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EXHIBIT 10.57
THIRD AMENDED AND RESTATED
ACCOUNTS RECEIVABLE MANAGEMENT
AND SECURITY AGREEMENT
DATED AS OF MARCH 15, 2000
BY
TRANSTEXAS GAS CORPORATION, AS BORROWER
AND
GMAC COMMERCIAL CREDIT LLC, AS LENDER
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TABLE OF CONTENTS
1. (A) General Definitions..................................................................................1
(B) Accounting Terms...............................................................................22
(C) UCC Terms......................................................................................22
(D) Other Terms....................................................................................22
2. Conditions; Accounts Receivables Management; Loans......................................................22
3. Repayment...............................................................................................27
4. Procedure for Revolving Credit Advances.................................................................27
5. Interest; Fees; Commissions.............................................................................28
6. Security Interest.......................................................................................31
7. Representations Concerning the Collateral...............................................................32
8. Covenants Concerning the Collateral.....................................................................32
9. Collection and Maintenance of Collateral and Records....................................................34
10. Inspections.............................................................................................34
11. Information.............................................................................................35
12. Additional Representations and Warranties...............................................................36
13. Covenants...............................................................................................38
14. Power of Attorney.......................................................................................45
15. Expenses................................................................................................45
16. Assignment By Lender....................................................................................46
17. Waivers.................................................................................................47
18. Term of Agreement.......................................................................................47
19. Events of Default.......................................................................................48
20. Remedies................................................................................................50
21. Waiver Cumulative Remedies..............................................................................50
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22. Application of Payments.................................................................................51
23. Depository Accounts.....................................................................................51
24. Lock Box Accounts.......................................................................................51
25. Revival.................................................................................................51
26. Notices.................................................................................................51
27. Governing Law; Consent to Exclusive Jurisdiction and Waiver of Jury Trial...............................52
28. Limitation of Liability.................................................................................53
29. Entire Understanding....................................................................................53
30. Modification............................................................................................54
31. Severability............................................................................................54
32. Captions................................................................................................54
33. Confidentiality.........................................................................................54
34. Guarantee...............................................................................................54
35. Counterparts; Telecopied Signatures.....................................................................58
36. Construction............................................................................................58
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SCHEDULES
Schedule 12(e) - Laws, including environmental laws
Schedule 12(h) - Litigation
Schedule 13(c) - Inventory Locations
Schedule 16 - Consent Required for Assignment
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THIRD AMENDED AND RESTATED ACCOUNTS RECEIVABLE
MANAGEMENT AND SECURITY AGREEMENT
This Third Amended and Restated Accounts Receivable Management and
Security Agreement (the "Third Amended Credit Agreement") is made as of March
15, 2000, by and between GMAC COMMERCIAL CREDIT LLC ("Lender"), having offices
at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ and TRANSTEXAS GAS
CORPORATION ("TRANSTEXAS" or "Borrower"), having its principal place of business
at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇.
WITNESSETH
WHEREAS, Borrower and Lender have heretofore entered into an Accounts
Receivable Management and Security Agreement dated as of October 6, 1994 (the
"Original Credit Agreement"), providing, among other things, for revolving
credit advances to be made and letters of credit to be issued by Lender to, or
for the account of, Borrower on the terms and subject to the conditions therein
set forth;
WHEREAS, the Original Credit Agreement was amended by an Amended and
Restated Accounts Receivable Management and Security Agreement dated as of
October 31, 1995, and by a First Amendment to Amended and Restated Accounts
Receivable Management and Security Agreement dated as of December 13, 1996, by a
Second Amended and Restated Accounts Receivable Management and Security
Agreement dated as of October 14, 1997 and a Post-Petition Amendment No. 1 to
Financing Agreement dated as of April 19, 1999 (collectively the "Amended Credit
Agreement").
WHEREAS, Borrower has requested that Lender amend the Amended Credit
Agreement to reflect the implementation of the Plan of Reorganization of
Borrower;
WHEREAS, Lender is willing to (a) amend the Amended Credit Agreement to
reflect the effectiveness of the Plan of Reorganization of Borrower and (b) to
restate the Amended Credit Agreement as so amended, all on the terms and subject
to the conditions herein set forth.
NOW, THEREFORE, Borrower and Lender agree that the Amended Credit
Agreement is hereby amended and restated, effective as of the Closing Date, to
read in its entirety as follows:
1. (A) General Definitions. When used in this Agreement. the following
terms shall have the following meanings:
"Adjusted Net Assets" of a Guarantor means the lesser of (a) the amount
by which the Guarantor's property, at a fair valuation, exceeds the sum of its
debts (including unliquidated or contingent debts), (b) the amount by which the
present fair salable value of the Guarantor's assets exceeds the amount that
will be required to pay its probable liability on its existing debts as they
become absolute and matured, (c) the amount by which the Guarantor's assets
exceed the maximum amount that would constitute unreasonably small capital for
its business, or (d) the
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amount by which the Guarantor's assets exceed the amount that such Guarantor
should reasonably retain to pay its debts (including unliquidated or contingent
debts) as they mature.
"Affiliate" of any Person means (a) any other Person (other than a
Subsidiary or an Unrestricted Subsidiary) which, directly or indirectly, is in
control of, is controlled by, or is under common control with such Person, or
(b) any Person who is a director or officer (i) of such Person, (ii) of any
Subsidiary of such Person or (iii) of any Person described in clause (a) above.
For purposes of this definition, control of a Person shall mean the power,
direct or indirect, (i) to vote 10% or more of the securities having ordinary
voting power for the election of directors of such Person, or (ii) to direct or
cause the direction of the management and policies of such Person whether by
contract or otherwise.
"Alternate Base Rate" means, for any day, a rate per annum equal to the
higher of (i) the Prime Rate in effect on such day and (ii) the Federal Funds
Rate in effect on such day plus 1/2 of 1%.
"Ancillary Agreements" means the Letter of Credit Agreement, any
Guaranty and all other agreements, instruments, and documents including, without
limitation, mortgages, pledges, powers of attorney, consents, assignments,
contracts, security agreements, trust agreements, whether heretofore,
concurrently, or hereafter executed by or on behalf of Borrower or any
Subsidiary or Guarantor and delivered to Lender, relating to this Agreement or
any of such Ancillary Agreements or to the transactions contemplated by this
Agreement.
"Asset Sale" means any direct or indirect conveyance, sale, transfer or
other disposition (including through damage or destruction for which insurance
proceeds are paid or by condemnation), in one or a series of related
transactions, of any of the properties, businesses or assets of Borrower or any
Guarantor; provided, however, that "Asset Sale" shall not include (i) any
disposition of property that is not Collateral, (ii) any disposition of
Collateral in accordance with Section 8(a) hereof, or (iii) any pledge or
disposition of assets to the extent and only to the extent that it results in
the creation of a Permitted Lien.
"Attributable Indebtedness" in respect of a Sale and Leaseback
Transaction means, at the time of determination, the present value (discounted
at the rate of interest implicit in such transaction, determined in accordance
with GAAP or, in the event that such rate of interest is not reasonably
determinable, discounted at the rate of interest of 9%) of the Capitalized Lease
Obligation during the remaining term of the Capital Lease included in such Sale
and Leaseback Transaction (including any period for which such lease has been
extended or may, at the option of the lessor, be extended).
"Availability" means the lesser of (x) the Maximum Loan Amount, or (y)
the Formula Amount, less the total amount, without duplication, of outstanding
(i) Revolving Credit Advances and other amounts charged or chargeable to
Borrower's account hereunder, plus (ii) Letter of Credit Liabilities.
"Bank" means The Bank of New York.
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"Borrower Entity(ies)" means, individually or collectively, Borrower
and each of its Subsidiaries.
"Business Day" means any day other than a day on which commercial banks
in New York or Texas are authorized or required by law to close.
"Capital Expenditures" of a Person means expenditures (whether paid in
cash or accrued as a liability) by such Person or any of its Subsidiaries that,
in conformity with GAAP, are or would be included in "capital expenditures,"
"additions to property, plant or equipment" or comparable items in the
consolidated financial statements of such Person consistent with prior
accounting practices.
"Capital Lease" as applied to any Person means the lease of any
property (whether real, personal or mixed) by that Person as lessee which, in
conformity with GAAP, is accounted for as a capital lease on the balance sheet
of that Person.
"Capital Stock" means, with respect to any Person, any capital stock of
such Person and shares, interests, participations or other ownership interests
(however designated), of such Person and any rights (other than debt securities
convertible into corporate stock), warrants or options to purchase any of the
foregoing, including without limitation each class of common stock and preferred
stock of such Person if such Person is a corporation and each general and
limited partnership interest or other equity interest of such Person if such
Person is a partnership.
"Capitalized Lease Obligation" means obligations under a lease that are
required to be capitalized for financial reporting purposes in accordance with
GAAP (including Statement of Financial Accounting Standards No. 13 of the
Financial Accounting Standards Board as in effect on the Closing Date), and the
amount of Indebtedness represented by such obligations shall be the capitalized
amount of such obligations, as determined in accordance with GAAP.
"Cash Equivalents" means (a) Dollars, (b) securities issued or directly
and fully guaranteed or insured by the United States government or any agency or
instrumentality thereof having maturities of not more than one year from the
date of acquisition, (c) certificates of deposit with maturities of one year or
less from the date of acquisition, bankers' acceptances with maturities not
exceeding one year, and overnight bank deposits, in each case, with any Eligible
Institution, (d) repurchase obligations with a term of not more than seven days
for underlying securities of the types described in clauses (b) and (c) entered
into with any Eligible Institution, (e) commercial paper rated "P-1," "A-1" or
the equivalent thereof by ▇▇▇▇▇'▇ Investors Service, Inc. or Standard & Poor's
Ratings Group, respectively, and in each case maturing within one year after the
date of acquisition, (f) shares of money market funds that invest solely in
Dollars and securities of the types described in clauses (a) through (e) above,
(g) demand and time deposits and certificates of deposit with any commercial
bank organized in the United States not meeting the qualifications specified in
clause (c) above or an Eligible Institution, provided, however, that such
deposits and certificates support bonds, letters of credit and other similar
types of obligations incurred in the ordinary course of business, (h) deposits,
including deposits denominated in foreign currency, with any Eligible
Institution; provided, however, that all such deposits do not exceed $10 million
in the aggregate at any one time, and
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(i) demand or fully insured time deposits used in the ordinary course of
business with commercial banks insured by the Federal Deposit Insurance
Corporation.
"Change of Control" means the occurrence of the following event: during
any period of three consecutive years or less beginning at or after 11:59 p.m.,
New York, New York time on the Closing Date, individuals who at the beginning of
such period constituted the Board of Directors of Borrower (together with any
new directors (a) whose election by such Board of Directors during such period
or whose nomination by such Board of Directors, for election by the stockholders
of Borrower during such period, was made or approved by a vote of not less than
60% of the directors of Borrower then still in office who were either directors
at the beginning of such period or whose election or nomination for election
during such period was previously so approved, or (b) in the case of the Class B
Director, elected during such period by the holders of the Class B Common Stock
voting separately as a class in such election) cease for any reason to
constitute a majority of the Board of Directors of Borrower then in office.
"Chapter 11 Proceeding" means that proceeding under Chapter 11, title
11 of the United States Code commenced by the filing of a voluntary petition
thereunder by Borrower in the United States Bankruptcy Court for the District of
Delaware on April 19, 1999, and transferred to the United States Bankruptcy
Court for the Southern District of Texas, Corpus Christi Division.
"Class B Common Stock" means the Class B Common Stock, par value $0.01
per share, of Borrower.
"Class B Director" means the Person elected to the Board of Directors
of Borrower by the holders of the Class B Common Stock voting separately as a
class in such election.
"Closing Date" means March 15, 2000 or such other date as may be agreed
upon by the parties hereto.
"Collateral" means and includes:
(i) all Inventory;
(ii) all Receivables; and
(iii) all products and proceeds of the foregoing (i) and (ii).
"Consolidated Coverage Ratio" means for any period, the ratio of (i)
the sum of Consolidated EBITDA of Borrower for such period, plus the net
proceeds received by Borrower and its consolidated Subsidiaries in respect of
Indebtedness for borrowed money (other than Indebtedness under this Agreement or
the Oil & Gas Credit Facility) incurred during such period, plus, without
duplication, the net proceeds received by Borrower and its consolidated
Subsidiaries from asset sales (other than sales of Inventory and Hydrocarbons in
the ordinary course of business) consummated during such period, to (ii) the sum
of Consolidated Interest Expense of Borrower for such period,
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plus Capital Expenditures of Borrower during such period, plus required
principal payments by Borrower and its consolidated Subsidiaries on Indebtedness
for borrowed money (other than Indebtedness under this Agreement or the Oil &
Gas Credit Facility) during such period, plus cash dividends.
"Consolidated EBITDA" of any Person for any period, unless otherwise
defined herein, means (a) the Consolidated Net Income of such Person for such
period, plus (b) the sum, without duplication (and only to the extent such
amounts are deducted from net revenues in determining such Consolidated Net
Income), of (i) the provision for income taxes for such period, for such Person
and its consolidated Subsidiaries, (ii) depreciation, depletion, and
amortization of such Person and its consolidated Subsidiaries for such period,
and (iii) Consolidated Fixed Charges of such Person for such period, determined
in each case, on a consolidated basis for such Person and its consolidated
Subsidiaries in accordance with GAAP.
"Consolidated Fixed Charge Coverage Ratio" on any date (the
"Transaction Date") means, with respect to any Person, the ratio, on a pro forma
basis, of (i) the aggregate amount of Consolidated EBITDA of such Person
(attributable to continuing operations and businesses and exclusive of the
amounts attributable to operations and businesses discontinued or disposed of,
on a pro forma basis as if such operations and businesses were discontinued or
disposed of on the first day of the Reference Period) for the Reference Period
to (ii) the aggregate Consolidated Fixed Charges of such Person (exclusive of
amounts attributable to discontinued operations and businesses on a pro forma
basis as if such operations and businesses were discontinued or disposed of on
the first day of the Reference Period, but only to the extent that the
obligations giving rise to such Consolidated Fixed Charges would no longer be
obligations contributing to such Person's Consolidated Fixed Charges subsequent
to the Transaction Date) during the Reference Period; provided, however, that
for purposes of such computation, in calculating Consolidated EBITDA and
Consolidated Fixed Charges, (a) the transaction giving rise to the need to
calculate the Consolidated Fixed Charge Coverage Ratio shall be assumed to have
occurred on the first day of the Reference Period (b) the incurrence of any
Indebtedness or issuance of Disqualified Capital Stock during the Reference
Period or subsequent thereto and on or prior to the Transaction Date shall be
assumed to have occurred on the first day of such Reference Period, (c)
Consolidated Interest Expense attributable to any Indebtedness (whether existing
or being incurred) bearing a floating interest rate shall be computed as if the
rate in effect on the Transaction Date had been the applicable rate for the
entire period, unless such Person or any of its Subsidiaries is a party to a
Swap Obligation (that remains in effect for the 12-month period after the
Transaction Date) that has the effect of fixing the interest rate on the date of
computation, in which case such rate (whether higher or lower) shall be used,
and (d) if Borrower or any Subsidiary of Borrower has repaid, repurchased,
defeased or otherwise discharged any Indebtedness or Disqualified Capital Stock
since the beginning of the period measured by the four full fiscal quarters
ended immediately before the Transaction Date or if any Indebtedness is to be
repaid, repurchased, defeased or otherwise discharged (in each case other than
Indebtedness incurred under any revolving credit facility unless such
Indebtedness has been permanently repaid and has not been replaced) on the
Transaction Date, EBITDA and Consolidated Fixed Charges for such period shall be
calculated on a pro forma basis as if such discharge had occurred on the first
day of such period and as if Borrower or such Subsidiary has not earned the
interest income which has actually accrued during such period in respect of cash
or Cash Equivalents used to repay, repurchase, defease or otherwise discharge
such Indebtedness.
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"Consolidated Fixed Charges" of any Person for any period means
(without duplication) the sum of (i) Consolidated Interest Expense of such
Person for such period, (ii) dividend requirements of such Person and its
Consolidated Subsidiaries (whether in cash or otherwise (except dividends
payable solely in shares of Qualified Capital Stock)) with respect to Preferred
Stock paid, accrued, or scheduled to be paid or accrued during such period, in
each case to the extent attributable to such period and excluding items
eliminated in consolidation, (iii) one-third of the Consolidated Operating Lease
Obligations for such period, and (iv) fees paid, accrued, or scheduled to be
paid or accrued during such period by such Person and its Subsidiaries in
respect of performance bonds or other guarantees of payment. For purposes of
clause (ii) above, dividend requirements shall be increased to an amount
representing the pre-tax earnings that would be required to cover such dividend
requirements; accordingly, the increased amount shall be equal to a fraction,
the numerator of which is such dividend requirements and the denominator of
which is 1 minus the applicable actual combined effective federal, state, local
and foreign income tax rate of such Person and its Subsidiaries (expressed as a
decimal), on a consolidated basis, for the fiscal year immediately preceding the
date of the transaction giving rise to the need to calculate Consolidated Fixed
Charges.
"Consolidated Interest Expense" of any Person means, for any period,
the aggregate interest (without duplication), whether expensed or capitalized,
paid, accrued, or scheduled to be paid or accrued during such period in respect
of all Indebtedness of such Person and its Consolidated Subsidiaries (including
(i) amortization of deferred financing costs and original issue discount and
non-cash interest payments or accruals, (ii) the interest portion of all
deferred payment obligations, calculated in accordance with the effective
interest method, and (iii) all commissions, discounts, other fees, and charges
owed with respect to letters of credit and banker's acceptance financing and
costs associated with Swap Obligations, in each case to the extent attributable
to such period determined on a consolidated basis in accordance with GAAP). For
purposes of this definition, (x) interest on a Capitalized Lease Obligation
shall be deemed to accrue at an interest rate reasonably determined to be the
rate of interest implicit in such Capitalized Lease Obligation in accordance
with GAAP (including Statement of Financial Accounting Standards No. 13 of the
Financial Accounting Standards Board), and (y) Consolidated Interest Expense
attributable to any Indebtedness represented by the guarantee by such Person or
a Subsidiary of such Person other than with respect to Indebtedness of such
Person or a Subsidiary of such Person shall be deemed to be the interest expense
attributable to the item guaranteed.
"Consolidated Net Income" of any Person for any period means the net
income (loss) of such Person and its Consolidated Subsidiaries for such period,
determined in accordance with GAAP, plus asset impairment charges, less (without
duplication) (i) all extraordinary, unusual and nonrecurring gains (but not
losses), (ii) the net income, if positive, of any other Person, other than a
Consolidated Subsidiary, in which such Person or any of its Consolidated
subsidiaries has an interest, except to the extent of the amount of any
dividends or distributions actually paid in cash to such Person or a
Consolidated Subsidiary of such Person during such period, but not in excess of
such Person's pro rata share of such other Person's aggregate net income earned
during
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such period or earned during the immediately preceding period and not
distributed during such period, (iii) the net income, if positive, of any Person
acquired in a pooling of interests transaction for any period prior to the date
of such acquisition, and (iv) the net income, if positive, of any Subsidiary of
such Person to the extent that the declaration or payment of dividends or
similar distributions is not at the time permitted by operation of the terms of
its charter or any agreement, instrument, judgment, decree, order, statute,
rule, or governmental regulation applicable to such Subsidiary.
"Consolidated Subsidiary" means, for any Person, each Subsidiary of
such Person (whether now existing or hereafter created or acquired) the
financial statements of which shall be (or should have been) consolidated for
financial statement reporting purposes with the financial statements of such
Person in accordance with GAAP.
"Continuation Notice" means a notice of continuation duly executed by
an authorized officer of Borrower substantially in the form of Exhibit I hereto.
"Contract Rate" means an interest rate per annum equal to the sum of
(i) the Alternate Base Rate plus (ii) one percent (1%); provided, however, the
Contract Rate shall not at any time exceed the Highest Lawful Rate or be less
than 6%.
"Court Order" means the order of the Bankruptcy Court, in form and
substance acceptable to Lender in its sole and absolute discretion, authorizing
Borrower, inter alia, to enter into this financing arrangement with Lender.
"Credit Risk" means the risk of loss resulting solely and exclusively
from a Customer's financial inability to pay at maturity with respect to any
Receivable constituting collateral hereunder.
"Customer" means and includes the account debtor with respect to any
Receivable and/or any party who enters into any contract or other arrangement
with Borrower pursuant to which Borrower is to deliver any personal property or
perform any services.
"Default Rate" means a rate equal to two (2%) percent per annum in
excess of the Contract Rate, or the Overadvance Rate, as the case may be.
"Dispute" means any cause asserted for nonpayment of Receivables,
including, without limitation any alleged defense, counterclaim, offset, dispute
or other claim (real or merely asserted) whether arising from or relating to the
sale of goods or rendition of services or arising from or relating to any other
transaction or occurrence (other than returns, discounts, offsets, claims,
credits and allowances against such Receivables as provided in clause (n) of the
definition of Eligible Receivables).
"Disqualified Capital Stock" means, with respect to any Person, any
Capital Stock of such Person or its Subsidiaries that, by its terms or by the
terms of any security into which it is convertible or exchangeable, is, or upon
the happening of an event or the passage of time would be, required to be
redeemed or repurchased by such Person or its Subsidiaries, including at the
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option of the holder, in whole or in part, or has, or upon the happening of an
event or passage of time would have, a redemption or similar payment due, on or
prior to the maturity date of the Indenture Notes.
"Dollar-Denominated Production Payments" means production payment
obligations recorded as liabilities in accordance with GAAP, together with all
undertakings and obligations in connection therewith.
"Drilling Program" means any current or future arrangement between the
Borrower or any Subsidiary of the Borrower and another Person pursuant to which
(i) such Person agrees to drill, complete or perform operations to enhance
recovery from, a well or ▇▇▇▇▇ on mineral interests owned by the Borrower or
such Subsidiary and (ii) the Borrower or such Subsidiary agrees to convey or
assign to such person an interest in such well or ▇▇▇▇▇ in accordance with
clause (e) of the definition of "Permitted Liens."
"Eligible Institution" means a domestic commercial banking institution
that has combined capital and surplus of not less than $500,000,000, that is
rated "A" (or higher) according to ▇▇▇▇▇'▇ Investors Service, Inc. or Standard &
Poor's Ratings Group (a division of McGraw Hill, Inc.) at the time as of which
any investment or rollover therein is made.
"Eligible Inventory" means Inventory used in the Borrower's oil and gas
drilling, and production business which Lender, in the exercise of its
reasonable discretion, determines: (a) is subject to the security interest of
Lender and is subject to no other Liens whatsoever (other than Permitted Liens);
(b) is in good condition and meets all standards imposed by any governmental
agency, or any department or division thereof having regulatory authority over
such Inventory, its use or sale including but not limited to the Federal Fair
Labor Standards Act of 1938 as amended, and all rules, regulations and orders
thereunder; (c) is currently either usable or salable in the normal course of
Borrower's oil and gas drilling and production business; (d) is located in a
location listed on Schedule 13(c) attached hereto, as amended from time to time;
and (e) is not determined by Lender, in the exercise of its reasonable
discretion, to be ineligible for any other reason.
"Eligible Receivables" means and includes each Receivable which
conforms to the following criteria: (a) shipment of the merchandise or the
rendition of services has been completed; (b) no return, rejection or
repossession of the merchandise has occurred; (c) merchandise or services shall
not have been rejected or disputed by the Customer and there shall not have been
asserted any Dispute (provided that such Receivable shall be deemed ineligible
only to the extent of such Dispute); (d) continues to be in full conformity with
the representations and warranties made by Borrower to Lender with respect
thereto; (e) Lender is, and continues to be, satisfied in its reasonable
discretion with the credit standing of the Customer in relation to the amount of
credit extended; (f) is or by the 15th day of the following month will be
documented by an invoice in a form approved by Lender and shall not be unpaid
more than 45 days from invoice date with respect to the sale of condensate and
60 days from invoice date with respect to the sale of gas or more than 30 days
from due date with respect to the sale of condensate or gas; (g) less than 25 %
of the unpaid amount of invoices due from such Customer remain unpaid more than
45 days from invoice date with respect to the sale of condensate and 60 days
from
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invoice date with respect to the sale of gas or more than 30 days from due date
with respect to the sale of condensate or gas; (h) is not evidenced by chattel
paper or an instrument of any kind with respect to or in payment of the
Receivable unless such instrument is duly endorsed to and in possession of
Lender or represents a check in payment of a Receivable; (i) if the Customer is
located outside of the United States, the goods which gave rise to such
Receivable were shipped after receipt by Borrower from or on behalf of the
Customer of an irrevocable letter of credit, assigned and delivered to Lender
and confirmed by a financial institution acceptable to Lender and in form and
substance acceptable to Lender in its sole and absolute discretion, payable in
the full amount of the Receivable in United States dollars at a place of payment
located within the United States; (j) such Receivable is not subject to any
Lien, other than Permitted Liens; (k) does not arise out of transactions with
any employee, officer, agent, director or stockholder or any Subsidiary of
Borrower; (l) is payable to Borrower, (m) does not arise out of a ▇▇▇▇ and hold
sale prior to shipment and, if the Receivable arises out of a sale to any Person
to which Borrower is indebted, the amount of such Indebtedness, and any
anticipated Indebtedness, is deducted in determining the face amount of such
Receivable; (n) is net of any returns, discounts, claims, offsets, credits and
allowances; (o) if the Receivable arises out of contracts between Borrower and
the United States, any state, or any department, agency or instrumentality of
any of them, Borrower has so notified Lender, in writing, prior to the creation
of such Receivable, and, if Lender so requests, there has been compliance with
any governmental notice or approval requirements, including without limitation,
compliance with the Federal Assignment of Claims Act; (p) is a good and valid
account representing an bona fide obligation incurred by the Customer therein
named, for a fixed sum as is or will be set forth in the invoice relating
thereto with respect to an unconditional sale and delivery upon the stated terms
of goods sold by Borrower or work, labor and/or services rendered by Borrower;
(q) if such Receivable at such time is not evidenced by an invoice, Borrower has
a purchase order, confirmation, contract or other written evidence of the
existence of an agreement with the Customer giving rise to such Receivable; (r)
if such Receivable arose from the sale of Hydrocarbons by the Borrower, the
Borrower was the owner of such Hydrocarbons or was contractually entitled to
sell such Hydrocarbons immediately prior to such sale and such Receivable was
invoiced by Borrower and (s) is otherwise satisfactory to Lender as determined
in good faith by Lender in its reasonable discretion.
"Event of Default" means the occurrence of any of the events set forth
in Section 19.
"Federal Funds Rate" means, for any day, the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or if such rate is not so published for any
day which is a Business Day, the average of quotations for such day on such
transactions received by The Bank of New York from three Federal funds brokers
of recognized standing selected by The Bank of New York.
"Formula Amount" shall have the meaning set forth in Section 2(c).
"GAAP" means generally accepted accounting principles, practices and
procedures in effect from time to time.
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"GMACCC" means GMAC Commercial Credit LLC.
"Guarantor" means (i) each Material Subsidiary of Borrower joining in
the execution of this Agreement for the purposes of evidencing its Guaranty and
of agreeing to bound by the terms of this Agreement, (ii) each Material
Subsidiary of Borrower that becomes (or is required to become) a Guarantor of
the Obligations of Borrower under this Agreement in accordance with Section 34,
and (iii) each Material Subsidiary of Borrower executing a joinder agreement in
which such Material Subsidiary agrees to become and be a Guarantor of the
obligations of Borrower under this Agreement and to be bound by the terms of
this Agreement.
"Guaranty" means the guaranty of the Obligations made by each Guarantor
in favor of Lender as provided in Section 34 of this Agreement.
"Hazardous Substance" means, without limitation, any flammable
explosives, radon, radioactive materials, friable asbestos, urea formaldehyde
foam insulation, polychlorinated biphenyls, petroleum and petroleum products,
methane, hazardous materials, hazardous wastes, hazardous or toxic substances or
related materials as defined in CERCLA, the Hazardous Materials Transportation
Act, as amended (49 U.S.C. Sections 1801, et. seq.), RCRA, or any other
applicable Environmental Law and in the regulations adopted pursuant thereto.
"Hedging Subsidiary" means a Subsidiary of the Borrower which engages
solely in the business of facilitating Hedging Transactions which constitute
Permitted Hedging Transactions.
"Hedging Transaction" means non-speculative transactions in futures,
forwards, swaps or option contracts (including both physical and financial
settlement transactions) engaged in by Borrower or any of its Subsidiaries as
part of its normal business operations as a risk management strategy or hedge
against adverse changes in market conditions in the oil and natural gas
industry.
"Highest Lawful Rate" means, as of a particular date, the maximum
nonusurious interest rate that may under applicable law then be contracted for,
charged or received by the Lender in connection with its Loans.
"Hydrocarbons" means oil, gas, condensate and natural gas liquids.
"Incipient Event of Default" means any act or event which, with the
giving of notice or passage of time or both, would constitute an Event of
Default.
"Indebtedness" means, with respect to any Person, without duplication
(i) all liabilities contingent or otherwise, of such Person (a) for borrowed
money (whether or not the recourse of the lender is to the whole of the assets
of such Person or only to a portion thereof), (b) evidenced by bonds, notes,
debentures, or similar instruments or letters of credit or representing the
balance deferred and unpaid of the purchase price of any property acquired by
such Person or services received by such Person (other than long-term service or
supply contracts which require minimum periodic payments), (c) evidenced by
bankers' acceptances or similar instruments
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issued or accepted by banks or Swap Obligations, (d) for the payment of money
relating to a Capitalized Lease Obligation, and (e) the Attributable
Indebtedness associated with any Sale and Leaseback Transaction; (ii)
reimbursement obligations of such Person with respect to letters of credit;
(iii) all liabilities of others of the kind described in the preceding clause
(i) or (ii) that such Person has guaranteed or that is otherwise its legal
liability (to the extent of such guaranty or other legal liability) other than
for endorsements, with recourse, of negotiable instruments in the ordinary
course of business; (iv) all obligations secured by a Lien (other than Permitted
Liens, except to the extent the obligations secured by such Permitted Liens are
otherwise included in clause (i), (ii) or (iii) of this definition and are
obligations of such Person) to which the property or assets (including, without
limitation, leasehold interests and any other tangible or intangible property
rights) of such Person are subject, regardless of whether the obligations
secured thereby shall have been assumed by or shall otherwise be such Person's
legal liability (but, if such obligations are not assumed by such Person or are
not otherwise such Person's legal liability, the amount of such Indebtedness
shall be deemed to be limited to the fair market value of such property or
assets determined as of the end of the preceding fiscal quarter); and (v) any
and all deferrals, renewals, extensions, refinancings, and refundings (whether
direct or indirect) of, or amendments, modifications, or supplements to, any
liability of the kind described in any of the preceding clauses (i) through (iv)
regardless of whether between or among the same parties; provided, however,
that, notwithstanding the foregoing, "Indebtedness" shall include obligations
related to Drilling Production Payments, whether denominated as
Dollar-Denominated Production Payments or Volumetric Production Payments, but
shall not include Dollar-Denominated Production Payments or Volumetric
Production Payments related to Drilling Programs.
"Indenture" means the Indenture dated as of the date hereof by
Borrower, Galveston Bay Pipeline Company, Galveston Bay Processing Corporation
and Trustee, for $200,000,000 of Senior Secured Notes due 2004, as the same may
be amended, supplemented or modified from time to time.
"Intercreditor Agreement" means the intercreditor agreement dated as of
March, 2000 by and among Lender, Trustee and GMACCC as agent for the lenders
under the Oil & Gas Credit Facility
"Inventory" means and includes, as to any Person, all of such Person's
now owned or hereafter acquired "Inventory" as such term is defined in Article 9
of the Uniform Commercial Code in the State of New York including, without
limitation, all of such person's now owned or hereafter acquired casing, drill
pipe and other supplies accounted for as inventory (whether or not constituting
equipment for purposes of any applicable Uniform Commercial Code) by such Person
on its financial statements (excluding any Hydrocarbons), all proceeds thereof,
and all documents of title, books, records, ledger cards, files, correspondence,
and computer files, tapes, disks and related data processing software that at
any time evidence or contain information relating to the foregoing.
"Inventory Advance Rate" shall have the meaning set forth in the
definition of Inventory Availability.
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"Inventory Availability" means the amount of Revolving Credit Advances
against Eligible Inventory Lender may from time to time in its sole and absolute
discretion during the Term make available to the Borrower up to the lesser of
(a) $1,000,000 or (b) 50% ("Inventory Advance Rate") of the value of the
Eligible Inventory (calculated on the basis of the lower of cost or market, on a
first-in first-out basis).
"Investment" by any Person in or with respect to any other Person means
(a) the acquisition (whether for cash, property, services, securities or
otherwise) of capital stock, bonds, notes, debentures, partnership or other
ownership interests or other securities of such other Person or any agreement to
make any such acquisition; (b) the making by such Person of any deposit with, or
advance, loan or other extension of credit to, such other Person (including the
purchase of property from another Person subject to an understanding or
agreement, contingent or otherwise, to resell such property to such other
Person) and (without duplication) any amount committed to be advanced, lent or
extended to such other Person; (c) the entering into of any guarantee (other
than any Guaranty hereunder) of, or other contingent obligation with respect to,
Indebtedness or other liability of such other Person; (d) the entering into of
any Interest Swap Obligation with such other Person; or (e) the making of any
capital contribution by such Person to such other Person.
"Investment Grade Rating" means, with respect to any Person or an issue
of debt securities or preferred stock, a rating in one of the four highest
letter rating categories (without regard to "+" or "-" or other modifiers) by
any rating agency or if any such rating agency has ceased using such letter
rating categories or the four highest of such letter rating categories are not
considered to represent "investment grade" ratings, then the comparable
"investment grade" ratings (as designated by any such rating agency).
"Letter of Credit" shall have the meaning set forth in Section 2(j).
"Letter of Credit Agreement" shall have the meaning set forth in
Section 2(j).
"Letter of Credit Liabilities" shall mean, at any time, with respect to
any Letter of Credit then in effect, the sum of (i) the undrawn face amount of
such Letter of Credit plus (ii) the aggregate unpaid amount, if any, of all
obligations of the Borrower then due and payable to reimburse the issuing bank
and the Lender in respect of drawings under such Letter of Credit which have not
been reimbursed.
"Letter of Credit Sublimit" shall have the meaning set forth in Section
2(j).
"Lien" means any mortgage, lien, pledge, charge, security interest, or
other encumbrance of any kind, regardless of whether filed, recorded or
otherwise perfected under applicable law (including any conditional sale or
other title retention agreement and any lease deemed to constitute a security
interest and any option or other agreement to give any security interest).
"Loan Year" means each period of 12 consecutive months commencing on
the Closing Date and ending on the day prior to each anniversary thereof.
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"Loans" means the Revolving Credit Advances and all other extensions of
credit hereunder.
"Material Subsidiary" means, at any particular time, any Subsidiary
that, together with its Subsidiaries, was the owner of more than 5% of the
consolidated assets of the Borrower and its Subsidiaries at the end of the most
recent fiscal year of the Borrower, as shown on the consolidated financial
statements of the Borrower and its Subsidiaries for such fiscal year.
"Matured Funds Rate" means the rate of interest per annum equal to the
lesser of (i) the Federal Funds Rate from time to time or (ii) the difference of
the Prime Rate from time to time minus 3%, such Matured Funds Rate to be
adjusted automatically on the effective date of any change in such rates as
determined by Lender.
"Maximum Loan Amount" at any time means $15,000,000.
"Obligations" means and includes all Loans, all advances, debts,
liabilities, obligations, covenants and duties owing by Borrower to Lender (or
any corporation that directly or indirectly controls or is controlled by or is
under common control with Lender) of every kind and description (whether or not
evidenced by any note or other instrument and whether or not for the payment of
money or the performance or non-performance of any act), direct or indirect,
absolute or contingent, due or to become due, contractual or tortious,
liquidated or unliquidated, whether existing by operation of law or otherwise
now existing or hereafter arising, under or as a result of this Agreement and
the Ancillary Agreements including, without limitation, all interest, charges or
any other payments Borrower is required to make by law or otherwise, together
with all reasonable expenses and reasonable attorneys' fees chargeable to
Borrower's account or incurred by Lender in connection with Borrower's account
whether provided for herein or in any Ancillary Agreement and including
obligations due to the lenders in connection with the Oil & Gas Credit Facility
in an amount equal to the O&G Reserve.
"Oil & Gas Credit Facility" means the Oil & Gas Revolving Credit and
Term Loan Agreement dated the date hereof among Lender, the other financial
institutions party thereto, Lender as agent for itself and such other financial
institutions, and Borrower, pursuant to which a $30,000,000 revolving credit
facility and a $22,500,000 term loan facility is made available to Borrower, as
the same may be amended or supplemented from time to time.
"O&G Reserve" shall mean $500,000 on the Closing Date, increased by
$500,000 on the fifteenth day of each month thereafter to a maximum of
$2,500,000 unless, following receipt by Lender of the audited year end financial
statements for the fiscal year ending January 31, 2001, there would be no event
of default in existence under the Oil & Gas Credit Facility or event which, with
the passage of time, or giving of notice, or both, would constitute an event of
default thereunder, in which case the O&G Reserve shall be permanently reduced
to $0.
"Overadvance" means the amount by which the sum of the outstanding
balance of Loans (including the aggregate of the then outstanding Letter of
Credit Liabilities) exceeds the lesser of (x) the Maximum Loan Amount or (y) the
Formula Amount.
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"Overadvance Rate" means a rate equal to one and one-half percent
(1.50%) per annum in excess of the Contract Rate.
"Permitted Hedge Transactions" means non-speculative transactions in
futures, forwards, swaps or option contracts (including both physical and
financial settlement transactions) engaged in by Borrower or any of its
Subsidiaries as part of its normal business operations as a risk-management
strategy or hedge against adverse changes in market conditions in the oil and
natural gas industry; provided, that such transactions do not, on a monthly
basis, relate to more than 90% of the Borrower's average net oil and natural gas
production per month for the most recent 3-month period measured at the time of
incurrence; and provided, further, that, at the time of such transaction (i) the
counterparty to any such transaction is an Eligible Institution or a Person that
has an Investment Grade Rating or has an issue of debt securities or preferred
stock outstanding with an Investment Grade Rating or (ii) such counterparty's
obligation pursuant to such transaction is unconditionally guaranteed in full
by, or secured by a letter of credit issued by, an Eligible Institution or a
Person that has an Investment Grade Rating or has an issue of debt securities or
preferred stock outstanding with an Investment Grade Rating.
"Permitted Investment" means, when used with reference to Borrower and
its Subsidiaries:
(i) trade credit extended to Persons in the ordinary course of
business;
(ii) purchases of Cash Equivalents;
(iii) Investments by Borrower or its wholly owned Subsidiaries in
wholly owned Subsidiaries of Borrower;
(iv) Swap Obligations;
(v) the receipt of Capital Stock in lieu of cash in connection
with the settlement of litigation;
(vi) advances to officers and employees in connection with the
performance of their duties in the ordinary course of business in an amount not
to exceed $500,000 in the aggregate outstanding at any time;
(vii) margin deposits in connection with Permitted Hedging
Transactions;
(viii) Investments and expenditures made in the ordinary course
of business by Borrower and its Subsidiaries, and of a nature that, at the time
of expenditure, is customary in the oil and gas business as a means of actively
exploiting, exploring for, acquiring, developing, processing, gathering,
marketing or transporting oil or gas through agreements, transactions, interests
or arrangements which permit a Person to share risks or costs, comply with
regulatory requirements regarding local ownership or satisfy other objectives
customarily achieved through the conduct of the oil and gas business jointly
with third parties, including, without limitation, (a) ownership interests in
oil and gas properties or gathering systems and (b) Investments and
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expenditures in the form of or pursuant to operating agreements, processing
agreements, farm-in agreements, farm-out agreements, development agreements,
area of mutual interest agreements, unitization agreements, pooling
arrangements, joint bidding agreements, service contracts, joint venture
agreements, partnership agreements (whether general or limited), subscription
agreements, stock purchase agreements and other similar agreements with third
parties; provided, however, that in the case of any joint venture engaged in
processing, gathering, marketing or transporting oil or gas, (1) all Debt of
such joint venture that would not otherwise constitute Debt of one of Borrower
Entities shall be deemed Debt of Borrower in proportion to its direct or
indirect ownership interest in such joint venture, and (2) such joint venture
shall be reasonably anticipated, at the time of Investment, to enhance the value
of the reserves of Borrower Entities or marketability of production from such
reserves;
(ix) the Guaranty and any guaranty by Borrower or any Subsidiary
of Borrower that is permitted under Section 13(d);
(x) deposits permitted by the definition of Permitted Liens or
any extension, renewal, or replacement of any of them,
(xi) an Investment in Capital Stock resulting from an Asset Sale
pursuant to Section 6.2 of the Oil & Gas Credit Facility,
(xii) any Guaranty by Borrower of the obligations of any wholly
owned Subsidiary of Borrower to the extent such obligations so guaranteed (A) do
not constitute Indebtedness unless and only to the extent such Indebtedness is
otherwise permitted under Section 13(d), and (B) except to the extent such
obligations constitute Indebtedness otherwise permitted under Section 13(d),
such obligations are of the type customarily incurred by such wholly owned
Subsidiary in favor of third parties in the ordinary course of conducting its
Related Business, or
(xiii) other Investments, provided, however, that such
Investments do not exceed $1 million in the aggregate at any time.
"Permitted Liens" means:
(a) Liens imposed by Governmental Bodies for taxes, assessments,
or other Charges not yet due or which are being contested in good faith and by
appropriate proceedings, if (1) adequate reserves with respect thereto are
maintained on the books of any of the Borrower Entities in accordance with GAAP
and (2) such Liens other than with respect to Permitted Prior Liens that do not
prime the Liens of Agent on the Collateral;
(b) statutory Liens of landlords, carriers, warehousemen,
mechanics, materialmen, repairmen, mineral interest owners, or other like Liens
arising by operation of law in the ordinary course of business, provided,
however, that (1) the underlying obligations are not overdue for a period of
more than 45 days, or (2) such Liens are being contested in good faith and by
appropriate proceedings and adequate reserves with respect thereto are
maintained on the books of any of Borrower Entities in accordance with GAAP;
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(c) pledges of assets or deposits of cash or Cash Equivalents to
secure (1) the performance of bids, trade contracts (other than borrowed money),
leases, statutory obligations, surety bonds, performance bonds and other
obligations of a like nature incurred in the ordinary course of business (or to
secure reimbursement obligations or letters of credit in support of such bonds)
in an aggregate amount not in excess of 5% of the PV10 indicated on Borrower's
most recent Proved Reserve Report (as defined in the Oil & Gas Credit Facility)
at the time such pledges or deposits are made, (2) appeal or supercedeas bonds
(or to secure reimbursement obligations or letters of credit in support of such
bonds) in an amount not to exceed $10 million at any one time outstanding, or
(3) pledges or deposits made in the ordinary course of business in connection
with worker's compensation, unemployment insurance, and other types of social
security legislation, property insurance and liability insurance;
(d) Liens encumbering customary initial deposits and margin
deposits of cash and Cash Equivalents securing Swap Obligations or Permitted
Hedging Transactions and Liens encumbering contract rights under Permitted
Hedging Transactions;
(e) pledges of cash and Cash Equivalents to secure margin
obligations, settlement obligations, reimbursement obligations or letters of
credit in connection with Permitted Hedging Transactions; provided, however,
that, at the time such pledge is made (or, if such pledge secures future
Permitted Hedging Transactions, at the time any such Permitted Hedging
Transaction is entered into), the maximum aggregate exposure under such
Permitted Hedging Transactions does not exceed the greater of (1) $10 million or
(2) 5% of the PV10 indicated on Borrower's then most recent Proved Reserves
Report (as defined in the Oil & Gas Credit Facility);
(f) Liens arising by operation of law in connection with
judgments, only to the extent, for an amount and for a period not resulting in
an Event of Default with respect thereto;
(g) Liens securing (1) Allowed Priority Tax Claims under the
Plan, (2) Allowed Claims in classes 2, 5, 6A or 6B under the Plan, (3) Debt
incurred pursuant to Section 6.3(j) of the Oil & Gas Credit Facility, or (4)
refinancing Indebtedness incurred pursuant to Section 6.3(f) of the Oil & Gas
Credit Facility with respect to Liens described in subsections (1), (2) or (3)
of this clause (g);
(h) Liens granted on Equipment to the extent granted to secure
Indebtedness incurred pursuant to Section 13(d) in a manner satisfactory to
Lender under this Agreement and Agent under the Oil & Gas Credit Facility, as
the case may be;
(i) Liens granted in connection with the Presale of Gas;
(j) Liens created on or Production Payments granted with respect
to undivided interests in, acreage drilled or to be drilled pursuant to Drilling
Programs, on Hydrocarbons produced therefrom and on the proceeds of such
Hydrocarbons to secure or to provide provision for payment of the Borrowed
Obligations under such Drilling Programs,
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provided, however, that (1) the number of ▇▇▇▇▇ included in such program
commenced in any fiscal year does not exceed 30 per fiscal year (plus the number
of ▇▇▇▇▇ included in programs commenced in prior years but not yet completed),
(2) such obligations are limited to a percentage of production from such ▇▇▇▇▇,
(3) such Liens survive only until the Person to whom such Lien was granted has
received production with a value equal to the costs, expenses and fees related
to property and services provided or paid for by such Person plus an agreed-upon
interest component, and (4) such Liens secure obligations that are nonrecourse
to each of Borrower or its Subsidiaries;
(k) Liens on the assets of any entity existing at the time such
assets are acquired by any of Borrower Entities, whether by merger,
consolidation, purchase of assets or otherwise so long as such Liens (1) are not
created, incurred or assumed in contemplation of such assets being acquired by
any of Borrower Entities and (2) do not extend to any other assets of any of
Borrower or its Subsidiaries;
(l) any extension, renewal, or replacement of Liens created
pursuant to any of clauses (a) through (f), (i) through (k), or (o) and (p) of
this definition, provided, however, that such Liens would have otherwise been
permitted under such clauses, and provided further, that the Liens permitted by
this clause (n) do not secure any additional Indebtedness or encumber any
additional property;
(m) Liens constituting of securing (1) Royalty Payment
Obligations referred to in clause (iii) of the definition of such term and (2)
Drilling Production Payments;
(n) Liens on the assets of any of the Borrower Entities in favor
of another Borrower Entity;
(o) Liens on the proceeds of any property subject to a Permitted
Lien or on deposit accounts containing any such proceeds;
(p) Liens (including extensions and renewals thereof) on real or
personal property, acquired after the Closing Date ("New Property"); provided,
however, that (1) such Lien is created solely for the purpose of securing
Indebtedness incurred to finance the cost (including the cost of improvements or
construction) of New Property subject thereto and such Lien is created prior to
or within six months after the later of the acquisition, the completion of
construction, or the commencement of full operation of such New Property, (2)
the principal amount of the Indebtedness secured by such Lien does not exceed
100% of such cost including costs and fees related to the financing thereof, and
(3) any such Lien shall not extend to or cover any property or assets other than
such item of New Property, any improvements on such New Property and any
throughput, capacity or similar agreements related to the operation of such New
Property;
(q) Liens under this Agreement; and
(r) Liens securing the Oil & Gas Credit Facility.
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"Permitted Prior Liens" means:
(a) Liens imposed by Governmental Bodies for taxes, assessments,
or other Charges consisting of severance taxes not yet due or which are being
contested in good faith and by appropriate proceedings, if adequate reserves
with respect thereto are maintained on the books of any of the Borrower Entities
in accordance with GAAP
(b) statutory Liens of landlords, carriers, warehousemen,
mechanics, materialmen, repairmen, mineral interest owners, or other like Liens
arising by operation of law in the ordinary course of business, provided,
however, that (1) the underlying obligations are not overdue for a period of
more than 45 days, or (2) such Liens are being contested in good faith and by
appropriate proceedings and adequate reserves with respect thereto are
maintained on the books of any of Borrower Entities in accordance with GAAP;
provided, further, that no further action must be taken by the holders of such
liens in order to obtain priority over the liens of Agent or the Collateral;
(c) pledges or deposits of cash or Cash Equivalents to secure (1)
the performance of bids, trade contracts (other than borrowed money), leases,
statutory obligations, surety bonds, performance bonds and other obligations of
a like nature incurred in the ordinary course of business (or to secure
reimbursement obligations or letters of credit in support of such bonds) in an
aggregate amount not in excess of 5% of the PV10 indicated on Borrower's most
recent Proved Reserve Report at the time such pledges or deposits are made, (2)
appeal or supercedeas bonds (or to secure reimbursement obligations or letters
of credit in support of such bonds) in an amount not to exceed $10 million at
any one time outstanding, or (3) pledges or deposits made in the ordinary course
of business in connection with worker's compensation, unemployment insurance,
and other types of social security legislation, property insurance and liability
insurance;
(d) Liens encumbering customary initial deposits and margin
deposits of cash or Cash Equivalents securing Swap Obligations or Permitted
Hedging Transactions and Liens encumbering contract rights under Permitted
Hedging Transactions;
(e) Liens on the assets of any entity existing at the time such
assets are acquired by any of Borrower Entities, whether by merger,
consolidation, purchase of assets or otherwise so long as such Liens (1) are not
created, incurred or assumed in contemplation of such assets being acquired by
any of Borrower Entities and (2) do not extend to any other assets of any of
Borrower or its Subsidiaries;
(f) Liens on the proceeds of any property subject to a Permitted
Prior Lien to the extent the holder of such Lien has done all acts necessary to
maintain its priority claim to such proceeds;
(g) Liens (including extensions and renewals thereof) on
Inventory acquired after the Closing Date ("New Property"); provided, however,
that (1) such Lien is created solely for the purpose of securing Debt incurred
to finance the cost of acquiring the New Property subject thereto and such Lien
is concurrent with the acquisition of such New Property, (2) the
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principal amount of the Debt secured by such Lien does not exceed 100% of such
cost including costs and fees related to the financing thereof, and (3) any such
Lien shall not extend to or cover any property or assets other than such item of
New Property, and (4) the holder of such Lien has done all acts necessary to
maintain its priority claim with respect to such Lien;
(h) Liens with respect to which Agent has released or
subordinated the Lien of the Security Documents in accordance with the terms of
this Agreement;
(i) any extension, renewal, or replacement of Permitted Prior
Liens, provided, however, that such Liens would have otherwise been Permitted
Prior Liens, and provided further, that the Liens described by this clause (i)
do not secure any additional Debt or encumber any additional property and the
holder of such Lien has done all acts necessary to maintain its priority claim
with respect to such Lien.
"Permitted Production Payment Obligations" means Volumetric Production
Payments and Dollar-Denominated Production Payments each as permitted to be made
under the Indenture, and similar burdens on the property of Borrower to the
extent such burdens are limited in recourse to (x) the properties subject to
such interests or agreements, (y) the Hydrocarbons produced from such
properties, and (z) the proceeds of such Hydrocarbons.
"Person" means an individual, partnership, corporation, limited
liability company, trust or unincorporated organization, or a government or
agency or political subdivision thereof.
"Presale of Gas" means any advance payment agreement or other
arrangement pursuant to which Borrower or any Guarantor having received full
payment of the purchase price for a specified quantity of Hydrocarbons prior to
the first scheduled date of delivery, is required to deliver, in one or more
installments subsequent to the date of such agreement or arrangement, such
quantity of Hydrocarbons to the purchaser of such Hydrocarbons pursuant to and
during the term of such agreement or arrangement, provided, however, that the
term "Presale of Gas" shall not include (i) any such agreement or other
arrangement covering deliveries of Hydrocarbons for a period not exceeding three
calendar months and pursuant to which Borrower or such Guarantor has received
full payment of the purchase price within 120 days of the last scheduled date of
delivery, (ii) a transaction to the extent and only to the extent that it
results in the creation of any Permitted Lien under clauses (e) or (h) of the
definition of "Permitted Liens," (iii) Permitted Hedging Transactions or (iv) an
asset sale of Hydrocarbon reserves.
"Prime Rate" means the prime commercial lending rate of the Bank as
publicly announced in New York, New York to be in effect from time to time, such
rate to be adjusted automatically, without notice, on the effective date of any
change in such rate. This rate of interest is determined from time to time and
is neither tied to any external rate of interest or index nor does it
necessarily reflect the lowest rate of interest actually charged to any
particular class or category of customers.
"Qualified Capital Stock" means any Capital Stock of the Borrower that
is not Disqualified Capital Stock.
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"Receivables" means and includes any and all of a Person's now owned or
hereafter acquired "accounts" as such term is defined in Article 9 of the
Uniform Commercial Code in the State of New York, all products and proceeds
thereof, and all books, records, ledger cards, files, correspondence, and
computer files, tapes, disks or software that at anytime evidence or contain
information relating to the foregoing.
"Receivables Advance Rate" shall have the meaning set forth in the
definition of Receivables Availability.
"Receivables Availability" means the sum of (x) 85% of the face amount
of Eligible Receivables arising from the sale of condensate and oil plus (y) 55%
of the face amount of Eligible Receivables arising from the sale of gas provided
that in calculating Receivables Availability there shall be deducted from the
face amount of Eligible Receivables an amount equal to of such reserves as
Lender deems appropriate in its sole and absolute discretion in connection with
any material claim asserted or threatened against Lender or of which Lender
becomes aware due to material facts leading Lender to reasonably believe that an
action or claim may be asserted against Lender arising out of or relating to
this financing arrangement, including but not limited to, amounts which lessors,
royalty holders, working interest holders and other Persons would be entitled to
assert are secured by a UCC 9.319 Lien on the Receivables or proceeds thereof,
whether or not such lessors, royalty holders, working interest holders or
Persons, or any of them, have asserted or claimed any such UCC 9.319 Lien.
"Related Business" means (i) the exploration for, acquisition of,
development of, production, transportation, gathering, marketing and processing
(in connection with natural gas and natural gas liquids only) of, crude oil,
natural gas, condensate, and natural gas liquids; provided, however, that the
Related Business shall not include any refining or distilling of Hydrocarbons
other than processing and fractionating natural gas and natural gas liquids,
(ii) the drilling and energy services business and pipeline services business,
(iii) owning and operating a Hedging Subsidiary, or (iv) owning or operating
facilities designed for separation, dehydration, treatment, stabilization,
processing or storage of Hydrocarbons and related operations.
"Reports" shall have the meaning set forth in Section 15.
"Reserve Report" means a report prepared by independent petroleum
engineers with respect to Hydrocarbon reserves in accordance with guidelines
published by the SEC.
"Revolving Credit Advances" shall have the meaning set forth in Section
2(c).
"Royalty Payment Obligations" means (i) royalties, overriding
royalties, revenue interests, net revenue interests, net profit interests,
reversionary interests and production payments, (ii) the interests of others in
pooling or unitization agreements, production sales contracts and operating
agreements, (iii) Liens arising under, in connection with or related to
farm-out, farm-in, joint operating or area of mutual interest agreements or
other similar or customary arrangements, agreements or interests, and (iv)
similar burdens on the property of the Borrower or any Subsidiary of the
Borrower, each as incurred in the ordinary course of business and to the extent
such burdens are limited in recourse to (x) the properties subject to such
interests or agreements, (y) the Hydrocarbons produced from such properties and
(z) the proceeds of such Hydrocarbons.
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"Sale and Leaseback Transaction" means an arrangement relating to
property owned on the Closing Date or thereafter acquired whereby the Borrower
or a Subsidiary of the Borrower transfers such property to a Person and leases
it back from such Person pursuant to a Capital Lease.
"SEC" means the Securities and Exchange Commission.
"Senior Indebtedness" means, with respect to any Person, any
Indebtedness that is not Subordinated Indebtedness.
"Services Agreement" means that certain Services Agreement of even date
herewith between Borrower and TNGC Holdings Corporation.
"Settlement Date" means one (1) Business Day after the day on which the
applicable Receivable is actually collected by Lender.
"Subordinated Indebtedness" means Indebtedness of Borrower that (i)
requires no payment of principal prior to or on the date on which the Term is
scheduled to end and (ii) is subordinate and junior in right of payment to the
Obligations in the event of a liquidation.
"Subsidiary" with respect to any Person, means (i) a corporation at
least fifty percent of whose Capital Stock with voting power, under ordinary
circumstances, to elect directors is at the time, directly or indirectly, owned
by such Person, by such Person and one or more Subsidiaries of such Person or by
one or more Subsidiaries of such Person, or (ii) a partnership in which such
Person or a subsidiary of such Person is, at the time, a general partner of such
partnership and has more than 50% of the total voting power of partnership
interests entitled (without regard to the occurrence of any contingency) to vote
in the election of managers thereof, or (iii) any other Person (other than a
corporation or partnership) in which such Person, one or more Subsidiaries of
such Person, or such Person and one or more Subsidiaries of such Person,
directly or indirectly, at the date of determination thereof has (x) at least a
fifty percent ownership interest or (y) the power to elect or direct the
election of the directors or other governing body of such Person; provided,
however, that "Subsidiary" shall not include any Unrestricted Subsidiary of such
Person or an entity that would be a "Subsidiary" hereunder only because of an
investment in such entity by Borrower or its Subsidiaries in accordance with
clause (ix) of the definition of "Permitted Investment."
"Swap Obligation" of any Person means any Interest Rate or Currency
Agreement entered into with one or more financial institutions or one or more
futures exchanges in the ordinary course of business and not for purposes of
speculation that is designed to protect such Person against fluctuations in (x)
interest rates with respect to Debt incurred and which shall have a notional
amount no greater than 105% of the principal amount of the Debt being hedged
thereby, or (y) currency exchange rate fluctuations.
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"Term" means the Closing Date through March 14, 2005 subject to
acceleration upon the occurrence of an Event of Default hereunder or other
termination hereunder.
"Trustee" means Firstar Bank, N.A., as the Trustee under the Indenture.
"UCC 9.319 Lien" means any rights created pursuant to Section 9.319 of
the Uniform Commercial Code of the State of Texas or a comparable provision of
the law of any other applicable jurisdiction in favor of a lessor, royalty
owner, working interest owner or other Person.
"Volumetric Production Payments" means production payment obligations
recorded as deferred revenue in accordance with GAAP, together with all
undertakings and obligations in connection therewith.
"Voting Stock" means Capital Stock of the Borrower having generally the
right to vote in the election of directors of the Borrower.
"Wholly Owned Subsidiary" means, with respect to any Person, at any
time, a Subsidiary of such Person to the extent (i), all of the Capital Stock of
which (except any director's qualifying shares) is at the time owned directly or
indirectly by such Person or (ii) such Subsidiary is organized in a foreign
(i.e. non-U.S.) jurisdiction and is required by the applicable laws and
regulations of such foreign jurisdiction to be partially owned by the government
of such foreign jurisdiction or individual or corporate citizens of such foreign
jurisdiction in order for such Subsidiary to transact business in such foreign
jurisdiction, provided that the Company, directly or indirectly, owns the
remaining capital stock or ownership interest in such foreign Subsidiary and, by
contract or otherwise, controls the management and business of such Subsidiary
and derives the economic benefits of ownership of such Subsidiary to
substantially the same extent as if such Subsidiary were a wholly owned
Subsidiary as defined in the preceding clause (i).
(B) Accounting Terms. Any accounting terms used in this Agreement which
are not specifically defined shall have the meanings customarily given them in
accordance with GAAP.
(C) UCC Terms. All other terms used in this Agreement and defined in
the Uniform Commercial Code as adopted in the State of New York, shall have the
meaning given therein unless otherwise defined herein.
(D) Other Terms. All other terms not otherwise defined herein shall
have the meaning ascribed thereto in the Oil & Gas Credit Facility. As a matter
of construction, all provisions of the Oil & Gas Credit Facility to which
reference is made herein shall survive termination of Oil & Gas Credit Facility.
2. Conditions; Accounts Receivables Management; Loans.
(a) In addition to the other terms and conditions hereof, the
obligation of the Lender to enter into this Agreement is subject to the
conditions (any of which may be waived, in whole or in part, only by Lender in
writing) that:
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(i) Lender shall have received, in form and substance satisfactory to
Lender and its counsel, all consents, waivers, acknowledgments and other
agreements from third persons which Lender may deem reasonably necessary or
desirable in order to permit, protect and perfect its Liens upon the Collateral
or to effectuate the provisions or purposes of this Agreement and the Ancillary
Agreements, including, without limitation, waivers by landlords and mortgagees
of any Liens by such Persons on the Collateral and agreements permitting Lender
access to the premises to exercise its rights and remedies and otherwise deal
with the Collateral;
(ii) Lender shall have received evidence of insurance and loss payee
endorsements required hereunder and under the other Ancillary Agreements, in
form and substance satisfactory to Lender, and certificates of insurance
policies and/or endorsements naming Lender as an insured or co-insured, as its
interests may appear;
(iii) The Ancillary Agreements and all instruments and documents
hereunder and thereunder shall have been executed and delivered to Lender, in
form and substance satisfactory to Lender;
(iv) Borrower shall have paid to Lender the fees due on the Closing
Date required by this Agreement;
(v) Lender shall have received the following documents, each to be in
form and substance satisfactory to Lender and its counsel:
(A) copies of all filing receipts or acknowledgments issued by
any governmental authority to evidence any filing or recordation
(including, without limitation, filing of UCC-3 financing statement
amendments and UCC-1 financing statements in all appropriate counties
and in all appropriate central filing offices) necessary to perfect
the Liens of Lender in the Collateral and evidence to Lender that such
Liens constitute valid and perfected Liens, having the lien priority
specified in Section 7(a) hereof;
(B) a copy of the Certificate of Incorporation, certificate of
limited partnership, or certificate of formation of limited liability
company, as the case may be, of Borrower and each Guarantor and all
amendments thereto, certified within 15 days before the Closing Date
by the Secretary of State or other appropriate official of its
jurisdiction of incorporation or formation;
(C) a copy of the bylaws, partnership agreement or limited
liability company agreement, as the case may be, of Borrower and each
Guarantor and all amendments thereto, certified as of the Closing Date
by the Secretary or Assistant Secretary of Borrower and such
Guarantor;
(D) good standing certificates for Borrower and each Guarantor
issued within 30 days before the Closing Date by the Secretary of
State or other appropriate official of Borrower's or such Guarantor's
jurisdiction of incorporation or formation and each jurisdiction where
the conduct of Borrower's or such Guarantor's business activities or
the ownership of its properties
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necessitates qualification (other than from those jurisdictions the
failure in which to be in good standing would not reasonably be
expected to have a material adverse effect);
(E) a closing certificate signed by the Chief Financial Officer
of Borrower dated as of the Closing Date, stating that (i) the
representations and warranties set forth in Section 7 hereof are true
and correct on and as of such date, (ii) Borrower and each Guarantor
is on such date in compliance with all the terms and provisions set
forth in this Agreement, and the Ancillary Agreements, and (iii) on
such date no Incipient Event of Default or Event of Default has
occurred or is continuing;
(F) the favorable, written opinion of Gardere & ▇▇▇▇▇, LLP,
special counsel to Borrower, regarding Borrower, the Ancillary
Agreements and the transactions contemplated hereby and by the
Ancillary Agreements, in form and substance satisfactory to Lender;
(G) a duly executed letter agreement from Borrower and Guarantors
regarding consent to jurisdiction in form and substance satisfactory
to Lender;
(H) the initial report pursuant to Section 8(h) in form and
substance, and in such detail, as is satisfactory to the Lender;
(I) this Agreement duly executed by Borrower and each Guarantor;
(J) the Oil & Gas Credit Facility shall close effective the
Closing Date;
(K) a duly executed Intercreditor Agreement;
(L) the Bankruptcy Court shall have entered the Confirmation
Order and the Confirmation Order shall have become a Final Order;
(M) A certificate of solvency and financial condition,
substantially in the form of Exhibit III hereto, duly executed by the
chief financial officer of Borrower along with a copy of Pro Forma
Financial Statements and Projections which shall be satisfactory in
all respects to Lender;
(N) Borrower shall have established procedures to ensure Lender
of the payment of distributions due under the Plan of Reorganization
and all ongoing payments due in connection with ongoing operations and
to the holders of royalty interests and with respect to severance
taxes, which procedures shall be satisfactory to Lender in its sole
and absolute discretion;
(O) Lender shall have reviewed all documentation relating to all
debt obligations of the Borrower and each Guarantor, and shall be
satisfied in all respects with such review. Lender shall have received
evidence that the total amount of Production Payment liability does
not exceed $60,000,000; and
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(P) Lender shall have received such other documents, instruments
and agreements as Lender shall reasonably request in connection with
the foregoing matters.
(b) In addition to the other terms and conditions hereof, the
obligation of the Lender to make each Revolving Credit Advance and to assist
Borrower in obtaining Letters of Credit pursuant to this Agreement and the
Ancillary Agreements, including the making of the initial and any future
Revolving Credit Advances and Letters of Credit contemplated hereunder, is
subject to the conditions (any of which may be waived, in whole or in part, by
Lender in writing) that:
(i) All representations and warranties contained herein (except those
contained in Sections 12(e) and 12(h) hereof) and in the Ancillary
Agreements shall be true and correct in all material respects as of the
date made (except representations and warranties that relate solely to an
earlier date and were true and correct on such earlier date);
(ii) Either (x) all representations and warranties contained in
Sections 12(e) and (h) hereof shall be true and correct in all respects as
of the date made or (y) the Borrower shall have notified the Lender in
writing of the occurrence of any and all events, facts or circumstances
which make any such representations and warranties untrue or incorrect and
the Lender shall either (i) have consented in writing with respect thereto,
or (ii) have funded such Revolving Credit Advance pursuant hereto (which
funding shall be deemed to be such consent); and
(iii) No Event of Default shall have occurred and be continuing and no
Incipient Event of Default shall have occurred and be continuing;
(c) Subject to the terms and conditions set forth herein and in the
Ancillary Agreements, Lender shall make revolving credit advances (the
"Revolving Credit Advances") to Borrower from time to time during the Term
which, in the aggregate at any time outstanding together (without duplication)
with the aggregate of then outstanding Letter of Credit Liabilities, will not
exceed the lesser of (x) the Maximum Loan Amount or (y) an amount equal to the
difference of:
(i) Receivables Availability plus Inventory Availability, minus
(ii) such reserves as Lender may in its sole and absolute discretion
deem proper and necessary from time to time, including, without limitation,
the (A) O&G Reserve, (B) a reserve for unpaid mortgage payments due under
that certain Deed of Trust and Security Agreement from Borrower to Barnet
▇. ▇▇▇▇▇▇▇, ▇▇., Trustee for the benefit of Mallard Bay Drilling, L.L.C. ,
dated March 15, 2000 ("Mallard Bay Mortgage"), which reserve may be imposed
by Agent in its sole and absolute discretion, after the occurrence of a
default under the Mallard Bay Mortgage (whether or not notice from the
trustee under the Mallard Bay Mortgage is received), and (C) a reserve in
such amount as Lender deems necessary to cover fees and expenses payable by
Borrower to Lender under this Agreement and to Lender and the other
financial institutions party to the Oil & Gas Credit Facility.
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The difference of the foregoing (i) minus (ii) shall be referred to as the
"Formula Amount". To the extent Lender receives proceeds of any Receivable which
proceeds are not necessary to maintain outstanding Obligations within the
Formula Amount (after giving effect to the application of such proceeds to the
Formula Amount), Lender agrees to advance such funds to the Borrower.
Notwithstanding the foregoing provisions of this Paragraph, prior to remittance
by Lender to Borrower of any Revolving Credit Advances, Lender shall be entitled
to segregate an amount equal to: (x) the aggregate claims of each alleged O&G
Lienor (as defined in the Court Order) asserting a right to adequate protection
under the O&G Lienor Adequate Protection Provision (as defined by the Court
Order) such claims being herein defined as the "O&G Lienor Claims"; (y) any
severance or other similar tax due in connection with any Receivables received
by Lender. Lender shall release such segregated funds (i) for payment of such
O&G Lienor Claims or tax or (ii) upon demonstration to Lender's sole and
absolute satisfaction that provision for payment for such O&G Lienor Claims has
otherwise been made.
(d) Notwithstanding the limitations set forth above, Lender retains the
right to lend to Borrower from time to time such amounts in excess of such
limitations as Lender may determine in its sole and absolute discretion which
excess amounts shall be payable on demand.
(e) If Borrower does not pay any interest, fees, costs, charges or
commissions to Lender when due in accordance with the terms of this Agreement,
any Ancillary Agreement or under the Oil & Gas Credit Facility, Borrower shall
thereby be deemed to have requested, and Lender is hereby authorized to make and
charge to Borrower's account, a Revolving Credit Advance to Borrower as of such
date in an amount equal to such unpaid interest, fees, costs, charges or
commissions.
(f) Any sums expended by Lender in accordance with the terms of this
Agreement or any Ancillary Agreement or under the Oil & Gas Credit Facility due
to Borrower's or any Subsidiary or Guarantor's failure to perform or comply with
its obligations under this Agreement, or any other Ancillary Agreement or under
the Oil & Gas Credit Facility, as the case may be, including but not limited to
the payment of taxes, insurance premiums or leasehold obligations, shall be
charged to Borrower's account as a Revolving Credit Advance and added to the
Obligations.
(g) Lender will account to Borrower monthly with a statement of all Loans
and other advances, charges and payments made pursuant to this Agreement, and
such account rendered by Lender shall be deemed final, binding and conclusive
unless Lender is notified by Borrower in writing to the contrary within thirty
(30) days of the date each account was rendered specifying the item or items to
which objection is made.
(h) During the Term, Borrower may borrow, prepay and reborrow Revolving
Credit Advances, all in accordance with the terms and conditions hereof.
(i) The aggregate balance, without duplication, of Revolving Credit
Advances plus Letter of Credit Liabilities outstanding at any time shall not
exceed the Maximum Loan Amount. Except as provided in Section 2(d), the
aggregate balance, without duplication, of Revolving Credit Advances plus Letter
of Credit Liabilities outstanding at any time shall not exceed the Formula
Amount. The aggregate balance of Letter of Credit Liabilities outstanding at any
time shall not exceed the Letter of Credit Sublimit.
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(j) In connection herewith, Borrower has entered into a letter with the
Lender dated the Closing Date Re: Letter of Credit Financing Supplement to Third
Amended and Restated Accounts Receivable Management and Security Agreement (the
"Letter of Credit Agreement") pursuant to which Lender agrees to assist the
Borrower in obtaining letters of credit (herein "Letters of Credit") from time
to time. The aggregate Letter of Credit Liabilities in respect of all Letters of
Credit at any time outstanding shall not exceed $3,500,000 (such amount the
"Letter of Credit Sublimit"). No Letter of Credit will have an expiry date of
than 180 days from the date of issuance or an expiry date which is later than
the last day of the Term.
3. Repayment.
(a) Borrower shall be required to (i) make a mandatory prepayment
hereunder at any time that the aggregate outstanding principal balance of the
Loans made by Lender hereunder plus, without duplication, the aggregate of the
then outstanding Letter of Credit Liabilities is in excess of the lesser of the
Maximum Loan Amount or the Formula Amount, in an amount equal to such excess,
and (ii) repay on the expiration of the Term (x) the then aggregate outstanding
principal balance of Revolving Credit Advances made by Lender hereunder together
with accrued and unpaid interest, fees, charges and commissions and (y) all
other amounts owed Lender under this Agreement and the Ancillary Agreements,
including, without limitation, the Letter of Credit Liabilities. Notwithstanding
the foregoing, any amount paid hereunder with respect to unmatured Letter of
Credit Liabilities shall be held by Lender as Collateral. All such amounts shall
be returned to Borrower upon expiration of the relevant Letter of Credit, less
any amounts necessary to satisfy any draws thereunder.
In the event that a Change of Control shall occur, Borrower shall
immediately notify Lender in writing of such Change in Control and unless Lender
shall consent to such Change of Control, the obligation of the Lender to make
Loans under this Agreement shall terminate, and Borrower shall within 20 days of
Borrower's receipt of written notice from the Lender repay the then aggregate
outstanding principal balance of Revolving Credit Advances made by Lender
hereunder together with accrued and unpaid interest, fees, charges and
commissions and all other amounts and obligations owed Lender under this
Agreement (including, without limitation, Section 18(c)) and the Ancillary
Agreements, including, without limitation, the Letter of Credit Liabilities.
Notwithstanding the foregoing, any amount paid hereunder with respect to
unmatured Letter of Credit Liabilities shall be held by Lender as Collateral.
All such amounts shall be returned to Borrower upon expiration of the relevant
Letter of Credit, less any amounts necessary to satisfy any draws thereunder.
In the event of any sale by Borrower, or any sale, transfer or issuance
by any of its Subsidiaries, of any shares of Capital Stock of any Subsidiary to
any Person other than Borrower or a Wholly Owned Subsidiary of Borrower (other
than the sale of director's qualifying shares or shares of foreign Subsidiaries
which after giving effect to the sale of such shares are Wholly Owned
Subsidiaries as provided in clause (ii) of the definition of Wholly Owned
Subsidiary), the Borrower shall pay all overadvances, if any, pursuant to
Section 2(d).
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4. Procedure for Revolving Credit Advances.
The Borrower may by written notice request a borrowing of Revolving
Credit Advances prior to 1:00 P.M. New York time one (1) Business Day prior to
the date on which it requests to incur a Revolving Credit Advance (provided that
such advance may be made on the same Business Day as the request is submitted if
the request is submitted before noon New York time), such request to specify the
amount of the Revolving Credit Advance requested. All Revolving Credit Advances
shall be disbursed from whichever office or other place Lender may designate
from time to time and, together with any and all other Obligations of Borrower
to Lender, shall be charged to Borrower's account on Lender's books. The
proceeds of each Revolving Credit Advance made by the Lender shall be made
available to the Borrower on the day so requested as aforesaid by way of credit
to Borrower's operating account maintained with Lender. Any and all Obligations
due and owing to Lender hereunder may be charged to the Borrower's account.
5. Interest; Fees; Commissions.
(a) Interest.
(i) Except as modified by paragraph 5(a)(iii) below, interest on Loans
shall be payable in arrears on the last day of each month. Interest
payments hereunder may, at Lender's option, be charged by Lender to
Borrower's account. Interest charges shall be computed on the unpaid
balance of the Loans for each day they are outstanding at a rate per annum
equal to the Contract Rate. In the event the aggregate amount, without
duplication, of Revolving Credit Advances plus the aggregate amount of
Letter of Credit Liabilities exceeds the Formula Amount, the average daily
balance of Revolving Credit Advances in that month shall bear interest at
the Overadvance Rate.
(ii) Interest shall be computed on the basis of actual days elapsed
over a 360-day year.
(iii) Upon the occurrence and during the continuance of an Event of
Default, interest shall be payable at the Default Rate.
(iv) Notwithstanding the foregoing, in no event shall interest exceed
the Highest Lawful Rate, and if any provision of this Agreement or any
Ancillary Agreement is in contravention of any law or regulation, such
provision shall be deemed amended to provide for interest at said Highest
Lawful Rate and any excess amount shall either be applied, at Lender's
option, to the outstanding Loans in such order as Lender shall determine or
refunded by Lender to Borrower.
(v) Borrower shall pay principal, interest and all other amounts
payable hereunder, or under any Ancillary Agreement, without any deduction
whatsoever, including, but not limited to, any deduction for any set-off or
counterclaim.
(b) Fees.
(i) Closing Fee. Upon execution of this Agreement by the Borrower and
Lender, Borrower shall pay to Lender a closing fee in an amount equal to
$100,000.
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(ii) Unused Line Fee. In the event the average of the sum of closing
daily unpaid balances of all Revolving Credit Advances hereunder plus,
without duplication, outstanding Letter of Credit Liabilities during any
calendar month is less than the Maximum Loan Amount, Borrower shall pay to
Lender a fee at a rate per annum equal to 1/4 of one percent (0.25%) on the
amount by which the Maximum Loan Amount exceeds such average sum. Such fee
shall be calculated on the basis of a year of 360 days and actual days
elapsed, and shall be charged to Borrower's account on the first day of
each month with respect to the prior month.
(iii) Collateral Monitoring Fee. Upon Lender's performance of any
collateral monitoring - namely any field examination, collateral analysis
or other business analysis, the need for which is to be determined by
Lender and which monitoring is undertaken by Lender or for Lender's
benefit, an amount equal to Lender's standard rates and fees per day, per
person, for each person employed to perform such monitoring (insofar as the
amount billed to Lender by outside examiners) together with all reasonable
costs, disbursements and expenses incurred by the Lender and the persons
performing such collateral monitoring shall be charged to Borrower's
account; provided, however that the maximum amount that the Lender shall
charge for a Collateral Monitoring Fee during any period during which no
Event of Default shall be in existence or during which the results of such
Collateral monitoring are satisfactory in Lender's reasonable judgment for
each contract year, is $60,000, and for any such period during which an
Event of Default shall be in existence or the results of such collateral
monitoring are deemed unsatisfactory in Lender's reasonable judgment, there
is no such maximum amount.
(iv) Letter of Credit Fee. Borrower shall pay Lender a fee each month
at the rate of one quarter of one percent (.25 %) per annum times the total
amount of the undrawn face amount of outstanding Letters of Credit of
Borrower for each day during the prior month. This fee shall be increased
to an overadvance rate of five sixteenths (5/16) of one percent per annum
for each day in any month in which the aggregate amount of Revolving Credit
Advances plus the aggregate amount of Letter of Credit Liabilities exceeds
the Formula Amount or the Letter of Credit Liabilities exceed the Letter of
Credit Sublimit. Upon the occurrence and during the continuance of an Event
of Default, the applicable letter of credit fee for any month within such
period shall be increased by an additional one sixth (1/6) of one percent
per annum.
(c) Increased Costs. In the event that any applicable law, treaty or
governmental regulation, or any change therein or in the interpretation or
application thereof, or compliance by Lender (for purposes of this Section 5(c),
the term "Lender" shall include Lender and any corporation or bank controlling
Lender) with any request or directive (whether or not having the force of law)
from any central bank or other financial, monetary or other authority, shall:
(i) subject Lender to any tax of any kind whatsoever with respect to
this Agreement or any Ancillary Agreement or any Letter of Credit or change
the basis of taxation of payments to Lender of principal, fees, interest or
any other amount payable hereunder or under any Ancillary Agreements
(except for changes in the rate of tax on the overall net income, gross
receipts or franchise taxes of Lender);
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(ii) impose, modify or hold applicable any reserve, special deposit,
assessment or similar requirement against assets held by, or deposits in or
for the account of, advances or loans or letters of credit by, or other
credit extended by, any office of Lender, including (without limitation)
pursuant to Regulation D of the Board of Governors of the Federal Reserve
System; or
(iii) impose on Lender any other condition with respect to this
Agreement or any Ancillary Agreements;
and the result of any of the foregoing is to increase the cost to Lender of
making, renewing or maintaining its Loans or Letters of Credit hereunder by an
amount that Lender deems to be material or to reduce the amount of any payment
(whether of principal, interest or otherwise) in respect of any of the Loans or
Letters of Credit by an amount that Lender deems to be material, then, in any
case Borrower shall promptly pay Lender, upon its demand, such additional amount
as will compensate Lender for such additional cost or such reduction, as the
case may be. Lender shall certify the amount of such additional cost or reduced
amount to Borrower, and such certification shall be presumed correct.
If Lender is owed such additional amounts or amounts at any one time
pursuant to this Section 5(c) in excess of three-fourths of one percent (3/4 of
1%) of the average daily balance of Revolving Credit Advances for the preceding
30 days, then the Borrower shall have the right to terminate this Agreement,
subject to the terms and provisions of Sections 18(d) and (e) of this Agreement;
provided, however, (i) no such termination shall be effective until Borrower has
paid all of the Obligations (except as set forth in clause (ii) below) in
immediately available funds and (ii) Borrower shall not be obligated to pay to
Lender any termination charge described in Section 18(c) of this Agreement.
(d) Capital Adequacy.
(i) In the event that Lender shall have determined that any
applicable law, rule, regulation or guideline regarding capital
adequacy, or any change therein, or any change in the interpretation
or administration thereof by any governmental authority, central bank
or comparable agency charged with the interpretation or administration
thereof, or compliance by Lender (for purposes of this Section 5(d),
the term "Lender" shall include Lender and any corporation or bank
controlling Lender) with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such
authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on Lender's capital as a
consequence of its obligations hereunder or under any Letter of Credit
to a level below that which Lender could have achieved but for such
adoption, change or compliance (taking into consideration Lender's
policies with respect to capital adequacy) by an amount deemed by
Lender to be material, then, from time to time, Borrower shall pay
upon demand to Lender such additional amount or amounts as will
compensate Lender for such reduction. In determining such amount or
amounts, Lender may use any reasonable averaging or attribution
methods. The protection of this Section shall be available to Lender
regardless of any possible contention of invalidity or inapplicability
with respect to the applicable law, regulation or condition.
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(ii) A certificate of Lender setting forth such amount or amounts
as shall be necessary to compensate Lender with respect to Section
5(d) hereof when delivered to Borrower shall be presumed correct.
(iii) If Lender is owed such additional amounts or amounts at any
one time pursuant to Section 5(d) hereof in excess of three-fourths of
one percent (3/4 of 1 %) of the average daily balance of Revolving
Credit Advances for the preceding 30 days, then the Borrower shall
have the right to terminate this Agreement, subject to the terms and
provisions of Sections 18(d) and (e) of this Agreement; provided,
however, (i) no such termination shall be effective until Borrower has
paid all of the Obligations (except as set forth in clause (ii) below)
in immediately available funds and (ii) Borrower shall not be
obligated to pay to Lender any termination charge described in Section
18(c) of this Agreement.
(e) Commission. Borrower shall pay to Lender monthly, on the fifteenth
day of each month, a commission at the rate of the greater of $1,500 in the
aggregate or $50 per invoice evidencing any Receivable pledged or assigned
hereunder during the previous month. The procedure manual Lender has delivered
to Borrower describes Lender's current practices and procedures regarding its
accounts receivable management and record keeping services. Lender reserves the
right to vary such practices and procedures from time to time in its sole and
absolute discretion. Lender's liability to Borrower and the Guarantors for any
alleged failure on Lender's part to provide adequate accounts receivable
management and record keeping services shall be expressly limited to a refund of
commissions paid by Borrower during the period of such alleged failure and
Lender shall have no liability of any kind whatsoever for consequential or other
damages of any type or penalties based upon any such alleged failure on Lender's
part.
(f) Interest on Borrower's Account. On the last day of each month
during the Term, Lender shall credit Borrower's account with interest at the
Matured Funds Rate in effect during such month on the average daily balance
during such month of any amounts payable by Lender to Borrower hereunder which
are not drawn by Borrower on the Settlement Date.
(g) Time Limit. Notwithstanding anything to the contrary in Sections
5(c) or (d), Borrower shall not be required to reimburse or pay any costs or
expenses to Lender under such sections which have accrued more than 120 days
prior to Lender's giving notice to Borrower that Lender has suffered or incurred
such costs or expenses; provided, however, if such costs and expenses accrued
more than 120 days prior to Lender's giving of such notice because Lender did
not have knowledge of the events or circumstances that gave rise to such costs
and expenses and Lender provides Borrower with such notice within 60 days after
obtaining knowledge of such events or circumstances, then the foregoing time
limit shall not apply with respect to such costs and expenses.
6. Security Interest.
(a) Borrower, to secure the prompt payment to Lender of the Obligations
and of any debt, liability or obligation owing from Borrower to others which
Lender may have obtained by assignment or otherwise, hereby assigns, pledges and
grants to Lender a continuing security interest in and Lien on its Collateral,
whether now owned or existing or hereafter acquired or
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arising and wheresoever located (whether or not the same is subject to Article 9
of the Uniform Commercial Code). Each confirmatory assignment schedule or other
form of assignment hereafter executed by Borrower shall be deemed to include the
foregoing grant, whether or not the same appears therein.
(b) To the extent permitted by applicable law, Lender may file one or
more financing statements disclosing Lender's security interest in the
Collateral without Borrower's signature appearing thereon or Lender may sign on
Borrower's behalf as provided in Section 14 hereof. The parties agree that a
carbon, photographic or other reproduction of this Agreement shall be sufficient
as a financing statement. If any Receivable in excess of $250,000 or any
Eligible Receivable becomes evidenced by a promissory note or any other
instrument for the payment of money, Borrower will immediately deliver such
instrument to Lender, appropriately endorsed.
7. Representations Concerning the Collateral. Borrower represents and
warrants (each of which such representations and warranties shall be deemed
repeated upon the making of each request for a Revolving Credit Advance and made
as of the time of each and every Revolving Credit Advance hereunder):
(a) (i) all the Collateral is owned by Borrower free and clear of all
Liens except (A) those in Lender's favor and (B) Permitted Liens and (ii) none
of the Collateral is subject to any enforceable agreement prohibiting or
restricting the granting of a security interest to the Lender or requiring
notice of or consent to the granting of a security interest;
(b) all Receivables for Hydrocarbon sales (i) represent complete bona
fide transactions which, with the exception of delivery of invoices, require no
further act under any circumstances on Borrower's part to make such Receivables
payable by Customers, (ii) to the best of Borrower's knowledge, except as
disclosed to Lender, are not subject to any present or contingent Disputes and
(iii) do not represent ▇▇▇▇ and hold sales, consignment sales, guaranteed sales,
sale or return or other similar understandings or obligations of any Affiliate
or Guarantor.
8. Covenants Concerning the Collateral. During the Term, Borrower
covenants that it shall:
(a) not dispose of any of its Collateral whether by sale, lease or
otherwise except for the sale of Inventory in the ordinary course of business;
(b) not encumber, mortgage, pledge, assign or ▇▇▇▇▇ ▇ ▇▇▇▇ on any of
its Collateral except Permitted Liens;
(c) place notations upon Borrower's books of account and any annual
audited consolidated financial statement of Borrower and its Subsidiaries
prepared by Borrower to disclose Lender's security interest in the Collateral;
(d) defend the Collateral against the claims and demands of all
Persons;
(e) not extend the payment terms of any (i) Eligible Receivable or (ii)
other Receivable in excess of $250,000 in the aggregate for all such other
Receivables more than 30 Business Days, without prompt notice thereof to Lender;
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(f) perform all other steps reasonably requested by Lender to create
and maintain in Lender's favor a valid perfected first security interest in all
Collateral;
(g) promptly provide Lender with duplicate originals of all credits
which it issues to its Customers and immediately notify Lender of any Disputes.
Each of Borrower shall bear the cost of resolving all Disputes at no cost or
expense to Lender. Should Lender so elect, upon the occurrence and during the
continuation of any Event of Default, Lender may at any time in its discretion
(i) withdraw Borrower's authority to issue credits to its Customers without
Lender's prior written consent or (ii) litigate Disputes or settle them directly
with Customers on terms acceptable to Lender;
(h) supply Lender each Business Day a report through the close of
business the immediately preceding Business Day concerning the Collateral in
form and substance satisfactory to Lender which report will contain, among other
items (i) a listing of all additional Receivables created since the date of the
previous report delivered pursuant to this Section 8(h), and setting forth the
amount of such additional Receivables, the Customers of such Receivables,
identified by Receivable, the volume of natural gas shipped to such Customers to
create such Receivables, (ii) a listing of all invoices, by date, Customer and
amount, issued since the date of the previous report delivered pursuant to this
Section 8(h), together with a reconciliation in reasonable detail of any
differences between invoices issued and Receivables created as described in the
preceding clause (i), (iii) a computation in reasonable detail of the Formula
Amount as of the close of business the immediately preceding Business Day, (iv)
a listing as of the close of business of the immediately preceding Business Day
of the Inventory located at the locations specified in Schedule 13(c), (v) a
listing in reasonable detail as of the close of business of the immediately
preceding Business Day setting forth the amount of obligations of Borrower
secured by a ▇▇▇ ▇.▇▇▇ ▇▇▇▇, whether or not the Person entitled to such Lien has
asserted or claimed such Lien, including, without limitation, a listing broken
down by month incurred of an (a) obligations of Borrower to royalty interest
owners, (b) obligations of Borrower to any other Hydrocarbon interest owners,
(c) the payment of severance taxes on taxable ▇▇▇▇▇ and (d) a calculation in
reasonable detail showing the percentage of production from the Borrower's
▇▇▇▇▇, which would be entitled to the benefits of a UCC 9.319 Lien (provided
that notwithstanding the foregoing, prior to the occurrence and continuation of
an Event of Default, unless otherwise requested by Lender, Borrower shall only
be obligated to deliver a report containing the information described in the
foregoing clause (iv) and in this clause (v) monthly, within two Business Days
after the 15th of the month) and (vi) such other information as Lender may
reasonably request concerning the Collateral; and
(i) deliver to Lender, monthly, on or before the fifteenth day of each
month, a report, showing in detail all obligations of Borrower created during
any previous month which remain unpaid as of the date of such report and which
are secured by a ▇▇▇ ▇.▇▇▇ ▇▇▇▇, whether or not the Person entitled to such Lien
has asserted or claimed such Lien.
(j) immediately notify Lender if Borrower shall drill and complete or
acquire any oil or gas well, of any interest therein, located other than in
▇▇▇▇▇, ▇▇▇▇▇▇ and Issaquena Counties County, Mississippi, ▇▇▇▇▇▇▇▇, ▇▇▇▇ or
▇▇▇▇▇▇ Counties, North Dakota, ▇▇▇ County, Florida or Austin, Brazoria, Calhoun,
Chambers, Galveston, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇, Live Oak, ▇▇▇▇▇, ▇▇▇ Verde,
▇▇▇▇▇▇▇ or ▇▇▇▇▇▇ Counties, Texas which notice will specify the location of such
well or
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▇▇▇▇▇ and shall contain such information as needed to enable Lender to perfect
its security interest in Receivables generated by production from such well or
▇▇▇▇▇.
9. Collection and Maintenance of Collateral and Records. Lender may at
any time verify Borrower's Receivables utilizing an audit control company or any
other agent of Lender provided that prior to an Event of Default, Lender shall
do so only at reasonable intervals. Lender or Lender's designee may notify
Customers, at any time at Lender's sole discretion, of Lender's security
interest in Receivables, collect them directly and charge the collection costs
and expenses to Borrower's account, but, unless and until Lender does so or
gives Borrower other instructions, Borrower shall instruct all of their
Customers to make payments on account of Receivables to an account under
Lender's dominion and control at such bank as Lender may designate, as provided
by the terms of Section 24. To the extent Borrower receives any payments on
account of Receivables, it shall hold such payments for Lender's benefit in
trust as Lender's trustee and immediately deliver them to Lender in their
original form with all necessary endorsements or, as directed by Lender, deposit
such payments as directed by Lender pursuant to Section 23 hereof. Lender will
credit (conditional upon final collection) all payments to the Borrower's
account on the Settlement Date; provided that if the amount credited to
Borrower's account as of the close of business on the Business Day immediately
preceding such Settlement Date is in excess of an amount equal to the sum of (i)
the total Obligations outstanding (after giving effect to any requests for
Revolving Credit Advances or Letters of Credit to be made or issued on such
Settlement Date), plus (ii) all unpaid liabilities owing to lessors, royalty
holders, working interest holders, the State of Texas and other Persons who
would be entitled to assert a ▇▇▇ ▇-▇▇▇ ▇▇▇▇ on the proceeds of Borrower's
previously collected Receivables on such Settlement Date, then the Lender, if
requested by the Borrower, will make such excess available to the Borrower on
such Settlement Date or the next Business Day following such Settlement Date.
Promptly after the creation of any Receivables by Borrower, Borrower shall
provide Lender with schedules describing all Receivables created or acquired by
Borrower and shall execute and deliver confirmatory written assignments of such
Receivables to Lender, but Borrower's failure to execute and deliver such
schedules or written confirmatory assignments of such Receivables shall not
affect or limit Lender's security interest or other rights in and to the
Receivables. Borrower shall furnish, at Lender's request, copies of contracts,
invoices or the equivalent, and any original shipping and delivery receipts for
all merchandise sold or services rendered and such other documents and
information as Lender may require. All of Borrower's invoices shall bear the
terms stated on the applicable customer order, and no material change from the
original terms of such customer order shall be made without the prior written
consent of Lender. Borrower shall provide Lender on a monthly (within fifteen
(15) days after the end of each month), or more frequent basis, as requested by
Lender, certified as true and accurate by its President or Chief Financial
Officer, an aged trial balance of its existing accounts payable. Borrower shall
provide Lender, as requested by Lender, such other schedules, documents and/or
information regarding the Collateral as Lender may require.
10. Inspections. At all times during normal business hours, Lender
shall have the right to (a) visit and inspect Borrower's office, and the
Collateral, (b) inspect, audit and make extracts from Borrower's relevant books
and records, including, but not limited to, management letters prepared by
independent accountants, and (c) discuss with Borrower's principal officers and
independent accountants, the business, assets, liabilities, financial condition
results of operations and business prospects of Borrower. Lender may conduct
inspections at Borrower's office no
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more than four (4) times per Loan Year unless an Event of Default has occurred
or the results of any audit report are not satisfactory to Lender in its
discretion, in which event there shall be no limit on the number of inspection
performed. Borrower will deliver to Lender any instrument necessary for Lender
to obtain records from any service bureau maintaining records for such Borrower.
11. Information.
(a) Disclosure of Material Collateral Matters. Immediately upon
learning thereof, report to Lender all matters materially affecting the value,
enforceability or collectability of the Collateral including, without
limitation, claims or disputes asserted by any Customer or other obligor.
(b) Material Occurrences. Promptly notify Lender in writing upon the
occurrence of (a) any Event of Default or Incipient Event of Default; (b) any
event of default under the Indenture; (c) any event which with the giving of
notice or lapse of time, or both, would constitute an event of default under the
Indenture; (d) any event, development or circumstance whereby any financial
statements or other reports furnished to Lender fail in any material respect to
present fairly, in accordance with GAAP consistently applied, the financial
condition or operating results of Borrower as of the date of such statements;
(e) any accumulated retirement plan funding deficiency which, if such deficiency
continued for two plan years and was not corrected as provided in Section 4971
of the Internal Revenue Code of 1986 (as amended, the "Code"), could subject
Borrower to a tax imposed by Section 4971 of the Code; (f) each and every
default by Borrower which might reasonably be expected to result in the
acceleration of the maturity of any Indebtedness in excess of $5,000,000
including the names and addresses of the holders of such Indebtedness with
respect to which there is a default existing or with respect to which the
maturity has been or could be accelerated, and the amount of such Indebtedness;
and (g) any other development in the business or affairs of Borrower which could
reasonably be expected to have a Material Adverse Effect; in each case
describing the nature thereof and the action Borrower proposes to take with
respect thereto.
(c) SEC Reports. Whether or not the Borrower is subject to the
reporting requirements of Section 13 or Section 15(d) of the Exchange Act, the
Borrower shall deliver to the Lender, within 60 days after the end of each
fiscal quarter (other than any fiscal quarter ending a fiscal year) and within
105 days after the end of each fiscal year quarterly and annual financial
statements, respectively, substantially equivalent to financial statements that
would have been included in the reports filed with the Securities and Exchange
Commission (the "SEC") if the Borrower were subject to the reporting
requirements of Section 13 or Section 15(d) of the Exchange Act, including, with
respect to annual information only, a report thereon by the Borrower's
independent certified public accountants as such would be required in such
reports to the SEC, and, in each case, together with a management's discussion
and analysis of financial condition and results of operations which would be so
required and, unless the SEC will not accept such reports, file with the SEC the
annual, quarterly and other reports which it is or would have (if it were
subject to such reporting obligations) been required to file with the SEC.
Annual and quarterly financial statements required to be delivered by Borrower
under this Section 11(c) shall be accompanied by comparable consolidating
balance sheets and consolidating income statements for each Material Subsidiary
(reviewed, with respect to annual information only, by Borrower's independent
certified public accountants).
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(d) Other Reports. Furnish Lender as soon as available, but in any
event within ten (10) days after the issuance thereof, (i) with copies of such
financial statements, reports and returns as Borrower shall send to its
stockholders and (ii) copies of all material notices sent pursuant to the
Indenture.
(e) Projected Operating Budget. Furnish Lender, no later than thirty
(30) days prior to the beginning of each of Borrower's fiscal years commencing
with fiscal year 2001, a month by month projected operating budget and cash flow
of Borrower on a consolidated or consolidating basis for such fiscal year
(including an income statement for each month and a balance sheet as at the end
of the last month in each fiscal quarter), such projections to be accompanied by
a certificate signed by Borrower's President or President and/or Chief Financial
Officer to the effect that such projections have been prepared on the basis of
sound financial planning practice consistent with past budgets and financial
statements and that such officer has no reason to question the reasonableness of
any material assumptions on which such projections were prepared.
(f) In addition to the foregoing, promptly upon incurring any
Indebtedness in a principal amount in excess of $10,000,000, Borrower shall
furnish Lender a copy of the principal documents relating to such Indebtedness.
12. Additional Representations and Warranties.Borrower represents and
warrants as to itself and each Guarantor (each of which such representations and
warranties (except those contained in Sections 12(e) and 12(h) (except
representations and warranties that relate solely to an earlier date and were
true and correct on such earlier date)) shall be deemed repeated upon the making
of a request for a Revolving Credit Advance or the issuance of a Letter of
Credit and made as of the time of each Revolving Credit Advance made hereunder
or Letter of Credit issued hereunder and either (x) all representations and
warranties contained in Sections 12(e) and 12(h) shall be deemed repeated in all
respects upon the making of a request for a Revolving Credit Advance or the
issuance of a Letter of Credit and made as of the time of each Revolving Credit
Advance made hereunder or Letter of Credit issued hereunder or (y) Borrower
shall have notified Lender in writing of the occurrence of any and all events,
facts or circumstances which makes any such representations and warranties in
Sections 12(e) and 12(h) untrue or incorrect and Lender shall have either (i)
consented in writing with respect thereto in its sole discretion) or (ii) have
funded such Revolving Credit Advance pursuant hereto or issued the requested
Letter of Credit (which funding or issuance shall be deemed to be such consent):
(a) each of Borrower and each Guarantor is a corporation, partnership
or limited liability company duly organized and validly existing under the laws
of the State of its organization and is duly qualified and in good standing in
every other state or jurisdiction in which the nature of its business requires
such qualification except to the extent failure to be so qualified or in good
standing would not have a material adverse effect upon its business, assets,
operations, condition, business prospects, financial or otherwise of the
Borrower and its Subsidiaries, taken as whole, or upon the Collateral or upon
Borrower's or such Guarantor's ability to perform its obligations hereunder or
under any of the other Ancillary Agreements;
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(b) the execution, delivery and performance of this Agreement and the
Ancillary Agreements (i) have been duly authorized, (ii) are not in
contravention of either Borrower's or any Guarantor's certificate of
incorporation, by-laws, certificate of limited partnership, certificate of
formation, limited liability company agreement or partnership agreement, of the
Indenture or of any other material agreement or undertaking to which Borrower or
any Guarantor is a party or by which Borrower or any Guarantor is bound and
(iii) are within each of Borrower's and each Guarantor's powers;
(c) this Agreement and the Ancillary Agreements executed and delivered
by Borrower, or any Guarantor are their respective legal, valid and binding
obligations, enforceable in accordance with their terms except as such
enforcement may be limited by bankruptcy, insolvency or similar laws relating to
the enforcement of creditors' rights generally and by general principles of
equity;
(d) each of Borrower and each Guarantor keeps all of its books and
records concerning the Collateral at its executive offices located at the
address set forth in the introductory paragraph of this Agreement or at such
other address as notified to Lender in writing pursuant to Section 26;
(e) Except as disclosed on Schedule 12(e) hereto, on the Closing Date
the operation of each of Borrower's and each Guarantor's businesses is in
compliance in all material respects with all applicable federal, state and local
laws, including but not limited to all applicable environmental laws and
regulations. At all times after the Closing Date when this representation is
deemed made, except as disclosed on Schedule 12(e) hereto or otherwise disclosed
in writing to the Lender, or the operation of each of Borrower's and each
Guarantor's business is in compliance with such laws, except where the failure
to comply would not reasonably be expected to have a material adverse effect on
Borrower and Guarantors taken as a whole.
(f) based upon the Employee Retirement Income Security Act of 1974 (as
amended from time to time, "ERISA"), and the regulations and published
interpretations thereunder: (i) neither Borrower nor any Guarantor has engaged
in any Prohibited Transaction as defined in Section 406 of ERISA and Section
4975 of the Internal Revenue Code, as amended; (ii) Borrower and its Guarantors
taken as a whole have met all applicable minimum funding requirements under
Section 302 of ERISA for which an administrative or statutory exemption was not
available in respect of its plans; (iii) neither Borrower nor any Guarantor has
any knowledge of any event or occurrence which would cause the Pension Benefit
Guaranty Corporation to institute proceedings under Title IV of ERISA to
terminate any employee benefit plan(s); (iv) neither Borrower nor any Guarantor
has any fiduciary responsibility for investments with respect to any plan
existing for the benefit of Persons other than such Borrower's or such
Guarantor's employees; and (v) neither Borrower nor any Guarantor has withdrawn,
completely or partially, from any multi-employer pension plan so as to incur
liability under the Multiemployer Pension Plan Amendments Act of 1980 the effect
of which in any case described in clauses (i) through (v) would have a material
adverse effect on Borrower and its Guarantors taken as a whole;
(g) giving effect to the Plan, the Order and the transactions
contemplated thereunder each of Borrower and each Guarantor is solvent, able to
pay its debts as they mature, has capital sufficient to carry on its business
and all businesses in which it is about to engage and the fair
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saleable value of its assets (calculated on a going concern basis and taking
into account their respective rights of reimbursement and contribution in
respect of any Guaranty) is in excess of the amount of its liabilities;
(h) except as disclosed on Schedule 12(h) hereto or otherwise in
writing to the Lender, there is no pending or to Borrower's knowledge threatened
litigation, action or proceeding which could reasonably be expected to have a
material adverse effect on Borrower's and its Subsidiaries' (taken as a whole)
business, assets, operations, condition or prospects, financial or otherwise, or
the ability of any of Borrower or any Guarantor to perform this Agreement or any
of the Ancillary Agreements to which it is a party;
(i) all consolidated balance sheets and income statements of Borrower
and its Subsidiaries which have been delivered to Lender present fairly in all
material respects the Borrower's consolidated financial condition on the date as
of which such financial statements were prepared on a basis consistent with that
of previous financial statements and there has been no material adverse change
in Borrower's consolidated financial condition as reflected in the most recent
of such statements since the date thereof and such statements do not fail to
disclose any fact or facts which could reasonably be expected to materially and
adversely affect Borrower's and its Subsidiaries' financial condition taken as a
whole;
(j) (x) each of Borrower and each Guarantor possesses all of the
material licenses, patents, copyrights, trademarks, tradenames and permits
necessary to conduct its business and (y) there has been no assertion or claim
of violation or infringement with respect thereof which could reasonably be
expected to have a material and adverse effect on Borrower's and its
Subsidiaries' financial condition, taken as a whole; and
(k) all financial projections of Borrower's or any Guarantor's
performance prepared by Borrower or at Borrower's direction and delivered to
Lender represent, at the time of delivery to Lender, its reasonable estimate of
such Borrower's or such Guarantor's future financial performance and are based
upon assumptions that are reasonable in light of such Borrower's or such
Guarantor's past performance and then current business conditions.
13. Covenants. Borrower hereby covenants as to itself and each
Guarantor covenants as to itself that from the date hereof and until
satisfaction in full of the Obligations the Borrower shall, and shall cause the
Guarantors to, comply with the following:
(a) Each of Borrower's and each Guarantor's businesses will continue to
be in compliance in all material respects with all applicable federal, state and
local laws, including but not limited to all applicable environmental laws and
regulations.
(i) Each of Borrower and each Guarantor will do all things
necessary to systematically assure and monitor continued compliance in
all material respects with all applicable environmental laws,
including periodic reviews of such compliance.
(ii) In the event any of Borrower, any of the Guarantors obtains,
gives or receives notice of any material release or threat of release
of a reportable quantity of any Hazardous Substances on its property
(any such event being hereinafter referred to as a "Hazardous
Discharge") or receives any notice of material violation, request for
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information or notification that it is potentially responsible for
investigation or cleanup of environmental conditions on its property,
demand letter or complaint, order, citation, or other written notice
with regard to any material Hazardous Discharge or material violation
of any environmental laws affecting its property or its interest
therein (any of the foregoing is referred to herein as an
"Environmental Complaint") from any governmental authority, including
any state agency responsible in whole or in part for environmental
matters in the state in which such property is located or the United
States Environmental Protection Agency (any such governmental
authority hereinafter the "Authority"), then it shall, within five (5)
Business Days, give written notice of same to the Lender detailing
facts and circumstances of which it is aware giving rise to the
Hazardous Discharge or Environmental Complaint and periodically inform
Lender of the status of the matter. Such information is to be provided
to allow the Lender to protect its security interest in the Collateral
and is not intended to create nor shall it create any obligation upon
the Lender with respect thereto.
(iii) Each of Borrower and each Guarantor of Borrower shall
respond promptly to any Hazardous Discharge or Environmental Complaint
applicable to it and take all necessary action in order to safeguard
the health of any Person and to avoid subjecting the Collateral to any
claim or Lien other than a Permitted Lien.
(iv) Borrower and the Guarantors shall each jointly and severally
defend and indemnify the Lender, its officers, directors, employees
and agents and hold the Lender, its officers, directors, employees and
agents harmless from and against all loss, liability, damage and
expense, claims, costs, fines and penalties, including attorney's
fees, suffered or incurred by the Lender, its officers, directors,
employees and agents under or on account of any violation by Borrower
or any Guarantor of any environmental laws, including, without
limitation, the assertion of any Lien thereunder other than Permitted
Liens, with respect to any Hazardous Discharge, the presence of any
Hazardous Substances in violation of applicable environmental laws
affecting Borrower's or such Guarantor's property, whether or not the
same originates or emerges from Borrower's or such Guarantor's
property or any contiguous real estate, including any loss of value of
the Collateral as a result of the foregoing, except to the extent such
loss, liability, damage and expense is directly attributable to any
Hazardous Discharge resulting from actions on the part of the Lender,
its officers, directors, employees and agents. The obligations of
Borrower and the Guarantors under this Section 13(a) shall arise upon
the discovery of the presenceof any Hazardous Substances in violation
of applicable environmental laws on Borrower's or such Guarantor's
property, whether or not any federal, state, or local environmental
agency has taken or threatened any action in connection with the
presence of any Hazardous Substances. The obligation and the
indemnifications hereunder shall survive the termination of this
Agreement.
(v) For purposes of Section 13(a) all references to Borrower's or
Guarantor's property shall be deemed to include all of such Borrower's
or Guarantor's right, title and interest in and to all owned and/or
leased premises;
(b) Each of Borrower and each Guarantor shall, and shall cause each of
its Subsidiaries to, pay or discharge when due or cause to be paid or discharged
when due all taxes, assessments
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and governmental charges or levies (including withholding taxes and any
penalties, interest, and additions to taxes) levied or imposed upon Borrower or
any of its Subsidiaries or any of their respective properties and assets;
provided, however, that neither Borrower nor any Guarantor shall be required to
pay or discharge or cause to be paid or discharged any such tax, assessment,
charge or levy whose amount, applicability or validity is being contested in
good faith by appropriate proceedings and for which disputed amounts adequate
reserves have been established in accordance with GAAP.
(c) Borrower will promptly inform Lender in writing of (i) the
commencement of all proceedings and investigations by or before and/or the
receipt of any notices from, any governmental body and all actions and
proceedings in any court or before any arbitrator against or in any way
concerning any of Borrower's or any Guarantor's properties, assets or business,
which singly or in the aggregate could reasonably be expected to have a material
adverse effect on Borrower and the Guarantors taken as a whole; (ii) any
material amendment of Borrower's or any Guarantor's certificate of
incorporation, by-laws, certificate of formation, certificate of limited
partnership, limited liability company agreement or partnership agreement; (iii)
any change in any of Borrower's or any Guarantor's business, assets,
liabilities, condition (financial or otherwise), results of operations or
business prospects which has had or could reasonably be expected to have a
material adverse effect on the Borrower, and the Guarantors, taken as a whole,
or the Collateral; (iv) any Event of Default or Incipient Event of Default; (v)
any default or any event which with the passage of time or giving of notice or
both would constitute a default under any agreement for the payment of money to
which Borrower or any Guarantor is a party or by which Borrower or any Guarantor
or any of Borrower's or any Guarantor's properties may be bound which would have
a material adverse effect on Borrower's and the Guarantors' (taken as a whole)
business, operations, property or condition (financial or otherwise) or the
Collateral; (vi) any change in the location of Borrower's or a Guarantor's
executive offices; (vii) any change in the location of Borrower's or a
Guarantor's Inventory from the locations listed on Schedule 13(c) attached
hereto (other than Inventory in transit for use by Borrower or such Guarantor
(which notice shall be deemed to amend Schedule 13(c)); (viii) any change in
Borrower's or a Guarantor's corporate name; (ix) any material delay in
Borrower's or a Guarantor's performance of any of its obligations to any
Customer and of any assertion of any material Disputes by any Customer and of
any allowances, credits and/or other monies granted by it to any Customer; and
(x) all material adverse information known to Borrower or its Subsidiaries
relating to the financial condition of any account debtor with accounts in
excess of $1,000,000 in the aggregate.
(d) Limitations on Incurrences of Additional Indebtedness and Issuances
of Disqualified Stock. Borrower shall not, and shall not permit any Guarantor
to, directly or indirectly, create, incur, assume, guarantee or otherwise become
liable for, contingently or otherwise (to "Incur" or, as appropriate, an
"Incurrence"), any Indebtedness or issue any Disqualified Capital Stock (other
than Capital Stock of a Subsidiary of Borrower issued to the Borrower or a
Wholly Owned Subsidiary of Borrower) except any such Indebtedness or
Disqualified Capital Stock which Borrower and its Subsidiaries would be
permitted to incur in compliance with Section 6.3 of the Oil & Gas Credit
Facility provided that for purposes of this Section 13(d) the term "Subordinated
Indebtedness" as used in Section 6.3 of the Oil & Gas Credit Facility shall have
the meaning assigned to such term in this Agreement; provided, further, that
notwithstanding the foregoing, Borrower will not Incur any Attributable
Indebtedness in respect of any Sale and Leaseback Transaction involving the
Collateral. Indebtedness Incurred and Disqualified Capital Stock
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issued by any Person that is not a Subsidiary, which Indebtedness is outstanding
at the time such Person becomes, or is merged into, or consolidated with, a
Borrower or Subsidiary of Borrower shall be deemed to have been Incurred or
issued, as the case may be, at the time such Person becomes, or is merged into,
or consolidated with Borrower or such Subsidiary.
(e) neither Borrower nor any Guarantor will (i) declare, pay or make
any dividend or distribution of any shares of the common stock or preferred
stock of Borrower or apply any of its funds, property or assets to the purchase,
redemption or other retirement of any common or preferred stock of Borrower
except as set forth in Section 6.6 of the Oil & Gas Credit Facility, (ii)
directly or indirectly, prepay any Indebtedness (other than to Lender), or
repurchase, redeem, retire or otherwise acquire any Indebtedness of Borrower or
any Guarantor or any Unrestricted Subsidiary of Borrower if an Event of Default
exists or if, after giving effect thereto an Incipient Event of Default or an
Event of Default shall exist; (iii) enter into any merger, consolidation or
other reorganization with or into any other Person (other than the Borrower or a
Guarantor) or permit any other Person (other than the Borrower or a Guarantor)
to consolidate with or merge with Borrower except as permitted by Section 6.1 of
the Oil & Gas Credit Facility; (iv) materially change the nature of its business
to a business that is not a Related Business; (v) change its fiscal year or make
any changes in accounting treatment and reporting practices without prior
written notice to Lender except as required by GAAP or in the tax reporting
treatment or except as required by law; (vi) enter into any transaction with any
Subsidiary or Affiliate, except as permitted by Section 6.8 of the Oil & Gas
Credit Facility as in effect on the date of this Agreement; or (vii) ▇▇▇▇
Receivables under any name except the present name of Borrower or any Guarantor;
(f) neither Borrower nor any Guarantor will enter into or be a party to
any Presale of Gas unless (i) Borrower or such Guarantor has provided Lender
prior written notice of such Presale of Gas, (ii) Borrower has paid to Lender a
fee equal to 2% of the aggregate amount of the purchase price for such Presale
of Gas and (iii) the aggregate purchase price for all Presales of Gas in a
calendar month does not exceed $5,000,000;
(g) none of the proceeds of the Loans or Letters of Credit hereunder
will be used directly or indirectly to "purchase" or "carry" "margin stock"
including the repurchase of Borrower's Capital Stock or to repay Indebtedness
incurred to "purchase" or "carry" "margin stock" within the respective meanings
of each of the quoted terms under Regulation U of the Board of Governors of the
Federal Reserve System as now and from time to time hereafter in effect;
(h) Insurance. Borrower will bear the full risk of loss from any loss
of any nature whatsoever with respect to the Collateral. Borrower at its own
cost and expense in amounts and with carriers reasonably acceptable to Lender,
shall (i) keep all of its insurable properties and properties in which it has an
interest insured against the hazards of fire, flood, sprinkler leakage, those
hazards covered by extended coverage insurance and such other hazards, and for
such amounts, as is customary in the case of companies engaged in businesses
similar to its business; (ii) maintain public and product liability insurance
against claims for personal injury, death or property damage suffered by others
as is customary in the case of companies engaged in businesses similar to its;
(iii) maintain all such workmen's compensation or similar insurance as may be
required under the laws of any state or jurisdiction in which it is engaged in
business; (iv) furnish Lender with (x) certificates evidencing insurance
policies and other evidence of the
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maintenance of such policies at least fifteen (15) days before any expiration
date, and (y) appropriate loss payable endorsements (with respect to Collateral
only) in form and substance satisfactory to Lender, naming Lender and the
Trustee under the Indenture as their interests may appear as loss payee (with
respect to Collateral only) and providing that as to Lender the insurance
coverage shall not be impaired or invalidated by any act or neglect of Borrower
and the insurer will provide Lender with at least fifteen (15) days notice prior
to cancellation. Borrower shall instruct the insurance carriers that in the
event of any loss thereunder, the carriers shall make payment for such loss
(with respect to Collateral only) to Lender and Agent under the Oil & Gas Credit
Facility, as their interests may appear. Upon the occurrence and during the
continuance of an Event of Default, if any insurance losses payable with respect
to the Collateral are paid by check, draft or other instrument payable to
Borrower, Lender may endorse Borrower's name thereon and do such other things as
Lender may deem advisable to reduce the same to cash. Lender is hereby
authorized to adjust and compromise claims with respect to the Collateral at any
time after the occurrence and during the continuance of an Event of Default.
Upon the occurrence and during the continuance of an Event of Default, all loss
recoveries received by Lender upon any such insurance may be applied to the
Obligations in such order as Lender in its sole discretion shall determine. Any
surplus shall be paid by Lender to the Borrower or applied as may be otherwise
required by law. Any deficiency thereon shall be paid by Borrower to Lender, on
demand;
(i) Borrower will not make any Investment in any Person except
Permitted Investments;
(j) Borrower will cause each of its Material Subsidiaries hereafter
formed or acquired to execute and deliver a joinder of this Agreement and the
documents, opinions, instruments and certificates listed in Sections 2(a)(i) and
2(a)(v)(A), (B), (C), (D), and (G) with respect to such Subsidiary promptly
following such formation or acquisition provided that if no Incipient Event of
Default or Event of Default shall have occurred and be continuing, the Lender
will release the Guaranty of a Guarantor and any unapplied Collateral from such
Guarantors within five Business Days from the receipt of the written request of
the Borrower in the form of an officer's certificate if such officer's
certificate shall certify that no Incipient Event of Default or Event of Default
shall have occurred and be continuing and either, (i) the stock of such
Subsidiary is sold or transferred by the Borrower and such Guarantor ceases to
be a Subsidiary or (ii) all or substantially all of the assets of such Guarantor
are sold or transferred and such Subsidiary has ceased or then ceases to be a
Material Subsidiary, so long as, in each case under the foregoing (i) and (ii)
any outstanding over advance, if any, pursuant to Section 2(d) is concurrently
repaid or such Guarantor is Galveston Bay Processing Corporation, and (i)
substantially all of the assets of such Subsidiary are sold, transferred,
mortgaged or collaterally assigned or (ii) release is requested in connection
with a GB Facility Financing made in compliance with Section 6.3 of the Oil &
Gas Credit Facility;
(k) within 60 days following the Closing Date, deliver to Lender lien
search reports, in form and substance satisfactory to Lender and its counsel, on
the properties of Borrower located in the counties listed in Section 8(j) of
this Agreement (to the extent not delivered to Lender on the Closing Date) and
evidencing that the Liens of the Lender on the Collateral have the lien priority
specified in Section 7(a) hereof.
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(l) Financial Covenants.
(i) Consolidated Coverage Ratio. Not permit Consolidated Coverage
Ratio for Borrower and its Subsidiaries on a consolidated basis at the end of
each fiscal quarter with respect to the immediately preceding fiscal period set
forth below (ending on the last day of such fiscal quarter) to be less than
Consolidated Coverage Ratio set forth below as corresponds to the applicable
fiscal period:
Period Coverage Ratio
------ --------------
One quarter ended 4/30/00 .33 to 1
Two quarters ended 7/31/00 .40 to 1
Three quarters ended 10/31/00 .45 to 1
Four Quarters Ended
1/31/01 .50 to 1
4/30/01 .55 to 1
7/31/01 .60 to 1
10/31/01 .65 to 1
1/31/02 .70 to 1
4/30/02 .75 to 1
7/31/02 .80 to 1
10/31/02 .85 to 1
1/31/03 .90 to 1
4/30/03 1.00 to 1
7/31/03 1.10 to 1
10/31/03 1.20 to 1
1/31/04 and thereafter to 1.25 to 1
the end of the Term
(ii) Consolidated Net Income. Not permit the sum of (i)
Consolidated Net Income for Borrower and its Subsidiaries on a consolidated
basis plus (ii) dividend requirements of Borrower and its consolidated
Subsidiaries (whether in cash or otherwise (except dividends payable solely in
shares of Qualified Capital Stock)) with respect to Preferred Stock paid,
accrued, or scheduled to be paid or accrued during each period set forth below
(in each case to the extent attributable to such period and excluding items
eliminated in consolidation) at the end of each fiscal quarter with respect to
the immediately preceding fiscal period set forth below (ending on the last day
of such fiscal quarter) to be less than the amount set forth below as
corresponds to the applicable fiscal period:
Fiscal Period Net Income
------------- ----------
One quarter ended 4/30/00 ($12,000,000)
Two quarters ended 7/31/00 ($25,000,000)
Three quarters ended 10/31/00 ($38,000,000)
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Four Quarters Ended
-------------------
1/31/01 ($40,000,000)
4/30/01 ($37,500,000)
7/31/01 ($35,000,000)
10/31/01 ($32,500,000)
1/31/02 ($30,000,000)
4/30/02 ($27,500,000)
7/31/02 ($25,000,000)
10/31/02 ($22,500,000)
1/31/03 ($20,000,000)
4/30/03 ($15,000,000)
7/31/03 ($10,000,000)
10/31/03 ($ 5,000,000)
1/31/04 and thereafter to 0
the end of the Term
(iii) Consolidated EBITDA Not permit Consolidated EBITDA for Borrower
and its Subsidiaries on a consolidated basis at the end of each fiscal
quarter with respect to the immediately preceding fiscal period set
forth below (ending on the last day of such fiscal quarter) to be less
than the consolidated EBITDA set forth below as corresponds to the
applicable fiscal period:
Fiscal Period EBITDA
------------- ------
One quarter ended 4/30/00 $18,000,000
Two quarters ended 7/31/00 $38,000,000
Three quarters ended 10/31/00 $60,000,000
Four Quarters Ended
1/31/01 $80,000,000
4/30/01 $82,500,000
7/31/01 $85,000,000
10/31/01 $87,500,000
1/31/02 $90,000,000
4/30/02 $92,500,000
7/31/02 $95,000,000
10/31/02 $97,500,000
1/31/03 $100,000,000
4/30/03 $102,500,000
7/31/03 $105,000,000
10/31/03 $107,500,000
1/31/04 and thereafter to $110,000,000
the end of the Term
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(iv) Upon the repayment in full of all obligations of Borrower under
the Oil & Gas Credit Facility and the irrevocable termination thereof,
Borrower and Lender shall use good faith efforts to reset the financial
covenants set forth in this Section 13(l) to levels satisfactory to
Borrower and Lender and pursuant to a mutually acceptable amendment to
this Agreement, provided, however, until Borrower and Lender have so
agreed, the financial covenants set forth herein shall continue in full
force and effect.
(m) Dismissal of Appeals. Borrower shall use commercially reasonable
efforts to have dismissed any presently pending appeals filed to the
Confirmation Order, including, without limitation such appeal pending by High
River Limited Partnership in the United States District Court, Southern District
of Texas, and shall immediately make application to have such appeals dismissed
on the grounds of mootness.
14. Power of Attorney. Borrower hereby appoints Lender (or any other
Person whom Lender may designate as its attorney) with power to: (i) endorse
Borrower's name on any uniform commercial code financing statements, any checks,
notes, acceptances, money orders, drafts or other forms of payment or security
that may come into Lender's possession; (ii) sign Borrower's name on any invoice
or ▇▇▇▇ of lading relating to any Receivables, drafts against Customers,
schedules and notices of assignment financing statements and other public
records, verifications of account and notices to or from Customers; (iii) verify
the validity, amount or any other matter relating to any Receivable by mail,
telephone, telegraph or otherwise with Customers; (iv) execute customs
declarations and such other documents as may be required to clear Inventory
through Customs; (v) do all things necessary to carry out this Agreement, any
Ancillary Agreement and all related documents; and (vi) on or after the
occurrence and during the continuation of an Event of Default, notify the post
office authorities to change the address for delivery of Borrower's mail to an
address designated by Lender, and to receive, open and dispose of all mail
addressed to Borrower. Each of Borrower and each Guarantor hereby ratifies and
approves all acts of the attorney-in-fact permitted pursuant to this Section 14.
Neither Lender nor the attorney-in-fact will be liable for any acts or omissions
or for any error of judgment or mistake of fact or law made by Lender in good
faith and in the absence of willful misconduct and gross negligence. This power,
being coupled with an interest, is irrevocable so long as any Receivable in
which Lender has a security interest remains unpaid and until the Obligations
have been fully satisfied.
15. Expenses. Borrower shall pay all of Lender's out-of-pocket costs
and expenses, including without limitation reasonable fees and disbursements of
counsel retained or employed by Lender and appraisers, in connection with the
preparation, execution and delivery of this Agreement and the Ancillary
Agreements, and in connection with the prosecution or defense of any action,
contest, dispute, suit or proceeding concerning any matter in any way arising
out of, related to or connected with this Agreement or any Ancillary Agreement.
Borrower shall also pay all of Lender's out-of-pocket costs and expenses,
including without limitation reasonable fees and disbursements of counsel
retained or employed by Lender, in connection with (a) the preparation,
execution and delivery of any waiver, any amendment thereto or consent proposed
or executed in connection with the transactions contemplated by this Agreement
or the Ancillary Agreements, (b) Lender's obtaining performance of the
Obligations under this Agreement and any Ancillary Agreements, including, but
not limited to, the enforcement or defense of Lender's Liens hereunder as valid
perfected security interests, (c) any attempt to protect, collect, sell,
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liquidate or otherwise dispose of any Collateral, (d) after the occurrence and
during the continuance of an Event of Default, any consultations in connection
with any of the foregoing and (e) subject to the cost limitations of Section
5(b)(iii) for any period during which an Event of Default does not exist any
attempt to inspect or verify any Collateral. Borrower shall also pay Lender's
then standard price for furnishing Borrower or any Guarantor or their respective
designees copies of any statements, records, files or other data (collectively,
"Reports") requested by Borrower or any Guarantor or their respective designees,
other than reports of the kind furnished to Borrower and the Guarantors and
Lender's other borrowers on a regular, periodic basis in the ordinary course of
Lender's business. Borrower shall also pay Lender's customary bank charges,
including, without limitation, all wire transfer fees incurred by Lender, for
all bank services performed or caused to be performed by Lender for Borrower or
any Guarantor at its request. All such costs and expenses together with all
filing, recording and search fees, reimbursable taxes and interest payable by
Borrower or any Guarantor to Lender shall be payable on demand and shall be
secured by the Collateral. If any tax by any governmental authority is or may be
imposed on or as a result of any transaction between Borrower or any Guarantor
and Lender (other than any franchise taxes or income taxes imposed on or
measured by the net income, assets, net worth or shareholders' capital of the
Lender or any lending office of the Lender) which Lender is or may be required
to withhold or pay, each of Borrower and each Guarantor agrees to indemnify and
hold Lender harmless in respect of such taxes, and each of Borrower and each
Guarantor will repay to Lender the amount of any such taxes paid by Lender,
which shall be charged to Borrower's account; and until Borrower or such
Guarantor shall furnish Lender with indemnity therefor (or supply Lender with
evidence satisfactory to it that due provision for the payment thereof has been
made), Lender may hold without interest any balance standing to Borrower's or
such Guarantor's credit (but only to the extent of the amount of such taxes,
penalties and interest) and Lender shall retain its security interests in any
and all Collateral. Each of Borrower and each Guarantor hereby acknowledges that
Lender shall not be liable in any manner whatsoever for any selling expenses,
orders, purchases or contracts of any kind resulting from any transaction
between Borrower or any Guarantor and any other Person and each of Borrower and
each Guarantor hereby indemnifies and holds Lender harmless with respect
thereto, which indemnity shall survive termination of this Agreement.
16. Assignment By Lender. (a) Lender, subject to clause (b) below, may
at any time and from time to time assign this Agreement or any or all of the
Obligations together with any or all of the security therefor and any transferee
shall succeed to all of Lender's rights with respect to the interest so
assigned. Upon such transfer, Lender shall be released from all responsibility
with respect to the interest so assigned (from the effective date of such
assignment forward) and for the Collateral to the extent same is assigned to any
transferee and Borrower shall have no further obligations to Lender with respect
to the interests so assigned, provided such transferee has assumed all of
Lender's responsibilities and obligations with respect to the interest and
Collateral so assigned. Lender, subject to clause (b) below, may from time to
time sell or otherwise grant participations in any of the Obligations to any
bank, finance company, insurance company, or other financial services company,
and the holder of any such participation shall, subject to the terms of any
agreement between Lender and such holder, be entitled to the same benefits as
Lender with respect to any security for the Obligations in which such holder is
a participant. Any agreement pursuant to which the Lender may grant such a
participating interest shall provide that the Lender shall retain the sole right
and responsibility to enforce the obligations of
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the Borrower hereunder including, without limitation, the right to approve any
amendment, modification or waiver of any provision of this Agreement; provided
that such participation agreement may provide that the Lender will not agree to
any modification, amendment or waiver of this Agreement that (i) increases the
Maximum Loan Amount, (ii) decreases the interest rate applicable to Revolving
Credit Advances or (iii) releases Collateral (other than, in each instance, as
expressly permitted or allowed by this Agreement or the applicable Ancillary
Document) without the consent of the participant. Borrower agrees that each such
holder may exercise any and all rights of banker's lien, set-off and
counterclaim with respect to its participation in the Obligations as fully as
though Borrower were directly indebted to such holder in the amount of such
participation.
Notwithstanding anything to the contrary in clause (a) above, unless an
Event of Default shall have occurred and during the continuance thereof, no
Lender shall (i) sell, without the prior written consent of Borrower, a
participating interest or (ii) sell, assign or transfer any part of its rights
hereunder to any Person listed on Schedule 16(b) or to a direct competitor of
the Borrower or any Guarantor or to a Person engaged as one of its principal
activities in a Related Business.
17. Waivers. Borrower waives presentment and protest of any instrument
and notice thereof, notice of default (except as expressly required hereunder),
notice of intent to accelerate, notice of acceleration and, to the extent
permitted under applicable law, all other notices to which it might otherwise be
entitled.
18. Term of Agreement. (a) This Agreement shall continue in full force
and effect until the expiration of the Term. The Term may be extended for
successive periods of one (1) year upon the request of Borrower, at least ninety
(90) days prior to the expiration of the initial Term or any renewal Term and
the consent of Lender at least forty-five (45) days prior to such expiration.
(b) Notwithstanding the foregoing, but subject to the other terms and
provisions of this Section 18, upon at least ten (10) days prior written notice
to Lender, Borrower may, at its option, terminate this Agreement; provided,
however, no such termination shall be effective until Borrower has paid all of
the Obligations in immediately available funds.
(c) At the effective date of any such termination by Borrower or if
this Agreement is otherwise deemed terminated upon an Event of Default under
Section 19(i) of this Agreement, Borrower shall pay to Lender (in addition to
the then outstanding principal, accrued interest and other charges owing under
the terms of this Agreement and any of the other Ancillary Agreements), as
liquidated damages for the loss of the bargain and not as a penalty, an amount
equal to $600,000 if termination occurs prior to March 15, 2001; $400,000 if
termination occurs during the period from March 15, 2001 through March 14, 2002;
$200,000 if termination occurs during the period from March 15, 2002 through
March 14, 2003; $150,000 if termination occurs during the period March 15, 2003
through March 14, 2004 and $100,000 if termination occurs after March, 2004 and
before the 30th day prior to the end of the Term.
(d) All of the Obligations shall be forthwith due and payable upon any
termination of this Agreement. Except as otherwise expressly provided for in
this Agreement or the Ancillary Documents, no termination or cancellation
(regardless of cause or procedure) of this Agreement
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or any of the other Ancillary Agreements shall in any way affect or impair the
rights, powers or privileges of Lender or the obligations, duties or liabilities
of Borrower, the Guarantors or Lender in any way relating to any transaction or
event occurring prior to such termination or cancellation. All of the
undertakings, agreements, consents, warranties or representations of Borrower,
or the Guarantors contained in this Agreement or any of the other Ancillary
Agreements shall survive termination or cancellation of this Agreement and the
other Ancillary Agreements and Lender shall retain its Liens in the Collateral
and all of its rights and remedies under this Agreement and the other Ancillary
Agreements notwithstanding such termination or cancellation until all of the
Obligations have been paid in full, in immediately available funds. Upon payment
in full of all Obligations and the termination of this Agreement, the Liens
granted herein and in the other Ancillary Agreements shall terminate, all rights
to the Collateral shall revert to the Borrower or the respective Guarantors, as
the case may be, and the Lender will, at the Borrower's expense, execute and
deliver to the Borrower and each Guarantor, as the case may be, such documents
as the Borrower or such Guarantor shall request to evidence such termination;
provided, however, that notwithstanding the foregoing, such termination and
reversion, and the delivery of such documents evidencing such termination, shall
be subject to the conditions precedent that Borrower and the Guarantors and any
Person whose loans to Borrower are used in whole or in part to satisfy the
Obligations shall first have executed an agreement indemnifying Lender from any
loss or damage Lender may incur as the result of dishonored checks or other
items of payment received by Lender from Borrower, the Guarantor or any Customer
and applied to the Obligations.
(e) It is understood that Borrower may elect to terminate this
Agreement in its entirety only; no section or lending facility may be terminated
singly.
19. Events of Default. The occurrence of any of the following shall
constitute an Event of Default:
(a) failure to make payment of any of the Obligations when required
hereunder;
(b) failure by Borrower to perform or observe any term or covenant in
Section 13 of this Agreement (other than Section 13(l) which failure shall
constitute an Event of Default upon the occurrence thereof) and such failure or
breach shall continue for ten (10) days after the occurrence thereof.
(c) Borrower or any Subsidiary or any Guarantors shall fail to perform
under and/or commit any breach of this Agreement or any Ancillary Agreement to
which it is a party, or all or any of them, (which failure or breach is not
otherwise an Event of Default under this Section 19) and such failure or breach
shall continue for thirty (30) days after written notice from Lender to Borrower
or such Subsidiary or Guarantor.
(d) occurrence of a default under any agreement to which (i) Borrower
is a party with third parties which default has a material adverse effect upon
Borrower's and its Subsidiaries' business, operations, property or condition
(financial or otherwise, including, without limitation, all leases for premises
where inventory is located), taken as a whole, or (ii) any Subsidiary or
Guarantor of Borrower is a party with third parties which default has a material
adverse effect upon Borrower's and its Subsidiaries' business, operations,
property or condition (financial or otherwise), taken as a whole.
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(e) any representation, warranty or statement made by Borrower or any
Subsidiary or the Guarantor hereunder, in any Ancillary Agreement to which it is
a party, any written certificate; statement or document delivered by Borrower or
such Subsidiary or Guarantor pursuant to the terms hereof, or in connection with
the transactions contemplated by this Agreement should be false or misleading in
any material respect when made or deemed made;
(f) an attachment or levy is made upon any of Borrower's or any
Subsidiary's or Guarantor's assets having an aggregate value in excess of
$1,000,000, or a judgment is rendered either against Borrower or any Subsidiary
or Guarantor or any of their property involving a liability of more than
$1,000,000, which shall not have been vacated, discharged, stayed or bonded
pending appeal within thirty (30) days from the entry thereof;
(g) any change in Borrower's or any Guarantor's condition or affairs
(financial or otherwise) which in Lender's good faith opinion, acting
reasonably, materially impairs the Collateral or the ability of Borrower to
perform its Obligations;
(h) any Lien on the Collateral (other than Inventory which is not a
material portion of the Inventory) created hereunder or under any Ancillary
Agreement for any reason ceases to be or is not a valid and perfected Lien on
the Collateral having a first priority interest except for Permitted Liens;
(i) Borrower or any Subsidiary or Guarantor shall (i) apply for or
consent to the appointment of, or the taking of possession by, a receiver,
custodian, trustee or liquidator of itself or of all or a substantial part of
its property, (ii) make a general assignment for the benefit of creditors, (iii)
commence a voluntary case under the federal bankruptcy laws (as now or hereafter
in effect), (iv) be adjudicated a bankrupt or insolvent, (v) file a petition
seeking to take advantage of any other law providing for the relief of debtors,
(vi) acquiesce to, or fail to have dismissed, within sixty (60) days, any
petition filed against it in any involuntary case under such bankruptcy laws, or
(vii) take any action for the purpose of effecting any of the foregoing;
(j) Borrower or any Subsidiary or Guarantor shall admit in writing its
inability, or be generally unable to pay its debts as they become due or cease
operations of its present businesses;
(k) a default by Borrower or any Subsidiary or Guarantor in the
payment, when due (after any applicable grace period, or extension for the
payment thereof), of any principal of or interest on any Indebtedness having a
principal amount, individually or in the aggregate, in excess of $500,000,
except so long as the holder or holders of such Indebtedness shall have waived
such default;
(l) if any Guarantor (i) attempts to terminate (other than as permitted
hereunder) or (ii) challenges the validity of, or its liability under, any
Guaranty;
(m) should any Guarantor default in the payment of any of its payment
obligations under the Guaranty and such default shall continue for a period of
ten (10) days hereunder or under the
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Guaranty or if any proceeding shall be brought to challenge the validity,
binding effect of this Agreement or the Guaranty, or should this Agreement or
the Guaranty cease to be a valid, binding and enforceable obligation of a
Guarantor;
(n) the occurrence and continuation of any Event of Default under the
Indenture unless waived thereunder;
(o) the occurrence and continuation of any Event of Default under the
O&G Credit Facility unless waived thereunder.
20. Remedies. Upon the occurrence of an Event of Default pursuant to
Section 19(i), all Obligations shall be immediately due and payable and this
Agreement shall be deemed terminated; upon the occurrence and continuation of
any other of the Events of Default, Lender shall have the right to demand
repayment in full of all Obligations, whether or not otherwise due. Until all
Obligations have been fully satisfied, Lender shall retain its security interest
in all Collateral. Lender shall have, in addition to all other rights provided
herein, the rights and remedies of a secured party under the Uniform Commercial
Code in effect in any applicable jurisdiction, and under other applicable law,
all other legal and equitable rights to which Lender may be entitled, including
without limitation, the right to take immediate possession of the Collateral, to
require each of Borrower and each Guarantor to assemble the Collateral, at its
expense, and to make it available to Lender at a place designated by Lender
which is reasonably convenient to all parties and to enter any of the premises
of Borrower or such Guarantor or wherever the Collateral shall be located, with
or without force or process of law, and to keep and store the same on said
premises until sold (and if said premises be the property of Borrower or such
Guarantor, Borrower or such Guarantor, as the case may be, agrees not to charge
Lender for storage thereof. Further, Lender may, at any time or times after the
occurrence and during the continuance of an Event of Default, sell and deliver
all Collateral held by or for Lender at public or private sale for cash, upon
credit or otherwise, at such commercially reasonable prices and upon such
commercially reasonable terms as Lender, in Lender's sole discretion, deems
advisable or Lender may otherwise recover upon the Collateral in any
commercially reasonable manner as Lender, in its sole discretion, deems
advisable. Except as to that part of the Collateral which is perishable or
threatens to decline speedily in nature or is of a type customarily sold on a
recognized market, the requirement of reasonable notice shall be met if such
notice is mailed postage prepaid to Borrower and the Guarantors at their
respective addresses as shown in Lender's records, at least ten (10) days before
the time of the event of which notice is being given. Lender may be the
purchaser at any sale, if it is public. The proceeds of sale shall be applied
first to all costs and expenses of sale, including all reasonable attorneys'
fees, and second to the payment (in whatever order Lender elects) of all
Obligations. Lender will return any excess to the Borrower or such Guarantor, as
the case may be, and the Borrower and the Guarantors shall remain liable to
Lender for any deficiency to the extent not prohibited by applicable law.
21. Waiver Cumulative Remedies. Failure by Lender to exercise any
right, remedy or option under this Agreement or any supplement hereto or any
other agreement between Borrower or any Guarantor, or any or all of them, and
Lender or delay by Lender in exercising the same, will not operate as a waiver;
no waiver by Lender will be effective unless it is in writing and then only to
the extent specifically stated. Lender's rights and remedies under this
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Agreement will be cumulative and not exclusive of any other right or remedy
which Lender may have.
22. Application of Payments. Each of Borrower and each Guarantor
irrevocably waives the right to direct the application of any and all payments
at any time or times hereafter received by Lender from or on Borrower's behalf
and each of Borrower and each Guarantor hereby irrevocably agrees that following
an Event of Default Lender shall have the continuing exclusive right to apply
and reapply any and all payments received at any time or times hereafter against
Borrower's Obligations and any Guarantor's obligations under the Guaranty in
such manner as Lender may deem advisable notwithstanding any entry by Lender
upon any of Lender's books and records.
23. Depository Accounts. Any payment received by Borrower or any
Guarantor on account of any Collateral shall be held by it in trust for Lender
and shall promptly be delivered in kind to Lender or deposited into a cash
collateral account at such bank as Lender may designate for application to
payment of the Obligations. Each of Borrower and each Guarantor shall also
execute such further documents as Lender may deem necessary to establish such an
account and Lender's dominion and control over all funds deposited in such
account.
24. Lock Box Accounts. Borrower shall instruct all of its Customers to
make such payments on account of Borrower's Receivables to, if by wire, Bank of
New York, ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ #▇▇▇-▇▇▇▇-▇▇ for credit to
TransTexas Gas Corporation Account #809-065-3114, and if by mail, to ▇.▇. ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇, or, if notified by Lender to Borrower, to an
account under Lender's dominion and control at such bank as Lender may
designate. Borrower shall also execute such further documents as Lender may deem
necessary to establish such an account and Lender's dominion and control over
all funds deposited in such account.
25. Revival. Each of Borrower and each Guarantor further agrees that to
the extent Borrower or such Guarantor makes a payment or payments to Lender,
which payment or payments or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside and/or required to be
repaid to a trustee, receiver or any other party under any bankruptcy act, state
or federal law, common law or equitable cause, then, to the extent of such
payment or repayment, the Obligations or part thereof intended to be satisfied
shall be revived and continued in full force and effect as if said payment had
not been made.
26. Notices. Any notice or request hereunder may be given to Borrower,
each Guarantor or Lender at the respective addresses set forth below or as may
hereafter be specified in a notice designated as a change of address under this
paragraph. Any notice or request hereunder shall be given by registered or
certified mail, return receipt requested, or by overnight courier or by telecopy
(with electronic confirmation of same). Notices and requests shall be, in the
case of those by mail or overnight courier, deemed to have been given when
deposited in the mail or with the overnight courier, and, in the case of a
telecopy, when confirmed electronically.
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Notices shall be provided as follows:
If to the Lender: GMAC Commercial Credit LLC
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
If to TransTexas: TransTexas Gas Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇ ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
27. Governing Law; Consent to Exclusive Jurisdiction and Waiver of Jury
Trial. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. LENDER SHALL HAVE THE RIGHTS
AND REMEDIES OF A SECURED PARTY UNDER APPLICABLE LAW INCLUDING, BUT NOT LIMITED
TO, THE UNIFORM COMMERCIAL CODE OF NEW YORK.
EACH OF BORROWER AND EACH GUARANTOR HEREBY AGREES THAT ALL ACTIONS AND
PROCEEDINGS RELATING DIRECTLY OR INDIRECTLY TO OR ARISING IN ANY WAY FROM THIS
AGREEMENT OR ANY ANCILLARY AGREEMENT TO WHICH BORROWER OR SUCH GUARANTOR IS A
PARTY OR ANY OBLIGATIONS SHALL BE LITIGATED EXCLUSIVELY IN THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK OR, AT LENDER'S OPTION, IN
ANY OTHER COURT OF COMPETENT JURISDICTION LOCATED IN NEW YORK STATE AS LENDER
MAY SELECT EXCEPTING ONLY THAT LENDER MAY BRING AN ACTION WHENEVER IT MAY BE
NECESSARY TO PROTECT ITS RIGHTS IN COLLATERAL. EACH OF BORROWER AND EACH
GUARANTOR HEREBY FURTHER AGREES THAT SUCH COURTS ARE CONVENIENT FORUMS AND EACH
OF BORROWER AND EACH GUARANTOR HEREBY SUBMITS TO THE PERSONAL JURISDICTION OF
SUCH COURTS. IT IS THE EXPRESS INTENT OF THE PARTIES HERETO TO CONFINE ALL SUCH
ACTIONS AND PROCEEDINGS TO COURTS LOCATED WITHIN THE STATE OF NEW YORK EXCEPTING
ONLY TO SUITS BY LENDER TO PROTECT ITS RIGHTS TO ITS COLLATERAL AS PREVIOUSLY
SET FORTH, AND EACH OF BORROWER AND EACH GUARANTOR HEREBY WAIVES ANY AND ALL
PROCEDURAL RIGHTS OR DEVICES INSOFAR AS SUCH RIGHTS OR DEVICES WOULD PREVENT OR
INTERFERE WITH THE REALIZATION OF THAT INTENT.
EACH OF BORROWER AND EACH GUARANTOR HEREBY AGREES NOT TO JOIN ANY CLAIM
AGAINST LENDER WITH ANY CLAIM AGAINST ANY OTHER PERSON OR ENTITY (OTHER THAN ANY
TRANSFEREE OR ASSIGNEE UNDER SECTION 16), AND EACH OF BORROWER AND EACH
GUARANTOR HEREBY AGREES THAT ANY SUCH JOINDER OF CLAIMS SHALL BE DEEMED TO BE
FRAUDULENT PER SE. IN THE EVENT ANY CLAIM AGAINST LENDER IS JOINED WITH ANY
CLAIM AGAINST ANY OTHER PERSON OR ENTITY (OTHER THAN ANY
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TRANSFEREE OR ASSIGNEE UNDER SECTION 16), EACH OF BORROWER AND EACH GUARANTOR
HEREBY AGREES THAT UPON DEMAND BY LENDER THEY SHALL TAKE ALL STEPS NECESSARY TO
SECURE THE SEVERANCE OF SUCH CLAIMS. EACH OF BORROWER AND EACH GUARANTOR FURTHER
AGREES THAT VENUE IN THE COURTS OF ANY STATE OTHER THAN THE ▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇
(▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇) IS INCONVENIENT FOR LENDER AND THAT TRANSFER OF
VENUE TO THE COUNTY OF NEW YORK, NEW YORK IS APPROPRIATE UNDER THE DOCTRINE OF
FORUM NON CONVENIENS.
EACH OF BORROWER AND EACH GUARANTOR, WAIVES PERSONAL SERVICE OF PROCESS
AND CONSENTS THAT SERVICE OF PROCESS UPON IT MAY BE MADE BY CERTIFIED OR
REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO IT AT ITS ADDRESS
APPEARING ON LENDER'S RECORDS, AND SERVICE SO MADE SHALL BE DEEMED COMPLETED TWO
(2) BUSINESS DAYS AFTER THE SAME SHALL HAVE BEEN SO MAILED.
ALL THE PARTIES HERETO WAIVE THE RIGHT TO A TRIAL BY JURY IN ANY ACTION
OR PROCEEDING BETWEEN BORROWER OR A GUARANTOR, OR BOTH, AND LENDER. BORROWER AND
EACH GUARANTOR WAIVES THE RIGHT TO ASSERT IN ANY ACTION OR PROCEEDING WITH
REGARD TO THIS AGREEMENT, ANY ANCILLARY AGREEMENT OR ANY OF THE OBLIGATIONS ANY
OFFSETS OR COUNTERCLAIMS (OTHER THAN COMPULSORY COUNTERCLAIMS) WHICH THEY MAY
HAVE.
EACH OF BORROWER AND EACH GUARANTOR ACKNOWLEDGES THAT THE PROVISIONS OF
THIS SECTION 27 ARE A MATERIAL INDUCEMENT TO THE LENDER TO ENTER INTO THIS
AGREEMENT AND THE ANCILLARY DOCUMENTS AND THAT IN LIGHT OF THE VOLUME AND NATURE
OF LITIGATION THAT BORROWER AND ITS AFFILIATES HAVE BEEN INVOLVED IN, IF
BORROWER AND THE GUARANTORS HAD NOT AGREED TO THE FOREGOING, LENDER WOULD NOT
HAVE ENTERED INTO THIS AGREEMENT OR ANY OF THE ANCILLARY AGREEMENTS.
EACH OF BORROWER AND EACH GUARANTOR FURTHER ACKNOWLEDGES THAT IT HAS
REVIEWED THIS SECTION WITH, AND HAS HAD THE ADVICE OF, COMPETENT LEGAL COUNSEL
OF ITS OWN CHOOSING, WITH RESPECT TO THIS SECTION.
28. Limitation of Liability. Borrower acknowledges and understands that
in order to assure repayment of the Obligations hereunder Lender may be required
to exercise any and all of Lender's rights and remedies hereunder and agree that
neither Lender nor any of Lender's agents shall be liable for acts taken or
omissions made in connection therewith except for actual bad faith, gross
negligence or willful misconduct.
29. Entire Understanding. This Agreement and the Ancillary Agreements
contain the entire understanding between Borrower, the Guarantors and Lender and
any promises,
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representations, warranties or guarantees not herein contained shall have no
force and effect unless in writing, signed by the Borrower's, the Guarantor's or
Lender's respective officers.
30. Modification. Neither this Agreement, the Ancillary Agreements, nor
any portion or provisions thereof may be changed, modified, amended, waived,
supplemented, discharged, cancelled or terminated orally or by any course of
dealing, or in any manner other than by an agreement in writing, signed by the
party to be charged.
31. Severability. Wherever possible each provision of this Agreement or
the Ancillary Agreements shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this Agreement or the
Ancillary Agreements shall be prohibited by or invalid under applicable law such
provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining provisions
thereof.
32. Captions. All captions are and shall be without substantive meaning
or content of any kind whatsoever.
33. Confidentiality. Lender agrees that it will use reasonable efforts
not to disclose (other than to its employees, affiliates, auditors or counsel or
to any other party hereto provided that such employees, affiliates, auditors or
counsel are informed of this confidentiality provision and agree to be bound
hereby) any information with respect to the Borrower or the Subsidiaries which
is furnished pursuant to this Agreement or any other Ancillary Agreement
executed pursuant hereto, without the prior written consent of the Borrower or
the Subsidiaries, as applicable, provided that the foregoing shall not apply to,
and Lender may disclose any such information (a) as has become generally
available to the public by no fault of Lender, (b) to any of its examiners or as
may be required by any municipal, state or Federal regulatory body having or
claiming to have jurisdiction over Lender or by the Federal Reserve Board or the
Federal Deposit Insurance Corporation or similar organizations (whether in the
United States or elsewhere) or their successors, (c) as may be required in
response to any summons or subpoena issued by any court having jurisdiction over
Lender, (d) in order to comply with any law, order, regulation or ruling
applicable to Lender, (e) to any prospective transferee or participant consented
to by Borrower (which consent will not be unreasonably withheld or delayed) in
connection with any contemplated transfer of any interest herein by Lender in
accordance with Section 16, provided, that such prospective transferee or
participant (other than an Affiliate of Lender) executes an agreement with the
Borrower containing provisions substantially identical to those contained in
this Section 33, (f) with the prior written authorization of the Borrower or the
Subsidiaries, as applicable, (g) already known by, or in the possession of
Lender without restrictions on the disclosure thereof at the time such
information was received by Lender or (h) in connection with the exercise of any
remedies by Lender.
34. Guarantee.
(a) Guaranty. Each Guarantor jointly and severally unconditionally
guaranties to each Lender the prompt payment when due (whether by acceleration
or otherwise) of all present and future Obligations, and irrespective of the
genuineness, validity, regularity or enforceability of such Obligations, or of
any instrument evidencing any of the Obligations or of any collateral
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therefor or of the existence or extent of such collateral, and irrespective of
the allowability, allowance or disallowance of any or all of the Obligations in
any case commenced by or against Borrower under ▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ Code,
including, without limitation, post-petition interest, fees, costs and charges
that would have accrued or been added to the Obligations but for the
commencement of such case.
(b) No Impairment. Agent may at any time and from time to time, either
before or after the maturity thereof, without notice to or further consent of
any Guarantor, extend the time of payment of, exchange or surrender any
collateral for, renew or extend any of the Obligations or increase or decrease
the interest rate thereon, and may also make any agreement with Borrower or with
any other party to or person liable on any of the Obligations, or interested
therein, for the extension, renewal, payment, compromise, discharge or release
thereof, in whole or in part, or for any modification of the terms thereof or of
any agreement between any Lender and Borrower or any such other party or Person,
or make any election of rights any Lender may deem desirable under the United
States Bankruptcy Code, as amended, or any other federal or state bankruptcy,
reorganization, moratorium or insolvency law relating to or affecting the
enforcement of creditors' rights generally (any of the foregoing, an "Insolvency
Law") without in any way impairing or affecting the obligations of Guarantors
hereunder. The obligations of Guarantors hereunder shall be effective regardless
of the subsequent incorporation, merger or consolidation of Borrower, or any
change in the composition, nature, personnel or location of Borrower and shall
extend to any successor entity to Borrower, including a debtor in possession or
the like under any Insolvency Law.
(c) Guaranty Absolute. Each Guarantor guarantees that the Obligations
will be paid strictly in accordance with the terms of this Agreement and/or any
other document, instrument or agreement creating or evidencing the Obligations,
regardless of any law, regulation or order now or hereafter in effect in any
jurisdiction affecting any of such terms or the rights of Borrower with respect
thereto. Each Guarantor hereby knowingly accepts the full range of risk
encompassed within a contract of "continuing guaranty" which risk includes the
possibility that Borrower will contract additional indebtedness for which such
Guarantor may be liable hereunder after Borrower's financial condition or
ability to pay its lawful debts when they fall due has deteriorated, whether or
not Borrower has properly authorized incurring such additional indebtedness.
Each Guarantor acknowledges that (i) no oral representations, including any
representations to extend credit or provide other financial accommodations to
Borrower, have been made by Agent or any Lender to induce such Guarantor to
enter into this Agreement and (ii) any extension of credit to Borrower shall be
governed solely by the provisions of this Loan Agreement and the Ancillary
Agreements. The liability of each Guarantor under this Agreement shall be
absolute and unconditional, in accordance with its terms, and shall remain in
full force and effect without regard to, and shall not be released, suspended,
discharged, terminated or otherwise affected by, any circumstance or occurrence
whatsoever, including, without limitation: (a) any waiver, indulgence, renewal,
extension, amendment or modification of or addition, consent or supplement to or
deletion from or any other action or inaction under or in respect of this
Agreement and the Ancillary Agreements or any other instruments or agreements
relating to the Obligations or any assignment or transfer of any thereof; (b)
any lack of validity or enforceability of any of this Agreement, the Ancillary
Agreements or any assignment or transfer of any thereof; (c) any furnishing of
any additional security to Agent and Lenders or its assignees or any acceptance
thereof or any release of any security by Agent and Lenders or its
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assignees; (d) any limitation on any party's liability or obligation under this
Agreement, the Ancillary Agreements or any other documents, instruments or
agreements relating to the Obligations or any assignment or transfer of any
thereof or any invalidity or unenforceability, in whole or in part, of any such
document, instrument or agreement or any term thereof; (e) any bankruptcy,
insolvency, reorganization, composition, adjustment, dissolution, liquidation or
other like proceeding relating to Borrower, or any action taken with respect to
this Agreement by any trustee or receiver, or by any court, in any such
proceeding, whether or not the undersigned shall have notice or knowledge of any
of the foregoing; (f) any exchange, release or nonperfection of any Collateral,
or any release, or amendment or waiver of or consent to departure from any
guaranty or security, for all or any of the Obligations; or (g) any other
circumstance which might otherwise constitute a defense available to, or a
discharge of, any Guarantor. Any amounts due from any Guarantor to Agent and
Lenders shall bear interest until such amounts are paid in full at the highest
rate then applicable to the Obligations.
(d) Waivers. (i) This is a guaranty of payment and not of collection.
Neither Agent nor any Lender shall be under any obligation to institute suit,
exercise rights or remedies or take any other action against Borrower or any
other person liable with respect to any of the Obligations or resort to any
collateral security held by it to secure any of the Obligations as a condition
precedent to any Guarantor being obligated to perform as agreed herein and each
Guarantor hereby waives any and all rights which it may have by statute or
otherwise which would require Agent or any Lender to do any of the foregoing.
Each Guarantor further consents and agrees that Lender shall not be under any
obligation to marshal any assets in favor of any Guarantor, or against or in
payment of any or all of the Obligations. Each Guarantor hereby waives all
rights of suretyship. Each Guarantor hereby waives any rights to interpose any
defense, counterclaim or offset of any nature and description (other than
affirmative defenses and compulsory counterclaims) which it may have or which
may exist between and among Agent, any Lender, Borrower and/or any Guarantor
with respect to any Guarantor's obligations hereunder, or which Borrower may
assert on the underlying debt, including but not limited to failure of
consideration, breach of warranty, fraud, payment (other than cash payment in
full of the Obligations), statute of frauds, bankruptcy, infancy, statute of
limitations, accord and satisfaction, and usury.
(ii) Each Guarantor further waives (i) notice of the acceptance
of this Agreement, of the making of any such loans or extensions of credit, and
of all notices and demands of any kind to which such Guarantor may be entitled,
including, without limitation, notice of adverse change in Borrower's financial
condition or of any other fact which might materially increase the risk of any
Guarantor and (ii) presentment to or demand of payment from anyone whomsoever
liable upon any of the Obligations, protest, notices of presentment, non-payment
or protest and notice of any sale of collateral security or any default of any
sort.
(e) Payments from Guarantor. Agent, with or without notice to any
Guarantor, may apply on account of the Obligations any payment from any
Guarantor or any other guarantor, or amounts realized from any security for the
Obligations.
(f) No Termination. This is a continuing irrevocable guaranty and shall
remain in full force and effect and be binding upon each Guarantor and each
Guarantor's successors and assigns, until all of the Obligations have been paid
in full and this Agreement has been terminated or until the Guaranty is released
or terminated in accordance with the terms of this
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Agreement. If any of the present or future Obligations are guaranteed by Persons
in addition to Guarantors, the death, release or discharge in whole or in part
or the bankruptcy, merger, consolidation, incorporation, liquidation or
dissolution of one or more of them shall not discharge or affect the liabilities
of any Guarantor hereunder.
(g) Recapture. Anything in this Agreement to the contrary
notwithstanding, if Agent or any Lender receives any payment or payments on
account of the liabilities guarantied hereby, which payment or payments or any
part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid to a trustee, receiver, or
any other party under any Insolvency Law, common law or equitable doctrine, then
to the extent of any sum not finally retained by Agent or any Lender, each
Guarantor's obligations to Agent or such Lender shall be reinstated and this
Agreement shall remain in full force and effect (or be reinstated) until payment
shall have been made to Lender, which payment shall be due on demand.
(h) Contribution. In order to provide for just and equitable
contribution among the guarantors, the guarantors agree, inter se, that in the
event any payment or distribution is made by any Guarantor (a "Funding
Guarantor") under the Guaranty, such Funding Guarantor shall be entitled to a
contribution from each other Guarantor in a pro rata amount based on the
Adjusted Net Assets of each Guarantor (including the Funding Guarantor) for all
payments, damages and expenses incurred by that Funding Guarantor in discharging
Borrower's obligations with respect to the Obligations or any other Guarantor's
obligations with respect to the Guaranty.
35. Disposition of Certain Collateral Without Requesting Release.
Borrower or its Subsidiaries may, so long as an Event of Default shall not have
occurred and be continuing or would exist after giving effect thereto and
without requesting or receiving the consent of Lender, make cash payments
(including repayments of Indebtedness permitted to be incurred hereby) that are
not otherwise prohibited by this Agreement, provided, however, Borrower shall
not dispose of or transfer any Collateral included in Receivables Availability
or Inventory Availability or make any payment if after giving effect thereto an
Overadvance shall exist.
36. Requesting Release of Collateral.
(a) Upon receipt of a Release Request, Agent shall execute and
deliver, within five Business Days from the receipt of such Release Request, any
instruments deemed by Borrower to be reasonably necessary or reasonably
appropriate to release all or a part of the Collateral from the security
interests of Agent, if the provisions of this Section 36 have been complied
with. Any such Release Request shall request Lender to execute one or more
specifically described release instruments (which release instruments shall
accompany such Release Request) and shall certify (i) that no Event of Default
has occurred and is continuing and (ii) that no Collateral included in
Receivables Availability or Inventory Availability shall be disposed if after
giving effect to such disposition on Overadvance shall exist, and (iii) that
either (A) the release of the Inventory to be released is required pursuant to,
or is required in order to effect compliance with, the Plan or a Plan Order or
(B) the Collateral is Inventory which will be disposed of in compliance with
Section 8(a).
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(b) At the request of Borrower Agent shall, in lieu of releasing
any Collateral pursuant to this Section 36, execute and deliver a Subordination
Agreement with respect to such Collateral in form and substance acceptable to
Agent.
35. 37. Counterparts; Telecopied Signatures. This Agreement may be
executed in any number of and by different parties hereto on separate
counterparts, all of which, when so executed, shall be deemed an original, but
all such counterparts shall constitute one and the same agreement. Any signature
delivered by a party by facsimile transmission shall be deemed to be an original
signature hereto.
36. 38. Construction. The parties acknowledge that each party and its
counsel have reviewed this Agreement and that the normal rule of construction to
the effect that any ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of this Agreement or any amendments,
schedules or exhibits thereto.
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THIRD AMENDED AND RESTATED
ACCOUNTS RECEIVABLE MANAGEMENT
AND SECURITY AGREEMENT
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day
and year first above written.
GMAC COMMERCIAL CREDIT LLC
By:
----------------------------
Name:
Title:
TRANSTEXAS GAS CORPORATION
By:
----------------------------
Name:
Title:
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