in Regulation D, Rule 501, promulgated by the Securities and Exchange
Commission.
"Advance" is defined in Section 2.01.
"Advance Request" is defined in Section 2.03.
"Affiliate" means, at any time, and with respect to any Person, (a)
any other Person that at such time directly or indirectly through one or more
intermediaries Controls, or is Controlled by, or is under common Control with,
such first Person, and (b) any Person beneficially owning or holding, directly
or indirectly, 10% or more of any class of voting or equity interest of the
Company or any Subsidiary or any corporation of which the Company and its
Subsidiaries beneficially own or hold, in the aggregate, directly or indirectly,
10% or more of any class of voting or equity interest. As used in this
definition, "Control" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
Unless the context otherwise clearly requires, any reference to an "Affiliate"
is a reference to an Affiliate of the Company.
"Agreement" means this Note Purchase Agreement, as amended or modified
from time to time.
"Availability Notice" is defined in Section 2.03.
"Business Day" means any day other than a Saturday, a Sunday or a day
on which commercial banks in Houston, Texas or New York, New York are required
or authorized to be closed.
"Capital Lease" means, at any time, a lease with respect to which the
lessee is required concurrently to recognize the acquisition of an asset and the
incurrence of a liability in accordance with GAAP.
"Change of Control" means any of (a) the acquisition by any Person or
two or more Persons (excluding underwriters in the course of their distribution
of voting stock in an underwritten public offering) acting in concert, of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Security Exchange Act of 1934, as amended) of 35% or more of the outstanding
shares of voting stock of USA, (b) 50% or more of the members of the Board of
Directors of USA on any date shall not have been (i) members of the Board of
Directors of USA on the date 12 months prior to such date or (ii) approved (by
recommendation, nomination, election or otherwise) by Persons who constitute at
least a majority of the members of the Board of Directors of USA as constituted
on the date 12 months prior to such date, (c) all or substantially all of the
CONFIDENTIAL
U 05198
assets of USA or the Company are sold in a single transaction or series or
related transactions to any Person, or (d) USA merges with or consolidates with
any other Person.
"Closing" is defined in Article III.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time, and the rules and regulations promulgated thereunder from time to time.
"Commitment Period" is defined in Section 2.01.
"Commitment" is defined in Section 2.01.
"Company" is defined in the introduction to this Agreement.
"Current Assets" means, as of any date, all assets of USA and its
Subsidiaries that would be reflected as current assets on a consolidated balance
sheet of USA and its Subsidiaries prepared on such date in accordance with GAAP
consistently applied.
"Current Liabilities" means, as of any date, all liabilities of USA
and its Subsidiaries that would be reflected as current liabilities on a
consolidated balance sheet of USA and its Subsidiaries prepared on such date in
accordance with GAAP consistently applied.
"Deductible Costs" means, for any month, the sum of the following
amounts, to the extent such amounts were not deducted in calculating Gross
Production Proceeds, and without duplication, (a) Lease Operating Expenses for
such month and severance and production taxes attributable to Gross Proceeds for
such month.
"Default" means an event or condition the occurrence or existence of
which would, with the lapse of time or the giving of notice or both, become an
Event of Default.
"Default Rate" means fifteen percent (15%) per annum, but in no event
to exceed the Highest Lawful Rate.
"Environmental Laws" means any and all Federal, state, local, and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or
governmental restrictions relating to pollution and the protection of the
environment or the release of any materials into the environment, including but
not limited to those related to hazardous substances or wastes, air emissions
and discharges to waste or public systems.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the rules and regulations promulgated thereunder
from time to time in effect.
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"ERISA Affiliate" means any trade or business (whether or not
incorporated) that is treated as a single employer together with the Company
under section 414 of the Code.
"Event of Default" is defined in Section 11.01.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fidelity Funding Agreement" means, collectively, that certain Loan
and Security Agreement dated as of August 31, 1995, between Universal Seismic
Acquisition, Inc. and Fidelity Funding, Inc. and that certain Loan and Security
Agreement, dated August 31, 1995, between Universal Seismic Technologies, Inc.
and Fidelity Funding, Inc.
"Future Net Revenue" means the aggregate of the estimated future net
revenues for each of the Company's Oil and Gas Properties, discounted at 10%,
attributable to the proved Hydrocarbon reserves for each such Oil and Gas
Property using average product prices and Lease Operating Expenses for the
six-month period preceding the date of determination of such future net
revenues. The product prices and Lease Operating Expenses for each such Oil and
Gas Property shall not be escalated over the life of such Oil and Gas Property.
Each determination of Future Net Revenue under the terms of this Agreement shall
also take into account cumulative production from the Oil and Gas Properties
since the last determination and such other criteria that are required by sound
petroleum engineering practice.
"GAAP" means generally accepted accounting principles as in effect
from time to time in the United States of America.
"Governmental Authority" means (a) the government of (i) the United
States of America or any State or other political subdivision thereof, or (ii)
any jurisdiction in which the Company or any Subsidiary conducts all or any
part of its business, or which asserts jurisdiction over any properties of the
Company or any Subsidiary, or (b) any entity exercising executive, legislative,
judicial, regulatory or administrative functions of, or pertaining to, any such
government.
"Gross Production Proceeds" means, for any month, the gross proceeds
accruing from the sale of Hydrocarbons produced from the Company's Oil and Gas
Properties during such month.
"Guaranty" means, with respect to any Person, any obligation (except
the endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
indebtedness, dividend or other obligation of any other Person in any manner,
whether directly or indirectly, including (without limitation) obligations
incurred through an agreement, contingent or otherwise, by such Person: (a) to
purchase such indebtedness or obligation or any property constituting security
therefor; (b) to advance or supply funds (i) for the purchase or payment of such
indebtedness or obligation, or (ii) to maintain any working capital or other
balance sheet condition or any income statement condition of any other Person or
otherwise to advance or make available funds for the purchase or payment of such
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CONFIDENTIAL
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indebtedness or obligation; (c) to lease properties or to purchase properties or
services primarily for the purpose of assuring the owner of such indebtedness or
obligation of the ability of any other Person to make payment of the
indebtedness or obligation; or (d) otherwise to assure the owner of such
indebtedness or obligation against loss in respect thereof. In any computation
of the indebtedness or other liabilities of the obligor under any Guaranty, the
indebtedness or other obligations that are the subject of such Guaranty shall be
assumed to be direct obligations of such obligor.
"Guaranty Agreement" is defined in Section 2.02.
"Hazardous Material" means any and all pollutants, toxic or hazardous
wastes or any other substances that might pose a hazard to health or safety, the
removal of which may be required or the generation, manufacture, refining,
production, processing, treatment, storage, handling, transportation, transfer,
use, disposal, release, discharge, spillage, seepage, or filtration of which is
or shall be restricted, prohibited or penalized by any applicable law
(including, without limitation, asbestos, urea formaldehyde foam insulation and
polycholorinated biphenyls).
"Highest Lawful Rate" means with respect to any indebtedness owed to
any Noteholder under any Transaction Document, the maximum nonusurious interest
rate, if any, that at any time or from time to time may be contracted for,
taken, reserved, charged or received by such Noteholder with respect to such
indebtedness under law applicable to such Noteholder.
"Hydrocarbons" means oil, natural gas, condensate and all other liquid
or gaseous hydrocarbons and all products produced or separated therefrom.
"holder" means, with respect to any Note, the Person in whose name
such Note is registered in the register maintained by the Company pursuant to
Section 12.01.
"Indebtedness" with respect to any Person means, at any time, without
duplication, (a) its liabilities for borrowed money and its redemption
obligations in respect of mandatorily redeemable Preferred Stock; (b) its
liabilities for the deferred purchase price of property acquired by such Person
(excluding accounts payable arising in the ordinary course of business but
including all liabilities created or arising under any conditional sale or other
title retention agreement with respect to any such property); (c) all
liabilities appearing on its balance sheet in accordance with GAAP in respect of
Capital Leases; (d) all liabilities for borrowed money secured by any Lien with
respect to any property owned by such Person (whether or not it has assumed or
otherwise become liable for such liabilities); (e) all its liabilities in
respect of letters of credit or instruments serving a similar function issued or
accepted for its account by banks and other financial institutions (whether or
not representing obligations for borrowed money); (f) Swaps of such Person; and
(g) any Guaranty of such Person with respect to liabilities of a type described
in any of clauses (a) through (f) hereof. Indebtedness of any Person shall
include all obligations of such Person of the character described in clauses (a)
through (g) to the extent such Person remains legally liable in respect thereof
notwithstanding that any such obligation is deemed to be extinguished under
GAAP.
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CONFIDENTIAL
U 05201
"Indemnified Person" is defined in Section 13.06.
"Investment" means, with respect to any Person, any direct or indirect
purchase or other acquisition by such Person of stock or other securities of any
other Person, or any direct or indirect loan, advance or capital contribution by
such Person to any other Person, and any other item which would be classified as
an "investment" on a balance sheet of such Person prepared in accordance with
GAAP.
"Lease Operating Expenses" means, for any month, direct out-of-pocket
costs and expenses incurred during such month by the Company to operate and
maintain the xxxxx located on the Company's Oil and Gas Properties, including
fixed overhead costs payable under applicable operating agreements. Without
limiting the foregoing, Lease Operating Expenses shall not include any land and
legal fees incurred by the Company, leasehold, seismic or other property
acquisition costs, or costs to drill, test, complete, equip, deepen, sidetrack,
recomplete or plug and abandon any well or internal overhead costs.
"Lien" means, with respect to any Person, any mortgage, lien, pledge,
charge, security interest or other encumbrance of any kind (whether voluntary or
involuntary), or any interest or title of any vendor, lessor, lender or other
secured party to or of such Person under any conditional sale or other title
retention agreement or Capital Lease, upon or with respect to any property or
asset of such Person (including in the case of stock, stockholder agreements,
voting trust agreements and all similar arrangements).
"Material" means material in relation to the business, operations,
affairs, financial condition, assets, properties, or prospects of (a) the
Company or (b) USA and its Subsidiaries taken as a whole.
"Material Adverse Effect" means a material adverse effect on (a) the
business, operations, affairs, financial condition, assets or properties of the
Company, or USA and its Subsidiaries taken as a whole, or (b) the ability of the
Company or USA, as the case may be, to perform their respective obligations
under this Agreement and the other Transaction Documents, or (c) the validity or
enforceability of this Agreement or the other Transaction Documents.
"Monthly Payment Date" means the first day of each calendar month
commencing February 1, 1997.
"Monthly Production Report" is defined in Section 8.01(e).
"Multiemployer Plan" means any Plan that is a "multiemployer plan" (as
such term is defined in section 4001(a)(3) of ERISA).
"Net Income" means, for any period, the consolidated net earnings of
USA and its Subsidiaries for such period, determined in accordance with GAAP.
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"Net Production Revenue" means, for any month, an amount equal
to the excess, if any, of Gross Production Proceeds for such month over
Deductible Costs for such month.
"Net Revenue" means, for any month, the sum of (a) the Net Sales
Proceeds for such month plus (b) the Net Production Revenues for the
immediately preceding month.
"Net Sales Proceeds" means, for any month, the gross proceeds
received during such month by the Company from the sale of any of its Oil
and Gas Properties, less the reasonable fees, taxes and expenses paid by
the Company and directly related to the consummation of any such sales
transactions.
"Noteholders" is defined in the introduction to this Agreement.
"Notes" is defined in Section 2.01.
"Officer's Certificate" means a certificate of a Senior Financial
Officer or of any other officer of the Company or USA, as applicable, whose
responsibilities extend to the subject matter of such certificate.
"Oil and Gas Properties" means oil and gas leasehold interests,
overriding royalty interests, mineral interests, royalty interests, net
profits interests, oil payments, production payments, carried interests,
operating rights and other similar properties or interests, including
contractual rights to any of the foregoing.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA or any successor thereto.
"Person" means an individual, partnership, corporation, limited
liability company, association, trust, unincorporated organization, or a
government or agency or political subdivision thereof.
"Plan" means an "employee benefit plan" (as defined in section 3(3)of
ERISA) that is or, within the preceding five years, has been established or
maintained, or to which contributions are or, within the preceding five years,
have been made or required to be made, by the Company or any ERISA Affiliate or
with respect to which the Company or any ERISA Affiliate may have any
liability.
"Pledge Agreement" means that certain Pledge Agreement of even date
herewith executed by USA in favor of the Noteholders pledging all of the common
stock of the Company, as amended from time to time.
"Preferred Stock" means any class of capital stock of a corporation
that is preferred over any other class of capital stock of such corporation as
to the payment of dividends or the payment of any amount upon liquidation or
dissolution of such corporation.
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U 05203
"Required Holders" means, at any time, the holder or holders of at
least 51% in principal amount of the Notes at the time outstanding (exclusive of
Notes then owned by the Company or any of its Affiliates).
"Reserve Report" is defined in Section 8.01(d).
"Responsible Officer" means any Senior Financial Officer and any other
officer of the Company or USA, as applicable, with responsibility for the
administration of the relevant portion of this Agreement.
"Second Amended and Restated Security Agreement" means that certain
Second Amended and Restated Security Agreement dated of even date herewith
granting a first Lien on the collateral described therein by USA in favor of the
Noteholders, as same may be supplemented or amended from time to time.
"Securities Act" means the Securities Act of 1933, as amended from
time to time.
"Security Documents" means the mortgages, deeds of trust, security
agreements and assignments of production in form and substance satisfactory to
the Noteholders granting a first priority Lien in favor of the Noteholders on
the Oil and Gas Properties and other related assets of the Company and such
other security agreements, guaranties, pledges, instruments, financing
statements or other documents which may be executed to secure the obligations of
the Company and USA with respect to the Notes and this Agreement and the other
Transaction Documents.
"Senior Financial Officer" means any of the chief financial officer,
principal accounting officer, treasurer or comptroller of the Company or USA, as
applicable.
"Subsidiary" means, as to any Person, any corporation, association or
other business entity in which such Person or one or more of its Subsidiaries or
such Person and one or more of its Subsidiaries owns sufficient equity or voting
interests to enable it or them (as a group) ordinarily, in the absence of
contingencies, to elect a majority of the directors (or Persons performing
similar functions) of such entity, and any partnership or joint venture if more
than a 50% interest in the profits or capital thereof is owned by such Person or
one or more of its Subsidiaries or such Person and one or more of its
Subsidiaries or such Person and one or more of its Subsidiaries (unless such
partnership can and does ordinarily take major business actions without the
prior approval of such Person or one or more of its Subsidiaries). Unless the
context otherwise clearly requires, any reference to a "Subsidiary" is a
reference to a Subsidiary of USA.
"Swaps" means, with respect to any Person, payment obligations with
respect to interest rate swaps, currency swaps and similar obligations
obligating such Person to make payments, whether periodically or upon the
happening of a contingency. For the purposes of this Agreement, the amount of
the obligation under any Swap shall be the amount determined in respect thereof
as of the end of the then most recently ended fiscal quarter of such Person,
based on the assumption that such Swap had terminated at the end of such fiscal
quarter, and in making such
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U 05204
determination, if any agreement relating to such Swap provides for the netting
of amounts payable by and to such Person thereunder or if any such agreement
provides for the simultaneous payment of amounts by and to such Person, then in
each such case, the amount of such obligation shall be the net amount so
determined.
"Tangible Net Worth" means, as of any date, the total shareholder's
equity (including capital stock, additional paid-in capital and retained
earnings after deducting treasury stock) which would appear on a consolidated
balance sheet of USA and its Subsidiaries prepared as of such date in accordance
with GAAP, minus (i) the amount of any assets resulting from capitalization of
goodwill, organizational expenses, research and development expenses,
trademarks, trade names, copyrights patents, patent applications, licenses and
rights in any thereof, and other similar intangibles, (ii) cash held in a
sinking or other analogous fund established for the purpose of redemption,
retirement or prepayment of capital stock or Indebtedness, and (iii) the amount
of any other items which are treated as intangible assets in accordance with
GAAP.
"Total Commitment" means, as of any date, an amount equal to the sum of
the Noteholders' Commitments, as of such date.
"Transaction Documents" is defined in Section 4.01.
"USA" is defined in Section 2.02.
"USA Note Agreements" means, collectively, that certain Note Purchase
Agreement, dated january 19, 1996, among USA and the Noteholders, as amended by
that certain First Amendment dated as of May 28, 1996, that certain Second
Amendment dated as of August 13, 1996, that certain Third Amendment dated as of
December 20, 1996, and as same may be amended or restated in the future, and
that certain note Purchase Agreement, dated may 28, 1996, among USA and the
Noteholders (other than RIMCO Partners, L.P. III), as amended by that certain
First Amendment dated as of December 20, 1996, and as same may be amended or
restated in the future.
"USA Notes" means the 10% Senior Secured General Obligation Notes in the
aggregate principal amount of $10,000,000 issued by USA under the USA Note
Agreements, together with any replacements, substitutions, extensions,
modifications and restatements thereof.
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U 05205
SCHEDULE 5.07
Litigation
None
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U 05206
Exhibit 2.01
UNEXCO, INC.
12% SENIOR SECURED GENERAL OBLIGATION NOTE
No. SN-1 December 20, 1996
$__________
FOR VALUE RECEIVED, the undersigned, UNEXCO, INC., a Delaware
corporation (the "Company"), hereby promises to pay to ___________________, a
Delaware limited partnership, or registered assigns, the principal sum of ______
_____________________________ and ____/100 DOLLARS ($_________________), or, if
less, the aggregate unpaid principal amount of all Advances (as defined in the
Note Purchase Agreement referred to below) made by _________________ under this
Note, together with interest (computed on the basis of a 360-day year of twelve
30-day months) (a) on the unpaid principal balance hereof at the rate of twelve
percent (12%) per annum from the date hereof, until the principal hereof shall
have become due and payable, and (b) on any overdue payment of principal or
interest, at a rate per annum from time to time equal to fifteen percent (15%);
provided, however, in no event shall such rate of interest ever exceed the
Highest Lawful Rate (as defined in the Note Purchase Agreement referred to
below).
This Note is one of a series of 12% Senior Secured General Obligation
Notes (herein called the "Notes") issued pursuant to the Note Purchase Agreement
dated as of December 20, 1996 (as from time to time amended, the "Note Purchase
Agreement") between the Company and the Noteholders named therein and is
entitled to the benefits, and otherwise subject to the provisions, thereof,
including, without limitation, the limitations on interest set forth in Section
13.05 thereof. This Note is secured by the Security Documents referred to in
the Note Purchase Agreement.
The principal balance of this Note and accrued interest thereon shall
be due and payable at the places, the times and in the manner specified in the
Note Purchase Agreement. Each Advance made by ________________ to the Company
and all payments made on account of the principal amount thereof shall be
entered by _________________ in its records or on the grid attached hereto which
is part of this Note.
All payments made by the Company on this Note shall be applied first,
to the accrued, but unpaid interest hereon, and the remainder, if any, shall be
applied to the principal balance hereof.
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U 05207
Payments of principal of and interest on this Note are to be made in
lawful money of the United States of America at places designated in the Note
Purchase Agreement.
This Note is a registered Note and, as provided in the Note Purchase
Agreement, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company will not be affected by any notice to
the contrary.
If an Event of Default, as defined in the Note Purchase Agreement,
occurs and is continuing, the principal of this Note may be declared or
otherwise become due and payable in the manner, at the price and with the effect
provided in the Note Purchase Agreement.
This Note shall be governed by and construed in accordance with the
laws of the State of New York, excluding the choice of law rules thereof.
UNEXCO, INC.
By:
-------------------------
Name:
-----------------------
Title:
----------------------
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CONFIDENTIAL
U 05208
ADVANCES, MATURITIES, AND PAYMENTS OF PRINCIPAL
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Date Amount of Maturity of Amount of Unpaid Principal Notation Made
Advance Advance Principal Paid Balance By
or Prepaid
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Page 3
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Exhibit 2.02
GUARANTY AGREEMENT
This GUARANTY AGREEMENT dated as of December 20, 1996 is from
UNIVERSAL SEISMIC ASSOCIATES, INC., a Delaware corporation ("USA"), to RIMCO
PARTNERS, L.P., a Delaware limited partnership, RIMCO PARTNERS, X.X. XX, a
Delaware limited partnership, RIMCO PARTNERS, L.P. III, a Delaware limited
partnership, and RIMCO PARTNERS, X.X. XX, a Delaware limited partnership
(collectively, the "Noteholders").
PRELIMINARY STATEMENT
The Noteholders have entered into a Note Purchase Agreement dated as
of December 20, 1996 (said Agreement, as it may hereafter be amended or
otherwise modified from time to time, being the "Note Agreement") with UNEXCO,
INC. (the "Company"), a wholly-owned subsidiary of USA, whereby the Noteholders
have purchased from the Company its 12% Senior Secured General Obligation Notes
in the maximum aggregate principal amount of $4,000,000 (such notes, together
with all substitutions, replacements, extensions, modifications and restatements
thereof, being referred to herein, collectively as the "Notes"). It is a
condition precedent to the obligation of the Noteholders to make Advances under
the Note Agreement that the Guarantor shall have executed and delivered this
Agreement. USA has determined that it will receive a substantial benefit if
Advances are made to the Company under the Note Agreement.
In consideration of the premises and other good and valuable
consideration, USA and the Noteholders agree as follows:
ARTICLE I
DEFINITIONS, ETC.
Section 1.01. Certain Defined Terms. Capitalized terms used in this
Agreement and not otherwise defined herein shall have the respective meanings
set forth in the Note Agreement and the Annex A attached thereto (such meanings
to be equally applicable to both singular and plural forms of the terms
defined).
Section 1.02. Covenant Construction. Each covenant contained herein
shall be construed (absent express provision to the contrary) as being
independent of each other covenant contained herein, so that compliance with any
one covenant shall not (absent such an express contrary provision) be deemed to
excuse compliance with any other covenant. Where any provision herein refers to
action to be taken by any Person, or which such Person is prohibited from
taking, such provision shall be applicable whether such action is taken directly
or indirectly by such Person.
Section 1.03. Other Rules of Construction. The words "hereof,"
"herein" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement. All references herein to articles,
CONFIDENTIAL
U 05210
sections, annexes, exhibits and schedules shall, unless the context requires a
different construction, be deemed to be references to the articles and sections
of this Agreement and the annexes, exhibits and schedules attached hereto and
made a part hereof. In this Agreement, unless a clear contrary intention
appears, the word "including" (and with correlative meaning "include") means
including, without limiting the generality of any description preceding such
term. The headings of the various articles and sections of this Agreement are
for convenience only and shall not affect the meaning of the terms and
conditions of this Agreement. No provision of this Agreement shall be
interpreted or construed against any party solely because that party or its
legal representative drafted such provision.
ARTICLE II
GUARANTY
Section 2.01. Guaranty. USA hereby unconditionally and irrevocably
guarantees the full and punctual payment when due, whether at stated maturity or
earlier by acceleration or otherwise, of any and all debts, liabilities and
obligations of the Company now or hereafter existing under the Note Agreement,
the Notes or any of the other Transaction Documents whether for principal,
interest (including, without limitation, all interest that accrues after the
commencement of any proceeding by or against the Company under any bankruptcy,
insolvency, liquidation, moratorium, receivership, reorganization or other
similar debtor relief law), fees, expenses or otherwise (such obligations being
the "Obligations"), and agrees to pay any and all reasonable costs and expenses
(including counsel fees and legal expenses) incurred by the Noteholders in
connection with the protection, defense or enforcement of any rights under this
Agreement and any of the other Transaction Documents.
Section 2.02. Guaranty Absolute. USA unconditionally guarantees that
the Obligations will be paid strictly in accordance with the terms of the Note
Agreement, the Notes and the other Transaction Documents, regardless of any law,
regulation or order now or hereafter in effect in any jurisdiction affecting any
of such terms or the rights of the Noteholders with respect thereto. The
liability of USA under this Agreement shall be absolute and unconditional
irrespective of: (a) any lack of validity or enforceability of the Note
Agreement, the Notes, the other Transaction Documents or any other agreement or
instrument relating thereto; (b) any change in the time, manner or place of
payment of, or in any other term of, all or any of the Obligations, or any other
amendment or waiver of or any consent to departure from the Note Agreement, the
Notes or the other Transaction Documents; (c) any taking, exchange, release or
non-perfection of any collateral, or any release or amendment or waiver of or
consent to departure from any other guaranty, for all or any of the Obligations;
(d) any manner of application of collateral, or proceeds thereof, to all or any
of the Obligations, or any manner of sale or other disposition of any collateral
for all or any of the Obligations or any other assets of the Company; (e) any
change, restructuring or termination of the corporate structure or existence of
the Company; or (f) any other circumstances which might otherwise constitute a
defense available to, or a discharge of, the Company or a guarantor.
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CONFIDENTIAL
U 05211
The obligations of USA under this Agreement shall not be subject to
reduction, termination or other impairment by reason of any setoff, recoupment,
counterclaim or defense or for any other reason. This Agreement is to be in
addition to and is not to prejudice or be prejudiced by any other securities or
guaranties (including any guaranty signed by USA) which the Noteholders may now
or hereafter hold from or on account of the Company and is to be binding on USA
as a continuing security notwithstanding any payments from time to time made to
the Noteholders or any settlement of account or disability or incapacity
affecting USA or any other thing whatsoever. This Agreement is a continuing
guaranty and shall remain in full force and effect until payment in full of the
Obligations and all other amounts payable under this Agreement.
Section 2.03. Wavier. USA hereby waives promptness, diligence,
notice of acceptance and any other notice with respect to any of the Obli-
gations and this Agreement and any liability to which this Agreement applies or
may apply, and waives presentment, demand of payment, notice of intent to
accelerate, notice of acceleration, notice of dishonor or nonpayment, and any
requirement that the Noteholders institute suit, collection proceedings or take
any other action to collect the Obligations including any requirement that the
Noteholders protect, secure, perfect or insure any security interest or lien or
any property subject thereto or exhaust any right or take any action against the
Company or any other person or entity or any collateral (it being the intention
of the Noteholders and USA that this Agreement is to be a guaranty or payment
and not of collection) or that the Company or any other person be joined in any
action hereunder. Notwithstanding the provisions of Section 8.13, USA hereby
expressly waives each and every right to which it may be entitled by virtue of
the suretyship laws of the State of Texas, including, without limitation, any
and all rights it may have pursuant to Rule 31 or Rule 32, Texas Rules of Civil
Procedure, Section 17.001 of the Texas Civil Practice and Remedies Code and
Chapter 34 of the Texas Business and Commerce Code. USA hereby waives
marshalling of assets and liabilities, sale in inverse order of alienation,
notice by the Noteholders of any indebtedness or liability to which it applies
or may apply any amounts received by the Noteholders, and of the creation,
advancement, increase, existence, extension, renewal, rearrangement and/or
modification of the Obligations.
Section 2.04. Waiver of Subrogation; Etc. USA will not have any
rights of subrogation under this Agreement, by any payment made hereunder or
otherwise, until such time as the Noteholders have received full payment of the
Obligations, and all such rights are hereby waived. If, notwithstanding the
preceding sentence, any amount shall be paid to USA on account of subrogation
rights at any time when all the Obligations shall not have been paid in full,
such amount shall be held in trust for the benefit of the Noteholders and shall
forthwith be paid to the Noteholders to be credited and applied upon the
Obligations in accordance with the terms of the Note Agreement.
USA hereby subordinates all indebtedness owing to it from the Company
to all indebtedness of the Company to the Noteholders, and agrees that upon the
occurrence and continuance of an Event of Default or any event which with the
giving of notice or lapse of time could become an Event of Default, it shall not
accept any payment on the same until payment in full of the Obligations, and
shall in no circumstance whatsoever attempt to set off or reduce any
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CONFIDENTIAL
U 05212
Obligations hereunder because of such indebtedness. USA further subordinates
any lien or security interest that it has or may have on any collateral or
security securing payment of the Obligations to the liens and security interest
on said collateral and security in favor of the Noteholders, but the foregoing
shall in no event imply or be construed to imply the Noteholders' agreement or
consent to the existence of any such security interest in favor of USA.
Section 2.05. Right of Set-off. Upon the occurrence and during the
continuance of any event of Default the Noteholders are hereby authorized at any
time and from time to time, to the fullest extent permitted by law, to set off
and apply any and all deposits (general or special, time or demand, provisional
or final) at any time held and other indebtedness at any time owing by the
Noteholders to or for the credit or the account of USA against any and all of
the obligations of USA now or hereafter existing under this Agreement,
irrespective of whether or not the Noteholders shall have made any demand under
this Agreement and although such obligations may be contingent and unmatured.
The Noteholders agrees promptly to notify USA after any such set-off and
application, provided that the failure to give such notice shall not affect the
validity of such set-off and application. The rights of the Noteholders under
this Section are in addition to other rights and remedies (including, without
limitation, other rights of set-off) which the Noteholders may have.
Section 2.06. Transaction Documents. USA acknowledges that it has
full and complete access to the Note Agreement, the Notes and all other
instruments and documents executed by the Company, or any other Person in
connection with the Note Agreement, has fully reviewed same and is fully aware
of their contents.
Section 2.07. Effect of Bankruptcy Proceeding, Etc. This Agreement
shall continue to be effective, or be automatically reinstated, as the case may
be, if at any time payment, in whole or in part, of any of the sums due any
Noteholders pursuant to the terms of the Note Agreement or hereunder is
rescinded or must otherwise be restored or returned by the Noteholders upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization of the
Company or USA, or upon or as a result of the appointment of a custodian,
receiver, trustee or other officer with similar power with respect to the
Company or USA or any substantial part of their property, or otherwise, all as
though such payments had not been made. If an Event of Default shall at any
time have occurred and be continuing and declaration of such Event of Default
shall at such time be prevented by reason of the pendency against the Company of
a case or proceeding under a bankruptcy or insolvency law, USA agrees that, for
purposes of this Agreement and its obligations hereunder, the Note Agreement
shall be deemed to have been declared in default with the same effect as if the
Note Agreement had been declared in default in accordance with the terms
thereof, and USA shall forthwith pay the amounts specified by the Noteholders to
be paid thereunder, any interest thereon and any other amounts guaranteed
hereunder without further notice or demand.
Section 2.08. No Waiver; Remedies. No failure on the part of the
Noteholders to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof
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CONFIDENTIAL
U 05213
or the exercise of any other right. The remedies herein provided are cumulative
and not exclusive of any remedies provided by law.
Section 2.09. Security. USA's obligations under this Agreement are secured
by the Pledge Agreement in favor of the Noteholders.
Section 2.10. Further Assurances. USA hereby agrees to execute and deliver
all such instruments and take all such action as the Noteholders may from time
to time reasonably request in order to fully effectuate the purpose of this
Agreement.
ARTICLE III
Intentionally Omitted.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF USA
USA represents and warrants to the Noteholders that:
Section 4.01. Organization; Power and Authority. USA is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and is duly qualified as a foreign corporation and is in good standing
in each jurisdiction in which such qualification is required by law, other than
those jurisdictions as to which the failure to be so qualified or in good
standing could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect. USA has the corporate power and authority to own
or hold under lease the properties it purports to own or hold under lease, to
transact the business it transacts and proposes to transact, to execute and
deliver this Agreement and the other Transaction Documents and to perform the
provisions hereof and thereof.
Section 4.02. Authorization, etc. This Agreement and the other Transaction
Documents to which USA is a party have been duly authorized by all necessary
corporate action on the part of USA, and this Agreement constitutes, and upon
execution and delivery thereof each other Transaction Document to which USA is a
party will constitute, a legal, valid and binding obligation of USA enforceable
against USA in accordance with its terms, except as such enforceability may be
limited by (a) applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights generally and
(b) general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
Section 4.03. Compliance with Laws, Other Instruments, etc. The execution,
delivery and performance by USA of this Agreement and the other Transaction
Documents to which USA is a party will not (a) contravene, result in any breach
of, or constitute a default under, or result in the creation of any Lien in
respect of any property of USA or any Subsidiary under, any indenture,
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CONFIDENTIAL
U 05214
mortgage, deed of trust, loan, purchase or credit agreement, lease, corporate
charter or by-laws, or any other agreement or instrument to which USA or any
Subsidiary is bound or by which USA or any Subsidiary or any of their respective
properties may be bound or affected, (b) conflict with or result in a breach of
any of the terms, conditions or provisions of any order, judgment, decree, or
ruling of any court, arbitrator or Governmental Authority applicable to USA or
any Subsidiary or (c) violate any provision of any statute or other rule or
regulation of any Governmental Authority applicable to USA or any Subsidiary.
Section 4.04. Governmental Authorizations, etc. No consent, approval
or authorization of, or registration, filing or declaration with, any
Governmental Authority is required in connection with the execution, delivery or
performance by USA of this Agreement or the other Transaction Documents.
Section 4.05. Subsidiaries. Schedule 4.05 contains complete and correct
lists of USA's Subsidiaries, showing, as to each Subsidiary, the correct name
thereof, the jurisdiction of its organization, and the percentage of shares of
each class of its capital stock or similar equity interests outstanding owned by
USA and each other Subsidiary. No Subsidiary is a party to, or otherwise subject
to any legal restriction or any agreement (other than this Agreement and
customary limitations imposed by corporate law statutes) restricting the ability
of such Subsidiary to pay dividends out of profits or make any other similar
distributions of profits to USA or any of its Subsidiaries that owns outstanding
shares of capital stock or similar equity interests of such Subsidiary.
Section 4.06. Financial Statements. The consolidated balance sheet of
USA and its Subsidiaries as at June 30, 1996, and the related consolidated
statements of income, retained earnings and cash flows for the 12-month period
then ended, copies of which USA has delivered to each Noteholder, fairly present
in all material respects the consolidated financial position of USA and its
Subsidiaries as of such date and the consolidated results of their operations
and cash flows for such period and have been prepared in accordance with GAAP
consistently applied throughout the periods involved except as set forth in the
notes thereto (subject, in the case of any interim financial statements, to
normal year-end adjustments).
Section 4.07. Disclosure. This Agreement, the documents, certificates
or other writings delivered to the Noteholders by or on behalf of USA in
connection with the transactions contemplated hereby and the financial
statements referred to in Section 4.06, taken as a whole, do not contain any
untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein not misleading. Except as disclosed in the
financial statements referred to in Section 4.06, since June 30, 1996, there has
been no change in the financial condition, operations, business, properties or
prospects of USA or any Subsidiary except changes that individually or in the
aggregate could not reasonably be expected to have a Material Adverse Effect.
There is no fact known to USA that could reasonably be expected to have a
Material Adverse Effect that has not been set forth herein or in the other
documents, certificates and other writings (including
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U 05215
the financial statements referred to in Section 4.06) delivered to the
Noteholders by or on behalf of USA specifically for use in connection with the
transactions contemplated hereby.
Section 4.08. Litigation. Except as disclosed in Schedule 4.08,
there are no actions, suits or proceedings pending or, to the knowledge of USA,
threatened against or affecting USA or any Subsidiary or any property of USA or
any Subsidiary in any court or before any arbitrator of any kind or before or by
any Governmental Authority that, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.
Section 4.09. Observance of Agreements, Statutes and Orders.
Neither USA nor any Subsidiary is in default under any term of any agreement or
instrument to which it is a party or by which it is bound, or any order,
judgment, decree or ruling of any court, arbitrator or Governmental Authority or
is in violation of any applicable law, ordinance, rule or regulation (including
without limitation Environmental Laws) of any Governmental Authority, which
default or violation, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect.
Section 4.10. Taxes. USA and its Subsidiaries have filed all tax
returns that are required to have been filed in any jurisdiction, and have paid
all taxes shown to be due and payable on such returns and all other taxes and
assessments levied upon them or their properties, assets, income or franchises,
to the extent such taxes and assessments have become due and payable and before
they have become delinquent, except for any taxes and assessments (i) the amount
of which is not individually or in the aggregate Material or (ii) the amount,
applicability or validity of which is currently being contested in good faith by
appropriate proceedings and with respect to which USA or a Subsidiary, as the
case may be, has established adequate reserves in accordance with GAAP. USA
knows of no basis for any other tax or assessment that, if imposed, could
reasonably be expected to have a Material Adverse Effect. The charges, accruals
and reserves on the books of USA and its Subsidiaries in respect of Federal,
state or other taxes for all fiscal periods are adequate in all respects. The
Federal income tax liabilities of USA and its Subsidiaries have been determined
by the Internal Revenue Service and paid for all fiscal years up to and
including the fiscal year ended June 30, 1996.
Section 4.11. Title to Property. USA and its Subsidiaries have
good and sufficient title to their respective properties that individually or in
the aggregate are Material, including all such properties reflected in the most
recent audited balance sheet referred to in Section 4.06 or purported to have
been acquired by USA or any Subsidiary after said date, in each case free and
clear of Liens other than those permitted by this Agreement. All leases that
individually or in the aggregate are Material are valid and subsisting and are
in full force and effect in all material respects.
Section 4.12. Licenses, Permits, etc. USA and its Subsidiaries own
or possess all licenses, permits, franchises, authorizations, patents,
copyrights, service marks, trademarks and trade names, or rights thereto, that
individually or in the aggregate are Material, without known conflict with the
rights of others. To the best knowledge of USA, (a) no product of USA infringes
in any
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material respect any license, permit, franchise, authorization, patent,
copyright, service xxxx, trademark, trade name or other right owned by any other
Person; and (b) there is no Material violation by any Person of any right of USA
or any of its Subsidiaries with respect to any patent, copyright, service xxxx,
trademark, trade name or other right owned or used by USA or any of its
Subsidiaries.
Section 4.13. Compliance with ERISA.
(a) USA and each ERISA Affiliate have operated and administered
each Plan in compliance with all applicable laws except for such instances of
noncompliance as have not resulted in and could not reasonably be expected to
result in a Material Adverse Effect. Neither USA nor any ERISA Affiliate has
incurred any liability pursuant to Title I or IV of ERISA or the penalty or
excise tax provisions of the Code relating to employee benefit plans (as defined
in section 3 of ERISA), and no event, transaction or condition has occurred or
exists that could reasonably be expected to result in the incurrence of any such
liability by USA or any ERISA Affiliate, or in the imposition of any Lien on any
of the rights, properties or assets of USA or any ERISA Affiliate, in either
case pursuant to Title I or IV of ERISA or to such penalty or excise tax
provisions or to Section 401(a)(29) or 412 of the Code, other than such
liabilities or Liens as would not be individually or in the aggregate Material.
(b) The present value of the aggregate benefit liabilities
under each of the Plans (other than Multiemployer Plans), determined as of the
end of such Plan's most recently ended plan year on the basis of the actuarial
assumptions specified for funding purposes in Plan's most recent actuarial
valuation report, did not exceed the aggregate current value of the assets of
such Plan allocable to such benefit liabilities. The term "benefit liabilities"
has the meaning specified in section 4001 of ERISA and the terms "current value"
and "present value" have the meaning specified in section 3 of ERISA.
(c) USA and its ERISA Affiliates have not incurred withdrawal
liabilities (and are not subject to contingent withdrawal liabilities) under
section 4201 or 4204 of ERISA in respect of Multiemployer Plans that
individually or in the aggregate are Material.
(d) The expected post-retirement benefit obligation (determined
as of the last day of USA's most recently ended fiscal year in accordance with
Financial Accounting Standards Board Statement No. 106, without regard to
liabilities attributable to continuation coverage mandated by section 4980B or
the Code) of USA and its Subsidiaries is not Material.
Section 4.14. Status under Certain Statutes. Neither USA nor any
Subsidiary is subject to regulation under the Investment Company Act of 1940, as
amended, the Public Utility Holding Company Act of 1935, as amended, the
Interstate Commerce Act, as amended, or the Federal Power Act, as amended.
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Section 4.15. Capitalization. The authorized capital stock of USA
consists solely of 20,000,000 shares of $.0001 par common stock, of which
5,229,109 shares are issued and outstanding.
Section 4.16. Environmental Matters. Neither USA nor any Subsidiary
has knowledge of any claim or has received any notice of any claim, and no
proceeding has been instituted raising any claim against USA or any of its
Subsidiaries or any of their respective real properties now or formerly owned,
leased or operated by any of them or other assets, alleging any damage to the
environment or violation of any Environmental Laws, except, in each case, such
as could not reasonably be expected to result in a Material Adverse Effect.
Except as otherwise disclosed to the Noteholders in writing, (a) neither USA nor
any Subsidiary has knowledge of any facts which would give rise to any claim,
public or private, of violation of Environmental Laws or damage to the
environment emanating from, occurring on or in any way related to real
properties now or formerly owned, leased or operated by any of them or to other
assets or their use, except, in each case, such as could not reasonably be
expected to result in a Material Adverse Effect; (b) neither USA nor any of its
Subsidiaries has stored any Hazardous Materials on real properties now or
formerly owned, leased or operated by any of them and has not disposed of any
Hazardous Materials in a manner contrary to any Environmental Laws in each case
in any manner that could reasonably be expected to result in a Material Adverse
Effect; and (c) all buildings on all real properties now owned, leased or
operated by USA or any of its Subsidiaries are in compliance with applicable
Environmental Laws, except where failure to comply could not reasonably be
expected to result in an Material Adverse Effect.
ARTICLE V
INFORMATION AS TO COMPANY
Section 5.01. Financial and Business Information. USA shall deliver to
each of the Noteholders:
(a) Within 45 days after the end of each quarterly fiscal period
in each fiscal year of USA, copies of (i) a consolidated balance sheet of USA
and its Subsidiaries as at the end of such quarter, and (ii) consolidated
statements of income, changes in shareholders' equity and cash flows of USA and
its Subsidiaries, for such quarter and for the portion of the fiscal year ending
with such quarter, setting forth in each case in comparative form the figures
for the corresponding periods in the previous fiscal year, all in reasonable
detail, prepared in accordance with GAAP applicable to quarterly financial
statements generally, and certified by a Senior Financial Officer of USA as
fairly presenting, in all material respects, the financial position of the
companies being reported on and their results of operations and cash flows,
subject to changes resulting from year-end adjustments.
(b) Within 90 days after the end of each fiscal year of USA,
copies of (i) a consolidated balance sheet of USA and its Subsidiaries, as at
the end of such year, and (ii) consolidated statements of income, changes
in shareholders' equity and cash flows of USA and its Subsidiaries, for such
year, setting forth in each case in comparative form the figures for the
previous
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fiscal year, all in reasonable detail, prepared in accordance with GAAP, and
accompanied (A) by an opinion thereon of independent certified public
accountants of recognized national standing, which opinion shall state that such
financial statements present fairly, in all material respects, the financial
position of the companies being reported upon and their results of operations
and cash flows and have been prepared in conformity with GAAP, and that the
examination of such accountants in connection with such financial statements has
been made in accordance with generally accepted auditing standards, and that
such audit provides a reasonable basis for such opinion in the circumstances,
and (B) a certificate of such accountants stating that they have reviewed this
Agreement and stating further whether, in making their audit, they have become
aware of any condition or event that then constitutes a Default or an Event of
Default, and, if they are aware that any such condition or event then exists,
specifying the nature and period of the existence thereof.
(c) Within 20 days after the end of each calendar month, copies of
(i) a consolidated balance sheet of USA and its Subsidiaries as at the end of
such month, and (ii) consolidated statements of income, changes in shareholders'
equity and cash flows of USA and its Subsidiaries, for such month and for the
portion of the fiscal year ending with such month, setting forth in each case in
comparative form the figures for the corresponding periods in the previous
fiscal year, all in reasonable detail, prepared in accordance with GAAP
applicable to monthly financial statements generally, and certified by a Senior
Financial Officer of USA as fairly presenting, in all material respects, the
financial position of the companies being reported on and their results of
operations and cash flows, subject to changes resulting from year-end
adjustments.
(d) Promptly upon their becoming available, one copy of (i) each
financial statement, report, notice or proxy statement sent by USA or any
Subsidiary to public securities holders generally, and (ii) each regular or
periodic report, each registration statement (without exhibits except as
expressly requested by such holder), and each prospectus and all amendments
thereto filed by USA or any Subsidiary with the Securities and Exchange
Commission and of all press releases and other statements made available
generally by USA or any Subsidiary to the public concerning developments that
are Material.
(e) Promptly, and in any event within five days after a Responsible
Officer of USA becoming aware of any of the following, a written notice setting
forth the nature thereof and the action, if any, that USA or an ERISA Affiliate
proposes to take with respect thereto: (i) with respect to any Plan, any
reportable event, as defined in section 4043(b) of ERISA and the regulations
thereunder, for which notice thereof has not been waived pursuant to such
regulations as in effect on the date hereof; or (ii) the taking by the PBGC of
steps to institute, or the threatening by the PBGC of the institution of,
proceedings under section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan, or the receipt by USA or any
ERISA Affiliate of a notice from a Multiemployer Plan that such action has been
taken by the PBGC with respect to such Multiemployer Plan; or (iii) any event,
transaction or condition that could result in the incurrence of any liability by
USA or any ERISA Affiliate pursuant to Title I or IV of ERISA or the penalty or
excise tax provisions of the Code relating to employee benefit plans, or in the
imposition of any Lien on any of the rights, properties or assets of USA or any
ERISA Affiliate pursuant to Title
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I or IV of ERISA or such penalty or excise tax provisions, if such liability or
Lien, taken together with any other such liabilities or Liens then existing,
could reasonably be expected to be Material.
(f) Promptly, and in any event within 30 days of receipt thereof,
copies of any notice to USA or any Subsidiary from any Federal or state
Governmental Authority relating to any order, ruling, statute or other law or
regulation that could reasonably be expected to have a Material Adverse Effect;
and
(g) With reasonable promptness, such other data and information
relating to the business, operations, affairs, financial condition, assets or
properties of USA or any of its Subsidiaries or relating to the ability of USA
to perform its obligations hereunder and under the Notes as from time to time
may be reasonably requested by any of Noteholder.
Section 5.02. Officer's Certificate. Each set of financial statements
delivered to a holder of Notes pursuant to Section 5.01(a), Section 5.01(b) or
Section 5.01(c) shall be accompanied by a certificate of a Senior Financial
Officer of USA setting forth: (a) the information (including detailed
calculations) required in order to establish whether USA was in compliance with
the requirements of Section 7.03 hereof during the monthly, quarterly or annual
period covered by the statements then being furnished (including with respect to
each such Section, where applicable, the calculations of the maximum or minimum
amount, ratio or percentage, as the case may be, permissible under the terms of
such Sections, and the calculation of the amount, ratio or percentage then in
existence); and (b) a statement that such officer has reviewed the relevant
terms hereof and has made, or caused to be made, under his or her supervision, a
review of the transactions and conditions of USA and its Subsidiaries from the
beginning of the monthly, quarterly or annual period covered by the statements
then being furnished to the date of the certificate and that such review shall
not have disclosed the existence during such period of any condition or event
that constitutes a Default or an Event of Default or, if any such condition or
event existed or exists (including, without limitation, any such event or
condition resulting from the failure of USA or any Subsidiary to comply with any
Environmental Law), specifying the nature and period of existence thereof and
what action USA shall have taken or proposes to take with respect thereto.
Section 5.03. Inspection. USA shall permit the representatives of
each Noteholder, at the expense of USA and upon reasonable prior notice to USA,
to visit and inspect any of the offices or properties of USA or any Subsidiary,
to examine all their respective books of account, records, reports and other
papers, to make copies and extracts therefrom, and to discuss their respective
affairs, finances and accounts with their respective officers and independent
public accountants (and by this provision USA authorizes said accountants to
discuss the affairs, finances and accounts of USA and its Subsidiaries), all at
such times and as often as may be requested.
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ARTICLE VI
AFFIRMATIVE COVENANTS
USA covenants that so long as any of the Commitments remain in effect
or any of the Notes are outstanding:
Section 6.01. Compliance with Law; Contracts. USA will, and will cause
each of its Subsidiaries to, comply with all laws, ordinances or governmental
rules or regulations to which each of them is subject, including, without
limitation, Environmental Laws, and will obtain and maintain in effect all
licenses, certificates, permits, franchises and other governmental
authorizations necessary to the ownership of their respective properties or to
the conduct of their respective businesses, in each case to the extent necessary
to ensure that non-compliance with such laws, ordinances or governmental rules
or regulations or failures to obtain or maintain in effect such licenses,
certificates, permits, franchises and other governmental authorizations could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. USA will, and will cause each of its Subsidiaries to, comply
with, and perform their respective obligations under, each contract or agreement
to which each is a party, unless, in good faith judgment of USA, the failure to
so comply or perform could not reasonably be expected to have a Material Adverse
Effect.
Section 6.02. Insurance. USA will, and will cause each of its
Subsidiaries to, maintain, with financially sound and reputable insurers,
insurance with respect to their respective properties and businesses against
such casualties and contingencies, of such types, on such terms and in such
amounts (including deductibles, co-insurance and self-insurance, if adequate
reserves are maintained with respect thereto) as is customary in the case of
entities of established reputations engaged in the same or a similar business
and similarly situated, including the insurance described in Schedule 6.02.
Section 6.03. Maintenance of Properties. USA will, and will cause each
of its Subsidiaries to, maintain and keep, or cause to be maintained and kept,
their respective properties in good repair, working order and condition (other
than ordinary wear and tear), so that the business carried on in connection
therewith may be properly conducted at all times, provided that this Section
shall not prevent USA or any Subsidiary from discontinuing the operation and
the maintenance of any of its properties if such discontinuance is desirable in
the conduct of its business and USA has concluded that such discontinuance could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
Section 6.04. Payment of Taxes and Claims. USA will, and will cause
each of its Subsidiaries to, file all tax returns required to be filed in any
jurisdiction and to pay and discharge all taxes shown to be due and payable on
such returns and all other taxes, assessments, governmental charges, or levies
imposed on them or any of their properties, assets, income or franchises, to
the extent such taxes and assessments have become due and payable and before
they have become delinquent and all claims for which sums have become due and
payable that have or might become
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a Lien on properties or assets of USA or any Subsidiary, provided that neither
USA nor any Subsidiary need pay any such tax or assessment or claims if (i) the
amount, applicability or validity thereof is contested by USA or such Subsidiary
on a timely basis in good faith and in appropriate proceedings, and USA or a
Subsidiary has established adequate reserves therefor in accordance with GAAP on
the books of USA or such Subsidiary or (ii) the nonpayment of all such taxes and
assessments in the aggregate could not reasonably be expected to have a Material
Adverse Effect.
Section 6.05. Corporate Existence, etc. USA will at all times
preserve and keep in full force and effect its corporate existence. USA will at
all times preserve and keep in full force and effect the corporate existence of
each of its Subsidiaries and all rights and franchises of USA and its
Subsidiaries unless, in the good faith judgment of USA, the termination of or
failure to preserve and keep in full force and effect such corporate existence,
right or franchise could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
ARTICLE VII
NEGATIVE COVENANTS
USA covenants that so long as any of the Commitments remain in effect
or any of the Notes are outstanding:
Section 7.01. Restrictions on Indebtedness. USA will not, and will
not permit any Subsidiary to, create, incur, assume, Guaranty or permit to exist
any Indebtedness, except:
(a) the Notes;
(b) the USA Notes;
(c) Indebtedness outstanding under the Fidelity Funding Agreement;
(d) Indebtedness with respect to the financing of insurance premiums
over the term in which the applicable insurance coverage is in place and
not to exceed one year, which financing is currently conducted through AFCO
Financing.
Section 7.02. Restrictions on Liens. USA will not, and will not
permit any Subsidiary to, create, incur, assume, or permit to exist any Lien
with respect to any asset now owned or hereafter acquired, except:
(a) Liens in favor of the Noteholders;
(b) Liens existing on the date hereof and described on Schedule 7.02;
(c) Liens in favor of the Noteholders under the USA Note Agreements;
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(d) encumbrances consisting of easements of ingress or egress over
real property, where the same do not materially detract from the use or
enjoyment of such property by, or the value of such property to, USA;
(e) Liens for taxes or assessments or governmental charges or levies,
if payment shall not at the time be required to be made in accordance with
the provisions of Section 6.04;
(f) any judgment lien, unless the judgment it secures shall not,
within 30 days after the entry thereof, have been discharged or execution
thereof stayed pending appeal, or shall not have been discharged within 30
days after the expiration of any such stay;
(g) statutory liens of landlords and liens of carriers, warehousemen,
mechanics, laborers and materialmen incurred in the ordinary course of
business for sums not yet due or being contested in good faith; and
(h) Liens (other than liens created by section 4068 of ERISA)
incurred on pledges or deposits made in the ordinary course of business in
connection with workmen's compensation, unemployment insurance, social
security laws or similar legislation.
Section 7.03. Financial Covenants. USA will not permit:
(a) its Current Assets at any time to be less than the sum of (i) its
Current Liabilities as at such date, minus (ii) any portion of such Current
Liabilities consisting of amounts outstanding under the Fidelity Funding
Agreement that are not due within one year of such date;
(b) its Tangible Net Worth at any time to be less than $7,000,000;
and
(c) the sum, determined as of the last day of each calendar month, of
(i) its Net Income for the twelve month period then ended, plus (ii) any
interest expense deducted in the calculation of Net Income for such twelve
month period, plus (iii) any depreciation and amortization expense deducted
in the calculation of Net Income for such twelve month period, plus (iv)
any Federal income taxes deducted in the calculation of Net Income for such
twelve month period, to be less than $2,500,000.
Section 7.04. Restricted Payments. USA will not, and will not permit
any Subsidiary, directly or indirectly, to make or pay (a) any dividend or other
distribution on any shares of USA's capital stock (including any dividends
payable in shares of capital stock), (b) any payment on account of the purchase,
redemption, retirement or acquisition of any shares of USA's capital stock or
any option, warrant or other right to acquire such shares, or (c) any payments
or other distributions to Sierra Management, Inc.
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Section 7.05. Merger, Consolidation, etc. USA shall not consolidate
with or merge with any other Person or convey, transfer or lease all or
substantially all of its assets in a single transaction or series of
transactions to any Person.
Section 7.06. Restrictions on Asset Sales. USA will not, and will not
permit any Subsidiary to, sell, transfer, assign, convey or otherwise dispose of
an interest in any asset now owned or hereafter acquired.
Section 7.07. Transactions with Affiliates. USA will not, and will not
permit any Subsidiary to, enter into directly or indirectly any Material
transaction or Material group of related transactions (including without
limitation the purchase, lease, sale or exchange of properties of any kind or
the rendering of any service) with any Affiliate (other than USA or another
Subsidiary), except in the ordinary course and pursuant to the reasonable
requirements of USA's or such Subsidiary's business and upon fair and reasonable
terms no less favorable to USA or such Subsidiary than would be obtainable in a
comparable arm's-length transaction with a Person not an Affiliate.
Section 7.08. Change in Business. Except for oil and gas exploration
and production operations to be conducted by the Company, USA will not, and will
not permit any of its Subsidiaries to, directly or indirectly engage to a
material extent in any business other than those in which it is presently
engaged or that are directly related thereto, or discontinue any of its existing
lines of business or substantially alter its method of doing business. Without
limiting the generality of the foregoing, USA and its Subsidiaries (other than
the Company) shall not engage in any oil and gas exploration and production
operations or business.
Section 7.09. Fidelity Funding Agreement. Without the prior written
consent of the Noteholders, USA will not, and will not permit any of its
Subsidiaries to, amend, modify or extend the Fidelity Funding Agreement.
Section 7.10. Restriction on Investment. Other than (a) the common
stock of the Company owned by USA on the date hereof, (b) Oil and Gas Properties
transferred to the Company prior to the date hereof and (c) capital
contributions to the Company that are applied directly by the Company to pay the
Indebtedness owing on the Notes, USA will not, and will not permit any of its
Subsidiaries to, make any Investment in the Company without the Noteholders'
prior written consent.
ARTICLE VIII
MISCELLANEOUS
Section 8.01. Transaction Expenses. Whether or not the transactions
contemplated hereby are consummated, USA will pay all reasonable costs and
expenses (including reasonable attorneys' fees of a special counsel and any
local or other counsel) incurred by the Noteholders or holder of a Note in
connection with such transactions and in connection with any amendments,
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waivers or consents under or in respect of this Agreement or the other
Transaction Documents (whether or not such amendment, waiver or consent becomes
effective), including, without limitation: (a) the reasonable costs and expenses
incurred in enforcing or defending (or determining whether or how to enforce or
defend) any rights under this Agreement or the other Transaction Documents or in
responding to any subpoena or other legal process or informal investigative
demand issued in connection with this Agreement or the other Transaction
Documents, or by reason of being a holder of any Note, (b) the reasonable costs
and expenses of negotiation, preparation and execution of this Agreement and the
other Transaction Documents, and (c) the reasonable costs and expenses,
including reasonable financial advisors' fees, incurred in connection with the
insolvency or bankruptcy of USA or any Subsidiary or in connection with any
work-out or restructuring of the transactions contemplated hereby and by the
Notes. USA will pay, and will save the Noteholders and each other holder of a
Note harmless from, all claims in respect of any fees, costs or expenses if any,
of brokers and finders (other than those retained by the Noteholders). The
obligations of USA under this Section 8.01 will survive the payment or transfer
of any Note, the enforcement, amendment or waiver of any provision of this
Agreement or the other Transaction Documents, and the termination of this
Agreement.
Section 8.02. Survival of Representations and Warranties. All
representations and warranties contained herein shall survive the execution and
delivery of this Agreement and the Notes, the purchase or transfer by the
Noteholders of any Note or portion thereof or interest therein and the payment
of any Note, and may be relied upon by any subsequent holder of a Note,
regardless of any investigation made at any time by or on behalf of the
Noteholders or any other holder of a Note. All statements contained in any
certificate or other instrument delivered by or on behalf of USA pursuant to
this Agreement shall be deemed representations and warranties of USA under this
Agreement.
Section 8.03. Amendment and Waiver. This Agreement may be
amended, and the observance of any term hereof may be waived (either
retroactively or prospectively), with (and only with) the written consent of the
Required Holders, except that no amendment or waiver may, without the written
consent of the holder of each Note at the time outstanding affected thereby,
release USA from its obligations hereunder. Any amendment or waiver consented
to as provided in this Section 8.03 applies equally to all holders of Notes and
is binding upon them and upon each future holder of any Note and upon USA
without regard to whether such Note has been marked to indicate such amendment
or waiver. No such amendment or waiver will extend to or affect any obligation,
covenant or agreement not expressly amended or waived or impair any right
consequent thereon. No course of dealing between USA and the holder of any Note
nor any delay in exercising any rights hereunder or under any Note shall operate
as a waiver of any rights of any holder of such Note.
Section 8.04. Notices. All notices and communications provided
for hereunder shall be in writing and sent (a) by telecopy if the sender on the
same day sends a confirming copy of such notice by a recognized overnight
delivery service (charges prepaid), or (b) by registered or certified mail with
return receipt requested (postage prepaid), or (c) by a recognized overnight
delivery
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service (with charges prepaid). Any such notice must be sent: if a Noteholder,
to its address specified for such communications in Schedule A to the Note
Agreement, or at such other address as it shall have specified to USA in
writing, if to USA, to USA at 00000 Xxxx Xxx Xxxxx, Xxxxx 000, Xxxxxxx, Xxxxx
00000, Telecopy No.: 000-000-0000, or at such other address as USA shall have
specified to the holder of each Note in writing. Notices under this Section 8.04
will be deemed given only when actually received.
Section 8.05. Limitation on Interest. Each provision in this
Agreement and each other Transaction Document is expressly limited so that in no
event whatsoever shall the amount paid, or otherwise agreed to be paid, by USA
for the use, forbearance or detention of the money to be loaned under this
Agreement or any other Transaction Document or otherwise (including any sums
paid as required by any covenant or obligation contained herein or in any other
Transaction Document which is for the use, forbearance or detention of such
money), exceed that amount of money which would cause the effective rate of
interest thereon to exceed the Highest Lawful Rate, and all amounts owed under
this Agreement and each other Transaction Document shall be held to be subject
to reduction to the effect that such amounts so paid or agreed to be paid which
are for the use, forbearance or detention of money under this Agreement or such
Transaction Document shall in no event exceed that amount of money which would
cause the effective rate of interest thereon to exceed the Highest Lawful Rate.
Section 8.06 Successors and Assigns. All covenants and other
agreements contained in this Agreement by or on behalf of any of the parties
hereto bind and inure to the benefit of their respective successors and assigns
(including, without limitation, any subsequent holder of a Note) whether so
expressed or not.
Section 8.07. Severability. Any provision of this Agreement that
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall (to the full extent permitted by law)
not invalidate or render unenforceable such provision in any other jurisdiction.
Section 8.08. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be an original but all of which
together shall constitute one instrument. Each counterpart may consist of a
number of copies hereof, each signed by less than all, but together signed by
all, of the parties hereto.
Section 8.09. Confidentiality. In connection with the negotiation
and administration of this Agreement and the other Transaction Documents, USA
has furnished and will from time to time furnish the Noteholders (such
information, other than any such information which (i) was publicy available, or
otherwise known to the Noteholders, at the time of disclosure, (ii) subsequently
becomes publicly available other than through any act or omission by the
Noteholders or (iii) otherwise subsequently becomes known to the Noteholders,
being hereinafter referred to as "Confidential Information"). The Noteholders
will maintain the confidentiality of any
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Xxxxxxxxxxxx Information in accordance with such procedures as the Noteholders
apply generally to information of that nature. It is understood, however, that
the foregoing will not restrict the Noteholders' ability to freely exchange such
Confidential Information with current or prospective investors, assignees and
advisors. Subject to the prohibitions and restrictions imposed on the
Noteholders with respect to the Confidential Information under applicable
securities laws, it is further understood that the foregoing will not prohibit
the disclosure of any or all Confidential Information if and to the extent that
such disclosure may be required or requested (w) by a Governmental Authority,
(x) pursuant to court order, subpoena or other legal process or in connection
with any pending or threatened litigation hereunder, (y) otherwise as required
by law, or (z) in order to protect its interests or its right or remedies
hereunder or under the other Transaction Documents; in the event of any required
disclosure under clause (w), (x), or (y) above, the Noteholders agree to use
reasonable efforts to inform USA as promptly as practicable.
Section 8.10. Final Agreement of the Parties. THIS AGREEMENT AND
THE OTHER TRANSACTION DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
Section 8.11. Jury Waiver. USA AND THE NOTEHOLDERS HEREBY
IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
Section8.12. Choice of Forum. USA AND THE NOTEHOLDERS AGREE THAT
ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY SHALL BE BROUGHT IN THE FEDERAL OR STATE
COURTS OF XXXXXX COUNTY, TEXAS, OTHER THAN LEGAL PROCEEDINGS INSTITUTED BY THE
NOTEHOLDERS WITH RESPECT TO THEIR RIGHTS AND REMEDIES UNDER THE SECURITY
DOCUMENTS, WHICH PROCEEDINGS MAY BE BROUGHT IN THE FEDERAL OR STATE COURTS OF
XXXXXX COUNTY, TEXAS OR THE COURTS OF ANY OTHER JURISDICTION DEEMED APPROPRIATE
BY THE NOTEHOLDERS TO ENFORCE THEIR RIGHTS AND REMEDIES UNDER THE SECURITY
DOCUMENTS.
Section 8.13. Governing Law. This Agreement shall be construed and
enforced in accordance with, and the rights of the parties shall be governed by,
the law of the State of New York excluding choice-of-law principles of the law
of such State that would require the application of the laws of a jurisdiction
other than such State.
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IN WITNESS WHEREOF, USA and the Noteholders have caused this Agreement
to be executed by their respective representatives thereunto duly authorized
effective as of the date first above written.
UNIVERSAL SEISMIC ASSOCIATES, INC.
By:
-------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: President
RIMCO PARTNERS, L.P.,
RIMCO PARTNERS, X.X. XX,
RIMCO PARTNERS, L.P. III, and
RIMCO PARTNERS, X.X. XX
By: Resource Investors Management Company
Limited Partnership, their general
partner
By: RIMCO Associates, Inc.,
its general partner
By:
-------------------------------------
Name: Xxxx Xxxxxxx
Title: Vice President
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